Morning Comments December 15, 2021

Grain Corn Pile Closeup

Relatively large price swings appear to be the norm in soybeans now as yesterday we recovered over half of what we lost on Monday. Corn traded higher as well, trading to the high side of the most recent range before settling back a touch into the close on weaker wheat values.

Much of yesterday's soybean strength could be credited to the concerns out of Southern Brazil and Argentina that we discussed yesterday. The region has been dry and looks to remain dry for at least the next two weeks. Again, as we discussed yesterday, it is early in the season yet, but the Buenos Aires Grain Exchange out of Argentina says there are reasons to be concerned and that the weather pattern poses a challenge.

At this point it appears around 20% of Southern Brazil with around 25% of Argentina is running much drier than average and will be looking at a potentially critical situation if rains do not develop in the near future. After 2021, however, many may caution being too concerned over drought conditions as a whole, as timely rains prove far more valuable than subsoil moisture when it comes to overall production potential. 

Northern and Central Brazil continues to see nearly ideal weather with folks talking about harvest looking to get underway in some locations before year-end. Cash values continue to indicate limited concern when it comes to overall production as Brazilian offers continue to undercut U.S. values relatively substantially February forward. 

In addition to concern over what is happening in South America when it comes to production, there were rumors again yesterday of China inquiring on values of U.S. corn. As we've talked about several times these last several months, the idea of China looking to return to the U.S. corn market in a big way as we saw a year ago will keep values underpinned for quite some time. 

Looking at Chinese values, it is easy to see why this story remains relevant. Domestic values continue to remain elevated, even in the face of a record large harvest. We discussed a few weeks back how some farmers in the Northern portions of the country continue to struggle with gathering the crop, with concerns regarding toxins and other quality issues keeping feeders and industrial end users in the area concerned. 

However, we are in a very different situation from a global supply standpoint as we do have much more in the way of grain available out of Ukraine, with Australian feed wheat values working their way into China far better than U.S. corn could. Just last week a government auction of imported corn only garnered purchases of around 31% of bushels offered, also indicating lackluster demand when it comes to more expensive bushels. 

At this point I would say Chinese buyers may be holding their breath to see how soon the second corn crop in Brazil gets planted and how that looks as we roll into February before they get overly aggressive when it comes to U.S. corn, but the fact they remain lurking in the market will keep even the biggest grain bear from feeling overly confident in their opinion.

Speaking of Australian wheat, a break in the weather and a final push to harvest in the country has prompted a near dollar a bushel drop in some cash wheat values being offered. Folks are now saying the crop is massive, and though there is a larger than normal portion of it that's feed wheat, there is still a reasonably large amount of quality milling wheat available for consumption.

Looking ahead, we will get updated insight from Fed Chair Powell this afternoon as the Federal Reserve holds its final meeting of 2021 this week. Traders fully anticipate Powell to confirm a much faster than once thought pace when it comes to unwinding fiscal stimulus, with some expecting rate increases by mid-2022 if not sooner. 

We will also get updated NOPA crush figures for November midday, giving us insight into how many beans we crushed last month, with updated energy and ethanol figures out around 10:30 a.m. Eastern.

Corn 1 to 2 lower

Beans 1 to 2 higher