Morning Comments December 30, 2021

Winter Bales

Corn and beans had another back and forth kind of day yesterday, both closing relatively close to unchanged, while wheat worked to gain back a portion of what it lost Tuesday.

Much of yesterday's market conversations were again centered around South America and what is taking place in the driest parts of the region weather-wise. We continue to struggle with just how much production potential truly has been lost as folks in Central and Northern Brazil are expecting to harvest a record crop and some in the areas labeled dry have been lucky enough to catch timely crop saving rains. 

There are areas experiencing significant losses, but whether those areas will outweigh other areas where significant increases in yields are expected remains the million dollar question.

Forecasts are currently calling for rains to fall as we finish out the week, with more expected throughout some of the drier areas as we work into next week. These rains are critical and will need to be verified, but could likely change the trajectory of the market if they are.

16-30 day forecasts are continuing to hint to a possible pattern shift towards wetter conditions in portions of Southern Brazil, especially Parana, but are too far out for forecasters to feel overly confident just yet.

Outside of South American weather, we saw Ukraine take the lion's share of the Egyptian business we spoke about yesterday. It is interesting to note the significant shift in Egyptian suppliers versus last year. A year ago Russia accounted for well over half the wheat sold to Egypt as drought-reduced Ukrainian supplies were far from competitive. 

Changes in Russian export taxes and quotas have also worked in the Ukrainian exporter's favor as many Russian exporters continue to struggle with sourcing supplies. 

One point of interest in the Egypt trade yesterday was the presence of a French wheat cargo. Many European traders are worried aggressive exports will exhaust supplies, a concern that has worked to keep European wheat futures elevated, keeping U.S. futures supported as well.

At this point one would think if sellers are still selling they obviously feel comfortable with supply, though it wouldn't be the first time we've seen comfort in supplies turn into empty bins a little too quickly for comfort. 

Speaking of export quotas, there was some chatter yesterday regarding Argentinean exports, with reports indicating the government is intending to limit wheat exports to 12.5 mmt and corn to 41.6 mmt. If realized, these restrictions would be 1 mmt lower than current USDA export projections for wheat and around 2.5 mmt (98 mbu) higher on corn. Local farmer groups are vowing to fight the limits.

Even in the face of reasonable supplies, the fear of supply scarcity after what we saw take place the last quarter of 2020 well into 2021 isn't something that's going to go away overnight. 

Looking ahead, we will get updated export sales this morning at 8:30 eastern. With the holidays providing folks some downtime, overall sales are expected to be a touch weaker as a whole. 

Markets are open tomorrow even though many offices and businesses will be closed to celebrate the New Year holiday. It is possible we could see some big moves with limited explanation these next couple days as many folks have left for the duration of 2021, looking to return next week instead. 

Corn down 4 to 5

Beans down 13 to 14