Morning Comments April 6, 2022

Cornboard Field 042221

Markets were firm again yesterday as the inflation trade rolls on and folks begin to imagine what the global grain and oilseed supply chain could look like if Russia's invasion of Ukraine continues indefinitely. On the day, May corn was up 9, with December corn up 7. May soybeans were up 28 while November beans were 16 higher. Wheat was up 35.

Developments between Russia and Ukraine feel almost non-existent. We are seeing a continued withdrawal of Russian troops out of portions of Northern Ukraine, especially from the areas surrounding Kyiv. Ukrainian officials warn the risk of continued discoveries like those found in Bucha are likely, with a dire warning that the worst discoveries are yet to come. 

The damage and civilian losses Russian troops are leaving behind are pushing global superpowers to ratchet up sanctions though ,one must wonder why these weren't put in place 6 weeks ago and what could possibly be done this far into the situation to actually deter Putin and his cohorts. 

There is some talk on the bright side of things, however, that the withdrawal of troops from the Northern portions of Ukraine will come just in time for the Spring planting campaign. While fuel supplies are tight and other inputs are nowhere near as secure as years prior, we are seeing some optimism regarding the potential crop outlook, with production estimates from the country's analysts increasing from initial dire thoughts. 

In addition to a potential floor in production outlooks being found, there was a lot of talk yesterday about just how much grain remains on hand in the country. Initial estimates indicated around 5 mmt of wheat and around 10 mmt of corn were still sitting in Ukraine at the time of the invasion. According to experts now, that number has increased with estimates as high as 12 mmt of wheat and 15 mmt of corn waiting to be shipped out once conditions become safe to do so. 

We have seen calls for continued increases in rail shipments, with an April export target of 1.5 mmt of grain. This is a far cry from the nearly 5 mmt of shipments we were seeing prior, but still better than the zero many analysts had in their spreadsheets just a handful of weeks ago.

Outside of what is happening in the Black Sea, we are watching production and exports shift out of other countries as changes in prices and supply availability are creating unique opportunities for some. Brazilian wheat exports for the first 3 months of the year are already double that of 2021, with India targeting 12 mmt of wheat exports for next year. We're seeing increased wheat export targets out of the EU and Australia as well.

Corn-wise, we're monitoring Brazilian production potential as private analysts have been bumping up their Safrinha corn crop estimates as of late. There is some concern we could run into a dry spell potentially to finish the crop, with drier than normal conditions already being observed in the Southeastern portions of the country. Luckily at this point heat seems to be limited, but continued forecasts will have to be monitored into mid-May.

Here in the U.S., the number of flocks and birds affected by Bird Flu has exploded, with reported cases doubling and an estimated 46 million birds euthanized so far. With nearly 3 months left in the migratory cycle, the concern is that the current outbreak could far outpace the loss encountered in ‘14-‘15. Currently the bulk of cases appear to be centered in Iowa and surrounding states, though cases have been found throughout the Eastern Corn Belt as well.

Looking ahead, we will get updated energy figures this morning. As has been the case, we will continue to look to see if we are starting to reduce ethanol stocks. With levels creeping up towards Covid lockdown highs, we definitely need to see exports or an increase in usage to keep us from having to talk about lack of space for finished product. 

In addition to energy figures, we will get insight into what was discussed in last month's Fed meeting with the release of meeting minutes. Traders will be scouring the notes for any indication of hidden intent regarding policy or hints that there could be other options on the table when it comes to controlling inflation.

The yo-yo trade is likely to continue. We managed to fill a gap on the December corn chart yesterday that had been open since 2012, so we're obviously in rare air. Keep focus on what today's prices mean for your operation and remain aware of where your risk lies. Markets are likely to remain supported for some time, but with funds still record long, all ags money flow will continue to dominate.

Corn down 5 to 7

Beans down 2 to 4