Morning Comments October 6, 2021

Farmer and a child walking toward a combine during harvest season

The markets are a touch weaker this morning after a solid performance out of soybeans yesterday. 

All things oil are hot right now with Malaysian palm oil trading to new all-time highs, canola working its way back to mid-August highs, and crude continuing to roll to its highest level seen in over 3 years. 

The exuberance surrounding oil of course is easily spilling over into soybean oil even though there is really nothing from a fundamental standpoint indicating that market has any sort of supply concern. With soy oil, the only market in that group still trading well below recent highs, one could venture there is still some room for upside there, with a likely continuation of support spilling over into beans. 

The entire world has lost its mind, it seems, as we roll from a pandemic to a shipping crisis to an energy crunch. Each individual country dealing with their energy issues seem to be doing so due to their own unique reasons, but with us hearing about them all at once it's easy to feel as though we are running out of energy supplies soon and will experience darkness around the world.

The concern that we are running out of everything energy producing ahead of winter has definitely invoked some feelings of panic, stoking the recent moves to the high side, some of which could best be described as parabolic.

We all know it stops somewhere, but until we get some answers and see the logistics and supply issues resolved it's likely we see all commodities maintain some continued level of support, even in the face of harvest and potential shifts in supply and demand economics as a whole, especially for corn and beans. 

Speaking of supply and demand economics, we will get an updated supply and demand report from the USDA next Tuesday. With not much else to discuss in the market outside of yield reports, lots of folks will turn their attention to what these numbers may say earlier than usual.

Right now, there seems to be a feeling amongst some of the more bullish private analysts that we will see a cut in corn production next week, though currently most survey driven estimates seem to be maintaining their ideas on overall crop potential.

Over in soybeans, most folks are starting to recognize it is likely we could see an increase in production there, with carryout likely rolling from 185 million bushels in last month's estimate to nearly 300 mbu once you factor in an expected increase in production combined with the increase to beginning stocks we got in last Thursday's report.

There are still some pretty big questions looming when it comes to our overall demand outlook, most of which hinge on just what is happening in China. The USDA attaché there came in 6 mmt (236 million bushels) below the most recent USDA estimate for new crop Chinese imports, claiming the country has more than adequate harvest potential and relatively weak domestic feed demand. 

Sales volumes at government auctions there remain tepid at best, while we continue to struggle with just what is happening there from an overall economic, energy, and feed demand standpoint.

With oil share as strong as it is, we are likely to see a slight increase in crush demand in next week's USDA report, potentially offsetting a portion of any reduction in exports we may see.

Wheat has its own unique set of fundamentals as we continue to wrap our arms around global wheat demand and just what is going to take place in the year ahead to alleviate any of the supply concerns we are currently facing. 

Looking ahead, we will get updated energy numbers released this morning. Many are anticipating an increase in ethanol production while hoping to see a drawdown in ethanol stocks versus the slight gain we saw a week ago. Folks will definitely be looking at overall oil and gas supplies in storage to see if there are any signs of significant gains there or if we continue to see demand outpace supply.

Soybeans are trading at a relatively important psychological level, with any sort of continued strength here likely working to push us back up to last week's pre-report highs. Any type of move towards $13 with the current fundamental set up we are seeing should continue to be rewarded with farmer sales. Corn has struggled to break through to the $5.50 level on the Dec as of late, setting lower highs each day in the process- any sustained move higher should look to be rewarded to a certain extent as well.

Corn 2-4 higher

Soybeans 3-5 higher