Morning Comments April 5, 2022

Soybeans Farnhamville

The markets were stronger across the board yesterday as confirmation of much-rumored Chinese corn interest and the idea the war in Ukraine feels as though it is leaning towards indefinite aggression brought buyers back into the market. On the day we saw Chicago wheat up 25, May corn finish 15 higher, and May soybeans up 19 as well.

Continued discoveries of atrocities committed against citizens while cities outside of Kyiv were held in Russian control has prompted many world leaders to push for additional rounds of sanctions, with the call to completely ban Russian energy imports growing louder. 

Talk of further cuts to ties between Russian banks and the outside economy are being discussed as well, with some believing this move would have the potential to make grain exports even more difficult. Currently Russian grain export shipments are running relatively in line with historical amounts, as foreign buyers look to continue to source relatively cheap food in the face of global inflationary pressure.

With ship insurers widening the area of the Black Sea deemed high risk however, we could see shipments out of Russia begin to slow as reports of floating mines are keeping some cargo lines from moving that direction at all. Ukrainian grain exports continue to run around 10% of previous pace as all shipments out of the country have to move by rail. 

Ukrainian fuel supplies for the spring planting campaign have become a concern recently, with reports of Russian forces shelling fuel depots and intentionally destroying supply lines. The Ukrainian Ag Ministry says fuel shortages will be minimal, upping their spring acreage potential from their previous low-end estimates, though total area is still expected to be over 3.5 million hectares lower than last year. 

Here in the U.S., we finally got confirmation of the much-rumored Chinese corn buying interest with a flash sale of just over 1 million metric tonnes announced yesterday morning. Of the just over 39 million bushels sold, just over 17 million is for old crop. This is the first major Chinese old crop corn purchase since last May and the second decent new crop buy on the year.

Export inspections came in as needed with corn export shipments just over 60 million bushels last week. Of the bushels shipped, China took just over 18 million. Bean shipments were a bit better than the weekly amount needed and in line with recent shipment pace, while wheat shipments were at a 12-week low, continuing to outperform itself to the downside week after week.

We got the first crop condition and planting progress figures from the NASS arm of the USDA yesterday, with wheat conditions coming in with their lowest condition rating on record at only 30% good to excellent. This week last year the crop was rated 53% good to excellent. 

Of course, the worst condition ratings are seen in the Southern Plains where drought and high winds continue to batter the young wheat crop. Dry conditions and strong winds are expected to continue for the next week, creating further concern before a pattern flip is expected early next week. 

While it is too early to have an overly high confidence level in extended forecasts, well-followed meteorologist Eric Snodgrass believes we could see several storm systems develop and move through the driest parts of the heart of the country, providing much needed moisture through mid-May. 

Looking ahead, we are continuing to watch what is happening in China as the country continues to battle Covid. Case numbers continue to rise as interprovince transportation remains at nearly a standstill, beginning to prompt some concern regarding energy and ag product demand. Interesting to note that only 248,000 tonnes of the 502,000 tonnes of beans offered via government reserves were bought last Friday, as crushers continue to struggle with logistics, demand and negative margins.

We will also continue to monitor Black Sea developments as leaders from the EU announced another round of sanctions this morning, with Ukrainian President Zelensky making comments regarding the difficult nature of continued negotiations.

Corn up 4 to 6

Beans up 12 to 14