Morning Comments December 22, 2021

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Corn and soybean values broke out of the high side of their recent range and surged higher yesterday, breaking $13 dollars for old crop beans, with old crop corn breaking out above $6 overnight.

Continued conversations regarding the weather in South America, specifically Southern Brazil, Uruguay, Paraguay, and Argentina remains the driver as we struggle to put our finger on what this dry weather will mean when it comes to overall production potential.

We saw a couple different private analysts lower their production outlook for Brazilian soybeans yesterday as well, one reducing their expected production by 2 mmt, with the other taking a far more aggressive approach. 

Crop conditions in the Brazilian state of Parana fell off hard last week as well, with soybeans falling from 83% or so rated good to 57% while corn conditions fell from 90% good to 63%. Not something you want to see with 40% or so of the corn crop pollinating and the forecast remaining warm and dry for at least the next two weeks. 

At this point there is a lot of emotion working through the market, especially considering it was only 2 months ago soybean bears were talking about a move back towards $10, but one must remember just last year where drought conditions throughout the month of December had some analysts dropping the Brazilian bean crop to 128 mmt versus the 138 million the country produced. 

It is easy to get caught up in the emotion, but one must also remain aware that overall global soybean production was expected to come in nearly 16 mmt higher than last year with much of that expected to be soaked up through increases in domestic crush. 

However, with the failure of the Build Back Better bill, something loaded with incentives for renewable fuels, specifically renewable diesel, and the Brazilian government's move to keep the country's biodiesel blends at 10% versus the previous level of 13% or the 15% expected, it will be interesting to see if the USDA manages to offset much of the potential production loss by reducing global crush demand. 

In any event, even with a reduction in production the world will have more than adequate soybean supplies, with an outlook of increased U.S. acreage due to high corn production costs on the horizon.

In addition to strength in corn and soybeans, we have seen wheat recover relatively well as of late. Rumblings regarding lower-than-expected Hard Red Winter Wheat acreage, in addition to dryness concerns, pushed Kansas City wheat much higher throughout the day yesterday, dragging Chicago and Minneapolis wheat along.

We continue to monitor what is happening with Russia and the Ukraine as we appear to be at a stalemate there with Putin refusing to back down from his threats of response to what he calls “Western aggression”.

Looking ahead, we will get updated energy information this morning. We will be looking at ethanol production figures and stocks, and try to get an idea on if gasoline demand has been impacted by Omicron or the continued surge in Covid cases nationally. We got another handful of work from home indefinitely announcements yesterday, with many who are planning winter time events and conferences unsure of if they should continue. 

From a technical standpoint the corn, soybeans, wheat etc. are a buy, with traders likely working to retest old highs in corn and resistance levels in beans if we don't see some sort of pattern shift show up in the long range forecasts. 

Keeping a level head and recognizing opportunities in the market is what sets a good marketer apart from a bad one; resuming a scale sell approach as we work our way back into the $6 and $13 handles is prudent.

Corn up 3 to 4

Beans up 9 to 10