Morning Comments April 20, 2022

Aerial Farm Land

News felt somewhat limited yesterday, allowing the markets to take a bit of a breather after recent big moves to the high side. Energies were weaker on the day, with natural gas off over 10% at one point, providing some pressure to commodities as a whole as well. On the day we saw Chicago wheat close down 20, July corn was 7 lower, with December down 3. Soybeans closed mixed to a penny lower.

The new phase of Russian military operations in Ukraine does not feel much different than previous offensives to the outside observer, though it is obvious the pause to regroup troops has provided a more organized attempt at taking Donbas than what we had seen prior.

Interesting to note, there are large amounts of fertilizer reportedly backed up at Brazilian ports. Some assume this is an indication that Russia and Brazil may be working together in some type of economic alliance, while others believe a large amount of business was done around the time the invasion occurred to get ahead of any potential sanctions or disruption to business. 

Russian wheat exports are also continuing at a relatively normal pace, as U.S. officials indicated yesterday that grain exports are not to be impacted by sanctions. 

The war in Ukraine is impacting the outlook for global economic growth according to the International Monetary Fund. During their updated global economic outlook, the IMF reduced their outlook for growth from 4.1% to 3.2% mostly due to the conflict in Ukraine, though they mentioned continued slowdowns in Chinese economic activity due to Covid could weigh further on that outlook if not quickly remedied. 

According to an economist at a major Japanese financial institution, nearly 40% of China's economic activity is being reduced due to Covid controls, with an estimated 400 million people impacted in some way by lockdowns or restrictions.

In Shanghai, the government has provided an avenue for companies to return to production, allowing nearly 700 factories to reopen if proper Covid protocols are practiced. In this instance, workers are required to stay on campus and not allowed to return home. These rules are also impacting port workers, with productivity falling off sharply the last month as an estimated 450 ships back up in Shanghai alone, waiting to be unloaded. 

Here in the U.S., we continue to monitor weather as the warmup this week throughout much of the country is expected to be short lived. The 6-10- and 8-14-day forecasts continue to call for cooler than normal temperatures as we work into the first part of May, though below normal precipitation is expected and especially welcome throughout much of the Eastern Corn Belt. 

According to our friends at AgTraderTalk, a well followed agriculture analytical group, the U.S. corn crop is generally 50% planted by around Mother's Day, with 50% of the bean crop usually in by May 22nd. 

With historical data pointing to a tremendous link between having over half the corn crop planted by mid-May and normal to above normal yields, traders will be holding their breath that the current advertised May warmup remains in the cards as models roll forward.

Looking ahead, we will get updated ethanol and other energy figures released mid-morning. Ethanol production last week was the lowest in 10 weeks as plants shutdown for spring maintenance or simply reduced grind. This week's figures will be interesting to see if the drop was a blip in an otherwise strong ethanol demand year or potentially a sign of things to come.

In the past we have seen instances where surging natural gas prices prompted ethanol producers to reduce production, choosing instead to resell natural gas supplies, finding themselves able to make better money. With natural gas surging to its highest level since 2008, one must wonder if some plants may not proceed down that path once again.

Otherwise, energies are recovering a bit this morning after yesterday, with other news remaining relatively limited.

Corn mixed- Steady to 1 lower

Beans 8 to 10 higher