Morning Comments November 17, 2021

Grain Bins

Markets were mostly mixed to lower yesterday as we ran into some pretty stout selling close to some key resistance levels on the charts. 

Fundamental news on the grain side was scarce for the most part as we saw confirmation of some Chinese business on beans from the day prior, as well as an announcement of corn sold to Mexico. Outside of that, trader attention seemed to be focused on what was taking place in the outside markets more than anything. 

October retail sales came in higher than expected, giving some continued bullish indications about the economy and potential consumer sentiment as a whole. One must wonder though how anyone could be surprised retail sales would come in higher as all we have heard about is how important it is to get Christmas shopping out of the way early this year. It is almost as though the fear of not being able to get one's hands on something they desire is greater than actually experiencing it.

While a strong economy tends to be a bullish indicator when it comes to oil and energy prices, crude seems to be lukewarm at best after last week's recovery that came after the prior week's key reversal. Confusion over potential supply increases as the US and China discuss reserve releases, as well as uncertainty over demand as we see Chinese imports down significantly and a resurgence of Covid concerns throughout Europe is keeping buyers at bay, at least in the short-term. 

With energies being such a large part in the run up in both crush and grind margins for both corn and beans, as well as a supplier of spill over buying strength over the last month and a half or so, where crude heads from here will be important on whether we see corn find a way to break out of the range it found itself in and move to the high side. 

In addition to energies, we are watching what is happening around the world when it comes to production potential. We have seen nearly perfect weather throughout the Central and Northern Parts of Brazil, with some concerns over dryness starting to pop up throughout Southern Brazil down into Argentina.

While at this point soil moisture remains more than adequate, with an inch to two inches just having fallen, the concern is somewhat muted. However, models are indicating that while Brazilian weather for the most part will stay nearly perfect, Argentina could be in for a dry stretch from late November into January.

Because La Nina influenced a drier-than-normal forecast, many farmers in Argentina have opted to wait on planting much of their corn. Like what we see in Brazil, Argentina has two corn crops, so to speak. Phase 1 corn which was planted several weeks ago accounts for just under 30% of Argentina's anticipated corn crop. Of that crop, 84% of it is rated good-to-excellent with much of it expected to pollinate next month.

Phase 2 corn planting will begin in two weeks or so, with farmers closely monitoring weather before doing so. The split phase production system in corn was what allowed Argentina to produce a near record crop a year ago as much of their production was planted later, pollinating after La Nina began to break down and weather transitioned wetter.

Looking ahead, we continue to watch Dalian corn values closely as they continue to trade at their highest level since June thanks to a rise in global corn prices combined with wet weather delaying harvest in parts of the country. 

We will also continue to monitor the dollar as it works to move higher, continuing to trade at its highest level since July of last year. Some Fed members are indicating the slowdown of tapering and potential rate increases may need to be expedited a bit as inflation continues to run hot, in addition to the economic data we discussed helping to support the greenback for sure.

Overnight we got news that Belarus has stopped the gas flow through one of its pipelines running into Europe due to 'unscheduled maintenance' saying it will be down for 3 days. As we discussed earlier this week with all that is taking place geopolitically as well as with natural gas prices throughout the EU influencing fertilizer prices and supply around the world, this will be something we have to watch closely.

Corn 1 to 2 higher

Beans 6 to 7 higher