Morning Comments April 25, 2022

Bin sunset harvest

Friday was a rough day across a broad spectrum of markets as uncertainty over the global economic outlook begins to raise concerns. Wheat managed to withstand the outside pressure however, thanks to less-than-ideal domestic weather with Chicago wheat closing up a penny, while Minneapolis wheat was up 8. Corn finished the day down 6 with December down 14. July soybeans were hit the hardest, down 31, while November was down 26.

Friday's market action in corn and soybeans was interesting, considering the day started with relatively bullish developments. Traders were caught off guard early Friday with reports Indonesia would ban palm oil exports. Indonesia is one of the world's largest suppliers of palm oil, a vegetable oil found in just above everything we as consumers use, it seems. 

With the recent run up in food prices, the Indonesia government has struggled to contain domestic values, changing its approach to palm oil exports a handful of times since the start of the year. From export reductions to an increase in tax rates to an outright ban, the government has tried and failed to contain prices, roiling global vegetable oil values in the process. 

Soy oil surged to all-time highs on the news, though this morning sources are indicating the export ban is on refined and specialty palm oil products, something that accounts for only a small amount of Indonesia's overall exports. If true, 90% of the concern regarding reduced supplies has been removed according to one analyst.

In addition to reports on what was happening in Indonesia, the USDA announced two decent sized corn export sales to Mexico and China and one bean sale to China. Though long rumored, any confirmation of a Chinese corn purchase seems to create a buzz in the markets, with buyers coming in after the announcement only to be overpowered by negative outside market sentiment.

Though China is continuing to make grain and oilseed purchases, traders are becoming concerned over what demand could look like as we move ahead. Shanghai is entering its fourth week of lockdowns and Covid cases are starting to pop up in parts of Beijing.

Optimism regarding any rollback in Shanghai's Covid policy was all but erased over the weekend as officials began to erect fences around neighborhoods throughout the city. In addition to parts of the city being fenced in, other reports indicate entire communities have been removed from their homes and shipped to quarantine sites in order to allow government officials to enter and sanitize their homes.

Meanwhile in Beijing, a handful of cases has prompted officials in one district to require all citizens to three Covid tests in the next 3-4 days. Many citizens in the country's capital flocked to grocery stores over the weekend, stocking up on supplies they may need after watching what has happened with food availability in Shanghai. 

Chinese stocks were down hard overnight, hitting their lowest levels since early 2020. 

Looking ahead, we continue to watch weather and what it could mean for 2022 production. Warm and dry conditions remain in Central Brazil's corn producing region, potentially prompting production losses as the crop there works to wrap up grain fill. 

Here in the U.S., colder-than-normal conditions are expected to remain entrenched across much of the Corn Belt for the next two weeks, with drier weather expected for the Eastern Belt, while another major storm system ramps up in the Western Belt later this week. 

After facing extreme drought for nearly all of 2021, North Dakota can't catch a break with Western areas of the state getting hit by another blizzard over the weekend. Heavy rains continue to fall on top of melting snow from last week's storm, prompting flooding throughout much of the Red River Valley. With continued cold temperatures and moisture expected, planting progress will be near zero at a time when many small grains and spring wheat should be going in the ground.

We will get updated export inspections data this morning at 11:00 a.m. Eastern, but much of the day will likely be spent watching outside markets and trader sentiment regarding the global economy as a whole.

Corn down 5 to 7

Beans down 22 to 27