Morning Comments October 19, 2021

Beans 062419

Strength continued in both the corn and soybean markets yesterday as global energy markets continue their epic run to the high side. 

The strength in energy is spilling over into the ethanol and vegetable oil markets, helping to provide substantial support to both beans and corn. Stout margins will push end users to get their hands on as much raw material as possible with the desire to turn it into something even more valuable before those markets cool. 

As we talked about yesterday, an earlier than normal plunge in temperatures in China has created another frenzy, pushing coal prices there to above $300/ton or the equivalent of nearly $80/barrel crude, which we're also seeing.

While the Chinese government has announced massive imports as well as new coal mine projects, the idea that they will do whatever it takes to source tons is keeping the buyer active in the market. 

It's interesting to note that many of the traditional supply and demand signals for the global energy sector could be considered bearish considering production continues to grow while economic indicators have begun to turn negative.

According to Baker Hughes, the amount of active oil rigs in the U.S. rose to a one and a half year high last week, with 445 rigs active currently in the country. This is compared to a low set just over a year ago of 172. This, in addition to the multi-week larger than expected growth in U.S. crude inventories, would indicate the U.S. seems to be suffering from what appears to be a more global push in values as opposed to a U.S. supply-centric one.

In addition to gains in U.S. supply we are seeing many economic indicators showing signs of concern. Fund manager sentiment is the most bearish it's been in over a year, while crane counts across the country are down nearly 5% from the first quarter of the year as major construction projects have seemingly come to a halt, not to mention housing market concerns or consumer sentiment. 

It feels as though we have seen this before, with folks seeing talk of inflationary concerns turn into worries over lacking growth. 

In the meantime, export inspections yesterday were a marketing year high for both corn and beans as the Gulf is back online just about everywhere outside of the Cargill Reserve facility. 

Corn inspections came in above expectations at 38 million bushels. 14 million of which are going to Mexico with China, Japan and Colombia taking just over 5 million bushels each. While inspections were larger than expected, they are still lacking the amount needed each week to meet USDA expectations, though with such a large amount of beans going out that's not necessarily surprising or concerning at this point.

Bean inspections were a marketing year high at 84 million bushels shipped. Of the beans shipped, China took the lion's share at 63 million bushels, with a host of other countries set to take smaller amounts. 

Wheat inspections were the third smallest on record as we really just want to make sure we price ourselves out of the global market for now.

Speaking of wheat, SovEcon put their Russian wheat estimate at just over 80 mmt as harvest reports there indicate just over 77 mmt harvested so far with another 1-2 million hectares left to go. This would be substantially higher than the current USDA estimate and could change the global supply and demand outlook as a whole, if Russia could get their domestic market structure and export tax values figured out at least.

Looking ahead, we won't see much in the way of major market-moving data. We remain at the mercy of outside markets and investors. Harvest looks to be wide open for the most part this week after last week's slowed pace thanks to rain.

The USDA put harvest progress at 52% complete for corn last week, above the 5-year average but slower than last year's pace. soy beans are at 60% complete, versus 73% last year and 55% as the 5-year average. 

Corn 1-2 higher

Beans 5-7 higher