Morning Comments December 6, 2021

Corn closeup

After an incredibly volatile week with big moves first lower then back higher, we managed to find ourselves within a nickel or so of where we started for corn and soybeans. Wheat remains stout, though well off its recent highs. 

Rumors of Chinese buying interest continue to help provide support any time we see the markets sell off. Late last week we heard of more purchases by China of Ukrainian corn with folks saying buyers are inquiring on U.S. values as well. While no purchases were confirmed and we still have a significant amount of corn on the books needing to be shipped, the idea China could return in a major way at any given moment will keep folks hesitant to sell any dips for a while yet.

Looking at domestic values, it does appear as though portions of China are struggling with supply issues. Reports out of Northern China indicate that though the production season was nearly ideal, rain ahead of and during harvest time has slowed harvest and raised concern over a potential increase in toxins as much of the rainy weather has been accompanied by warmth.

While the country insists production is still on track to be a record, the slow process of getting it out of the fields and to where it is needed has pushed prices back up to the high side of their recent range, improving import margins for some end users as well.

Again, when looking at current purchases on the books, China still has a large chunk of U.S. ownership, accounting for the lion's share of bushels left to be shipped. With nearly 13 mmt (511 million bushels) sold to both China and unknown. we will continue to watch shipment pace more closely in the first quarter of 2022 than anything else, though as mentioned the idea China could come in with big purchases will keep bulls fed and bears hesitant for the foreseeable future.

Over in wheat, we got confirmation Friday that Russia will issue an export quota on grains from mid-February forward. However, the figure the government seems set to establish is on the high side of rumors at 9 mmt for the time period. While a 9 mmt quota appears to pull overall Russian wheat exports down slightly from USDA projections, it is much larger than the 5 mmt rumor that sent wheat values higher on Thursday.

More than anything we continue to monitor tensions between Russia and Ukraine as the U.S. confirmed over the weekend that upwards of 175,000 troops are making their way to the contested border. Russia continues to claim they are operating within their rights as the troops remain within their borders and they are doing nothing to threaten Ukraine, though much of the world would beg to differ.

Russian President Putin and President Biden are expected to hold a video call Tuesday to discuss the current situation.

Looking ahead, we will get updated export inspections this morning at 11:00 a.m. eastern. As mentioned, traders will be looking to the numbers for some level of confirmation corn shipments are picking up as they have averaged less than half of what is needed to meet current USDA expectations since the start of the marketing year. 

Bean shipments are expected to come in strong after the recent run of Chinese purchases for December and January, while wheat shipments continue to dole out a tight crop a spoonful at a time.

Weather in South America will be watched closely as well as there are some pockets of extreme dryness starting to pop up in portions of Southern Brazil. Traders continue to discuss a likelihood of Argentina turning dry though rain fell throughout a good portion of the growing area this past weekend with more expected late in the week.

La Nina continues to influence South American weather, remaining a presence at least through January keeping folks in Southern Brazil and Argentina on high alert as it tends to impact them and the Southern Plains of the U.S. the most. 

Crude looks like it will try to recover some of last week's losses this morning on the idea that though Omicron seems to be much more capable of spreading than prior COVID variants, its infection appears to be mild.

Corn down 4 to 5

Beans down 5 to 7