Morning Comments April 27, 2022

Black Dirt

Spreads seemed to be the name of the game yesterday, with some correction to class spreads in wheat as well as increased risk premiums in new crop values for corn and beans, providing some interesting moves. On the day we saw Chicago wheat finish 22 higher, while Minneapolis was up 9. July corn gained 3 cents, with December up 9, while July beans were down 3 with November up 8.

The war in Ukraine is no closer to remedy than it was on day one it seems as we are starting to see offensives ramp up from both sides. Concern the war is spreading elsewhere is increasing as well as explosions have been reported in a pro-Russian area in neighboring Moldova. Reports Ukraine was responsible for an explosion at an oil storage facility in a Russian border city made their way around the wire earlier this week as well.

Putin has made good on his threat regarding gas flows and payments, cutting off flows to Poland and Bulgaria after the two countries refused to provide Rubles as payment. While both countries say they can weather a short-term shutdown, other European gas companies have scrambled to open accounts that would allow them to convert their currency as necessary, with four companies reportedly already actively paying in Rubles.

The concern over the cut to flows and the fact that Russia seems undeterred by many of the West's sanctions pushed energy prices higher yet again yesterday. 

On the grain side of things, Spring planting in Ukraine continues to roll in the areas removed from active fighting, with 88% of last year's spring wheat acreage already planted this year, according to the ag ministry. 66% of last year's barley acreage has been planted, with slower progress reported for other crops, while corn pace remains unreported for some reason.

Russian production continues to be on pace for a record as weather continues to cooperate for the majority of the country's growing regions. 

Export-wise, a trickle of Ukrainian grain has started to make its way to ports in Romania, with other neighboring countries offering their infrastructure to keep Ukrainian grain flowing as well. At this point, moving upwards of 1 mmt of grain into the global pipeline a month appears to be an optimistic estimate, down considerably from the 5 mmt monthly pace seen before the war. 

Russian grain continues to flow relatively unencumbered. 

Production wise, elsewhere we are continuing to monitor the dry finish to over a third of the Mato Grosso Safrinha crop, with a farmer group from the state yesterday saying production estimates will likely start to fall off in the coming weeks. At this point it appears upwards of 5 mmt of production potential could be lost, though there seems to be some confusion as to what kind of number that 5 mmt will be trimmed from. 

With such a solid start to the season there was talk of nearly 120 mmt of production potential overall, though official estimates remained in the 115-116 range for the most part. In any event, even if we were to see the 5 mmt cut from the 115 mmt estimates, Brazil is still on track to outproduce last year's crop by nearly 25 mmt. 

Here in the U.S., weather remains cool and wet in the Eastern Belt with limited field work being done especially in northern regions. Planters are starting to roll in the Western Belt, with farmers in Nebraska rolling hard into the driest conditions they've ever planted in, praying rain in the forecast for late this week into next week comes to fruition.

Farmers in parts of North Dakota are waiting for feet of snow to melt as precipitation chances remain through the end of the week, into next. Talk of prevented planting is beginning to circulate already, though some private forecasters continue to talk of a potential pattern shift into the second week of May and beyond. 

Outside of production weather we are continuing to monitor what is happening with Indonesia and their palm oil export ban. There seems to be some confusion as to what is banned, how long it is banned, and what it will mean to global supply and demand as a whole. The uncertainty in this type of market is prompting another wave of buying with Palm Oil up over 10% overnight and soybean oil trading to new all-time highs.

Looking ahead, we will continue to watch what is happening in the outside markets as worries over a Chinese Covid lockdown supply chain contagion as well as European economic concerns remain in the forefront of many traders' minds. Consumer confidence in Europe's two largest economies have fallen off a cliff, with German figures the lowest on record and France's the lowest since 2008.

To be filed under “things we definitely did not expect”, the Euro is now trading lower than the Ruble, even in the face of sanctions and predictions of an epic Russian economic collapse.

We're back up to recent highs in both new crop corn and beans, with old crop values back up to within shouting distance of recent highs as well. Don't forget the importance of target orders as you get ready to go to the field.

Corn steady to 1 lower

Beans up 15 to 17