Morning Comments December 3, 2021

Combine and Tractor in the field for Soybean Harvest

Markets were stronger across the board yesterday with wheat back in the driver's seat leading the charge.

The Russian story is a gift that keeps on giving to wheat bulls it seems, as much of yesterday's strength in the complex could be attributed to developments in Russia. We have been talking about Russian wheat export taxes and quotas for over a year now as the country continues to battle surging domestic food values and an angry milling industry. 

Though the wheat export tax in the country is now targeted to move above $80/tonne, export pace has remained brisk. As a result of decent shipment pace, continued price increases and exporters undeterred by the tax, rumors began to circulate yesterday that the Russian government would place a quota on exports March 1st forward.

Rumors indicated the government would limit exports to 5-9 mmt March through June in the coming year. Obviously a 5 mmt quota would have a far different impact on global supplies than a 9 million metric ton one, as it's a nearly 150 million bushel swing.

Some are scratching their head entirely as to why the quota talk when the Russian government remains steadfast in what they feel the country has to export and current sales and shipment pace is on track to meet targets. Though after a pretty substantial drop in price it should come as no surprise bullish chatter would start to resurface.

In addition to quota talk, satellite imagery showed a continued build-up of Russian troops along the Ukrainian border. Ukrainian officials estimate there are upwards of 90,000 troops in place, gearing up for an invasion, a claim Russia continues to deny, saying they can do whatever they would like with their troops within their borders.

The U.S. has made it clear they and their NATO allies back Ukraine, bringing a whole other angle into the dispute. Russian President Putin has requested a meeting with President Biden, something both groups say will happen soon, hopefully resolving tension and bringing folks throughout the Black Sea region some relief. 

Outside of Russia, we continue to monitor Chinese bean buying. Crush margins in the country had quietly slipped back up to some of the highest levels seen for this time of year over the last 5 years after spending much of the summer in negative territory. 

Rumors that China may begin to limit industrial output as it prepares for the Winter Olympics is pushing folks to increase production as well in the short-term, lifting demand.

With Brazilian beans close to a dollar a bushel cheaper February forward, it should come as no surprise to see US exporters doing everything they can to get beans sold for shipment before the country begins to harvest in earnest. 

Export sales yesterday were a bit lower than expected, with wheat a marketing year low, though many are attributing the slower pace to the holiday week.

Looking ahead, crude is trying to recover again this morning after falling apart early yesterday on news OPEC+ will stay the course when it comes to production increases, as many were expecting news they would reduce output after coordinated reserve releases and news of the Omicron variant.

After the initial selloff oil was able to recover, thanks to strength in outside markets and ideas that maybe Omicron won't be as bad as initially feared. Though news Omicron was found in New York has folks a little nervous about what that could mean as we work our way into the winter season.

News throughout the day today will give us direction, limited developments when it comes to Omicron or global tensions will likely keep things quiet, anything beyond that and we see big moves return to the market in either direction.

Corn up 5 to 6

Beans up 10-12