Morning Comments November 22, 2021

Taube Corn Pile

Though we finished last week with the markets mostly mixed to slightly weaker, wheat is starting the week with a vengeance tearing to the high side as of 6:00 a.m. Eastern.

Matif wheat futures, which represents European milling wheat, surged to new all-time highs overnight, taking U.S. futures with it as several bullish stories continue to circulate. 

Looking at what the market knows for certain when it comes to wheat, we can see that Russia is continuing to battle some pretty major domestic food inflation that no amount of wheat export tax seems able to cool. Though export tax values are expected to increase another $1.20 a tonne this week to $78.30/tonne and an export quota is in place for the first half of the calendar year next year, food prices in the country have risen by over 12% versus a year ago.

In addition to issues when it comes to Russia limiting or working to limit wheat exports, we are continuing to see China buying French wheat as they work to replenish supplies after releasing a rumored 40 million tonnes of wheat from government reserves in an attempt to offset corn demand for feed over the summer. 

Moving over to a bit more in the way of bullish unknowns, we are seeing some concerns over parts of the Australian wheat crop being damaged by heavy rain and flooding. While experts in the country are quick to caution that a large amount of the wheat in certain areas had been harvested before much of the rainfall, the unknown over what is left in fields and if it is even salvageable will be hard to pin down for the next several weeks. 

In addition to Australian crop damage concerns, we still have the Russian troop buildup at the Ukrainian border (though the Kremlin says they're completely harmless) and an uncertain amount of acreage throughout the Northern Hemisphere that went unplanted or was planted into less than desirable conditions potentially impacting new crop production potential.

As a good friend of mine once said, the most bearish story is the last bullish one. Though at this point one could argue it feels as though we are quite far removed from any major bearish catalyst and that alone has been enough to support corn and soybeans at somewhat lofty levels as well. 

Looking ahead, we will get updated export inspections for last week released later this morning. Traders are expecting another solid week of soybean exports, with thoughts we should see corn export inspections pick up any day now. In addition to export inspections, we will get one of the last crop progress reports for the year with most folks expecting to see corn and soybean harvest mostly wrapped up across the country. 

Market-wise, as we said earlier, all attention appears to be focused on wheat today, with strength spilling over into corn and soys. Volatility has definitely increased as has the presence of outside speculators in the market with funds back to being the longest we've seen in corn and soybean meal since May, while their length in Soft Red Wheat is the greatest since August. 

Crude is trying to recover a bit this morning, though headlines overnight indicate Japan will move to release oil from their strategic reserves with an announcement from the U.S. and China expected to come soon. COVID cases continue to rise around the world, bringing in some uncertainty over future demand.

With it being a holiday week, market moves may seem more aggressive than usual as some folks choose to move to the sidelines. 

Corn 4 to 5 higher

Beans 3 to 4 higher