Market Commentary April 22, 2022

Soybean Field Istock 000020962744Xlarge

Corn and wheat continued to struggle yesterday, while continued talk of Chinese buying interest helped keep soybeans from losing much ground for another day. On the day we saw Chicago wheat down 21, July corn down 15, with December down 10. Soybeans closed 2 higher.

The uptick in noise regarding what is happening in the markets feels noticeable these days as we seem to be nearing peak uncertainty. Planting progress in the U.S. has gotten off to less than a desirable start with cold and wet conditions across much of the country keeping many on the sidelines when they would traditionally be rolling.

In addition to uncertainty regarding U.S. production from here, we continue to monitor what is happening in Ukraine. Planting continues in the country, as does war, with Putin claiming Mariupol has been captured by Russian forces even though thousands of troops remain holed up in an industrial zone at the heart of the city. Putin announced Thursday forces will seal off the area in question as opposed to storming it, choosing instead to send forces elsewhere in the Donbas region.

Ukrainian officials say Mariupol still stands, though aid for troops and citizens trapped within the city is necessary. 

Russian production outlooks remain unfazed by the situation, with one Russian analyst predicting the country will produce 87.4 mmt of wheat, a new record. Good Fall weather combined with good Spring conditions so far is being credited for the increase, with upwards of 41 mmt of wheat exports anticipated in the coming crop year, an over 7 mmt increase from this year.

In addition to uncertainty regarding U.S. production and what is happening in the Black Sea, we have the Chinese Covid strategy and its effect on the global economy weighing heavy on the minds of central bankers around the world. 

Numbers released overnight indicate Chinese oil demand has fallen to its lowest level since early 2020. In addition to reduced oil demand, many analysts are growing concerned regarding their slower-than-normal import pace for the first three months of the year and how continued Covid lockdowns could limit further imports in the months ahead. 

Lockdowns in Shanghai have pushed the number of ships waiting to load or offload at port to over 500, with no sign of a complete relaxation of restrictions on the horizon.

Though concerns regarding demand remain, we have seen continued Chinese buying interest for U.S. beans as we remain competitive in the global market throughout the Summer, pushing this week's shipments to a noticeable high for this time of year and keeping sales pace reasonably elevated seasonally as well.

Excitement regarding exports doesn't seem to be carrying over into corn as expected, though. This week's export sales were decent, though much of the purchases were known prior, thanks to the Chinese export sales flash late last week.

Noticeably absent in this week's report was Japan. Typically one of our largest corn buyers year in and year out, a drop in the yen to 20 year lows is creating an even greater pricing divide than we would typically see, pushing them to source much cheaper corn out of South America.

Freight for nearby into Summer continues to weaken along the river, also pointing to potentially less demand than anticipated, though it is important to note higher water levels are providing the shipper an opportunity to move more per barge and possibly reducing the amount of transportation needed. Gulf basis bids have been falling with freight lately as well. 

Looking ahead, consolidation seems to be the name of the game today as we work to figure out a fair value to wrap up the week with all things considered. Chatter from Fed officials yesterday continues to point toward aggressive approach rates, with one of the swiftest transitions in monetary policy since the 1960's expected. 

Now is the time to build out your marketing plan. Get targets in place before you get in the fields and be aware of the seasonal tendency to trade higher into the first week of May before we start to remove unknowns and begin to trade lower into the Summer weather market. 

Corn up 4 to 6

Beans up 3 to 5