Morning Comments October 7, 2021

Bin sunset harvest

It was a bit of a back-and-forth kind of day yesterday, starting weaker in the early morning, moving higher ahead of the morning break and trading higher on the open before a turnaround in the energy markets sent everything lower.

As we discussed yesterday, folks from all over the world are continuing to grapple with just what is happening in energies. We saw multi-year and, in some cases, record high moves in values early yesterday morning before a couple different shifts in the narrative cooled some of the extreme buying there. 

First, we saw Russian President Putin declare that Russia has more than enough gas to supply Europe throughout the winter and beyond. Putin claims Russia could export a record amount of natural gas and they could do so quickly if his European counterparts would approve the use of the Nord Stream 2 natural gas pipeline that has been held up in a contentious permitting process.

The pipeline runs from Russia into Germany under the Baltic Sea and has been completed for some time, though is not in use. Russia argues that the current route through the Ukraine is more costly and harmful to the environment. Some argue that Russia is withholding supplies from Europe on purpose in an effort to strong-arm the approval process, though Putin says Russia is actually exporting more than they are obligated through current contracts on the books. 

In addition to talk of more than enough supply for Europe sitting in Russia, we saw oil reserves in the EIA report released late yesterday morning come in much higher than expected. On the week we saw crude oil reserves gain 2.3 million barrels, slightly higher than the 200,000-barrel increase traders were expecting. We also saw an increase in gasoline supplies. 

With the turnaround in energy prices, we saw most commodities take a breather as soybeans followed soy oil lower, corn sold off a bit as buying interest waned, and folks started to discuss what we could see in next week's supply and demand report again.

Ethanol production increased slightly as expected with stocks falling off a touch. We are only a month into the marketing year but are on track to meet current USDA expectations, with some thinking we could see a slight bump in corn used for ethanol demand in next week's report thanks to high energy values. 

We continue to get more of the same in wheat as well, with values moving higher yesterday and managing to fight off much of the weakness impacting corn and beans. Lots of talk regarding the GASC (Egypt's wheat buying arm) results, with Russia taking most of the business albeit at higher prices than the last tender. 

The increase in price had a lot of folks up in arms, claiming it was a sign Egypt would buy no matter the cost. This idea most likely true at this point as the country has a set amount of bushels it needs every year to meet domestic demand. However, it is interesting to note the higher values seen in yesterday's tender were all board driven with basis weaker. 

Speaking of Russia and wheat exports, there's a bit of a battle brewing there over just what we will see from an export standpoint. We had discussed earlier in the week the ag minister's assertion that total wheat exports could be capped at 31.5 mmt, down from last year's 38.5 mmt. However, yesterday the Russian Grain Union went on record claiming this year's exports could come in closer to 37.5 mmt.

220 million bushels doesn't seem like a lot in the face of a multi-billion-bushel global wheat crop, but where Russia comes in when it comes to exports will likely have a major impact on global supply and demand as well as values. 

Looking ahead, we will get updated export sales figures this morning. With China on holiday for much of the past week it is likely this week's bean numbers could come in a bit lower than we've been seeing. Most folks claim corn export business is pretty routine from a buyer standpoint, with no real major sales figures outside of what we already know expected there either.

Today's trade will likely be influenced by what we see shape up on the energy side of things and if we see some continued liquidation of positions or folks doubling down.

Corn 1 to 2 higher

Beans 3 to 4 higher