Morning Comments September 21, 2022

Grain Bins

Wheat led the charge to the upside, finishing the day 63 cents higher on a perceived escalation to the war in Ukraine. Corn and beans finished strong as well, trading up to last week’s post-report highs with corn closing up 14 and beans finishing 17 higher.

Early yesterday morning Russia announced it would support referendums in four separate Ukrainian territories in Eastern and Southern portions of the country. Votes will be held starting Friday on whether the territories will stay a part of Ukraine or will become a part of Russia. With Russian troops only partially occupying the Luhansk, Donetsk, Kherson and Zaporizhzhia regions the annexation would be a bold move, one Ukraine and its Western allies say will not be recognized.

A similar path to annexation was taken in Crimea in 2014 with limited global fanfare, something leaders admit now was a mistake.

Overnight President Putin also announced a mobilization of 300,000 reservists to serve, something his administration said was unlikely to take place just a week ago. According to experts, the move indicates Putin’s struggles in Ukraine and a likelihood of large troop loss. It also seems to indicate a desire to increase Russia’s ability to defend its ‘new border’ containing nearly 18% of former Ukrainian territory after the referendum votes are held this weekend.

The problem now becomes how the West handles this attempted land grab and what Russia does to defend its newfound territory. In addition to the mobilization announcement overnight, Putin also made sure to reiterate nuclear threats, indicating he is not afraid to make a bold move if deemed necessary. 

Many Russian citizens are less than pleased with the announcement, with Reuters reporting flights to countries still allowing Russian citizens sold out in the hours after the Putin speech. Anti-war protests are now reportedly being organized in some parts of the country as well.

In a normal news cycle, today’s rate decision by the Fed would be the most discussed component of market direction, as we face another historical adjustment higher in the benchmark interest rate. Many analysts remain steadfast in their prediction the Fed will stick to the plan of a 75 point hike, though the recent trend of other world central banks to surprise to the high side with their rate adjustments has some wondering if we see 100 points today.

Some market analysts and CEOs are cautioning an overreaction by the Fed, saying we are relying on lagging indicators to make decisions and run the risk of doing too much too quickly, creating more damage than anticipated to the economy. However, at this point it appears Jerome Powell and his cohorts around the world continue to believe inflation is worse than a recession and will continue to work to break prices.

Looking ahead we will be watching what takes place in the Black Sea closely today as we await this afternoon’s Fed announcement and press conference. Chinese central bankers continue to buck the trend of monetary tightening, indicating they may do more to relax lending further in an attempt to stimulate the economy. Limited consumer credit demand has many analysts in the region saying direct stimulus or incentives are needed more than further relaxation of lending requirements, but this goes against the desire of many Chinese officials. 

We will get updated energy information this morning with many traders expecting an increase in oil stocks. Ethanol production is expected to be steady to lower week over week with stocks up slightly.

Today is likely to be a very volatile day as we are actively trading 3-4 different market narratives at any given time. 

Corn up 1 to 3

Beans down 2 to 4