Morning Comments April 18, 2022

Winter Bales

Markets were mixed to wrap up the week last week, with wheat and new crop corn and beans closing lower Thursday while old crop corn and beans were higher. To finish the week, we saw May corn up over 21 cents, May beans down 7, with May wheat up 45. 

With much of the world on holiday Friday through today there was little in the way of news over the weekend, though the situation in Eastern Ukraine continues to deteriorate. 

Russian forces have all but taken Mariupol, Ukraine's 10th largest city in their quest to 'liberate' the Eastern regions. Russian leaders continue to urge Ukrainian officials to surrender the territory, but over the weekend Ukrainian President Zelensky said the country would do no such thing, not even to negotiate peace.

Ukrainian agriculture officials said over the weekend all regions of the country have started planting Spring crops, even those in close proximity to the war, with the first reported incident of a farmer hitting a mine in a field circulating social media. 

Current estimates from officials have 70% of the country's available land being seeded on the low end with upwards of 80% or more planted on the high end. Other analysts in the country seem to have differing views, but all agree so far that the Spring campaign has started off well, all things considered.

Spring planting here in the U.S. seems to be getting off to a slow start as colder and wetter-than-normal conditions continue for much of the Corn Belt. Lots of moisture fell over the weekend in the driest parts of the Spring Wheat Belt, though the fact it came as several feet of snow with more cold and snow expected is considered less than ideal. 

Temperatures are expected to warm in the Eastern Belt after a start to the week that has snow falling in parts of the Great Lakes, with above normal temperatures and relatively dry conditions expected to wrap up the week. The 8–14-day forecast has below normal temperatures for northern portions of the country, though normal to below normal precipitation is expected, likely opening the door for planting progress to kick off in earnest the first of May. 

Traders are watching what is happening in China closely to kick off the week, with a slew of economic data released overnight and Covid lockdowns continuing to grow. China's economy grew 4.8% in the first quarter, in line with expectations and better than the 4% growth seen in the fourth quarter of 2021. 

However, possible signs of things to come were seen in March consumer spending and unemployment numbers as consumer spending fell 3.5% on the month and unemployment surged. Perhaps the most interesting figure in March's numbers was the over 16% drop in restaurant spending and over 10% increase in grocery spending seen. 

As has been reported previously, the amount of food needed to supply a restaurant versus what goes into eating at home is a tremendous shift, with reductions to food waste and food demand obvious. The reduction in food demand continues to pressure hog margins as pork prices only remain supported by purchases for government reserves. 

Poor margins have resulted in herd reductions, with the Chinese hog herd now estimated to be the lowest since last March, down 6% in the last quarter. Covid lockdowns continue to wreak havoc with logistics though, creating elevated domestic prices as supplies have become difficult to move.

Looking ahead, we will be watching to see if federal regulators step in when it comes to the nation's railroads and their performance. Over the weekend CF Industries came out against the UP's recent plan that would remove private owned cars from the lineup, something that would impact grain and fertilizer suppliers. 

While CF says contracted tons would be able to be supplied, any new business would be unable to be supported, thus a reduction to Spring supply availability. A meeting this week was already scheduled for rail leaders and officials at the Surface Transportation Board, an independent government group tasked to make sure the nation's logistics move smoothly, as rail performance as of late has been abysmal. 

We will get updated export inspections later this morning, with updated crop progress from the USDA at 4:00 p.m. Eastern.

Corn up 5 to 7

Beans up 8 to 10