Morning Comments September 29, 2021

Cornboard Field 042221

Markets are stronger this morning after weakness throughout much of the day yesterday.

Conversations about inflation have returned to the forefront in recent days as energy pinches throughout Europe and China have sent energy producing commodity prices soaring to multi-year highs. 

While lumber and grains seemed to have cooled their epic run higher, a surge in energy and metals is pushing the commodity index to the highest level seen in over 10 years. This renewed excitement- if you want to call it that- has led some to feel the rally higher in all commodities isn't over quite yet. With grains sitting at the lower end of recent ranges it's no surprise to see some level of buying from outside investors thinking values are comparatively cheap.

While this is true and values for corn and beans are well removed from their May highs, fundamentally speaking there really isn't much of a reason values should move higher at least in the short-term, considering much of what has been bullish thus far remains a bit in question.

Throughout the last quarter of last year into the first half of this year, all we saw was exponential growth in demand combined with reductions in supply throughout the globe. So far as we roll into harvest and the new marketing year, we are hearing reasonably decent yield reports for corn likely keeping us in line with current production estimates, with much better than expected soybean yields, potentially pushing production higher there. 

In addition to what appears to be a relatively stable production outlook at least in the short-term, our biggest customer of global grains and oilseeds is struggling with an energy crisis with a financial crisis twist. China has been the cornerstone of the recent growth in demand, and while the signs just don't seem to be there that we'll see a repeat of last year, it will take months to confirm whether this is the case or not.

In the meantime, prices are unlikely to break too far just with the overall support to the commodity sector as a whole, but have really no reason to move higher, thus the range bound trade we've been watching and the likely continued range bound trade we see until something happens to give us conviction one way or another.

Looking ahead, we will get updated energy figures later this morning. Folks are expecting a continued drawdown in oil stocks as many feel demand is outpacing production there and will for a bit longer. On the ethanol side, more available corn at cheaper values is likely to encourage an uptick in production for the week, with stocks likely stable to lower. 

As mentioned, we will get an updated Quarterly Stocks figure tomorrow. This update will give us insight into actual old crop carryover, which in turn becomes new crop carry in- or the starting point when it comes to supply availability in the marketing year ahead. Traders are expecting cuts in both corn and soybeans, but many will likely remain on the sidelines until that report is released and we know we're free from any surprises. Especially considering cuts to stocks was where things started to get sideways from a price perspective a year ago.

We're likely to see continued harvest pressure run headlong into inflationary bulls throughout the day, so things could get messy.

Corn 3-4 higher

Soybeans 2-3 higher