Morning Comments November 2, 2021


A well-followed media source used the line 'commodity melt up' to describe yesterday's move as wheat, cotton, corn and other small grains saw big moves higher. 

As we discussed yesterday, when it comes to corn this isn't as much a fundamental move as it is a macro/speculative one.

Of course, the monstrous move to the high side in wheat as Minneapolis targets $11.00 and Kansas City and Chicago both top $8 doesn't hurt either. Since October 11th, corn has gained an astounding 75 cents.

In the meantime, while grains are enjoying their party, soybeans quietly continue to trade range bound, with spreads indicating we have more than enough beans, paying folks handsomely to keep them out of the pipeline.

From a fundamental standpoint, as we've talked about so many times this past month, not much has changed from where we were when those early October lows were forged. Yes, ethanol margins are phenomenal and have stayed strong even in the face of rising corn prices, but there is only so much grind capacity in the country. Demand growth there to a certain extent is a bit static. 

In addition, the uptick in ethanol production is providing a more plentiful supply of distillers grains, potentially offsetting some of the increase in corn used for ethanol as it's not needed for feed. 

After the close we saw StoneX release their updated crop production survey results for November. This month's numbers indicate their customers expect corn yields to come in 1.1 bushels per acre higher than last month's estimate at 177.7. If realized and acreage stayed constant, this would increase overall corn production by just over 102 million bushels. 

They increased their soybean estimate as well, up 0.6 bushels per acre to 51.9. This would be just under a half a bushel per acre higher than the last USDA estimate, potentially increasing overall production by just under 35 million bushels. 

On the export inspection side of things, we saw soybean exports remain stout at just over 80 million bushels shipped on the week. We are continuing to fall behind last year's pace, though we have done our best over the last 3 weeks to amp up shipments as Gulf capacity is mostly back to normal.

Corn shipment pace was less than half of what is needed each week to meet USDA projections, but as corn bulls will tell you, it is early yet. 

Wheat shipments were 4.2 million bushels, far below the 17 million bushels needed to meet USDA projections. With a wheat market bulled up after what appears to be a surge in global wheat purchasing tenders it is interesting to see our export pace lagging expectations significantly. However, as any real wheat trader will tell you, the job of the US wheat market is to be a residual, not primary supplier to the world. 

We also saw updated USDA NASS crush and grind numbers for September released yesterday. We saw 164.1 million bushels of soybeans crushed for the month, above expectations, but below the 182.5 million bushels needed to be crushed each month to meet USDA projections.

Corn grind for ethanol came in at 407.5 million bushels, also below the 433.3 million bushels we need to grind for ethanol each month to meet USDA estimates. 

Of course, September started a bit sluggish for both crush and grind as supplies of corn and soys were tight until the tail end of the month. We will want to continue to monitor these figures closely next month as more readily available supplies should help us see the increases necessary to meet current USDA projections.

Looking ahead we are again going to be at the mercy of outside markets as well as the excitement surrounding what is happening in grains as a whole. After a move like yesterday we tend to see another round of buying as headline traders don't want to miss out. 

This month's Fed meeting starts today, with a ton of talk about tapering expected. As we've talked about, these moves in commodities aren't going to let off the accelerator until we see capitulation from the Central Banks around the world. So far they seem steadfast in their transitory/broken supply chain theory, so it could be awhile.

Corn 1 to 2 higher

Beans. 5 to 6 higher