Morning Comments February 4, 2022

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The soybean market took a bit of a breather yesterday while corn and wheat continued to show weakness, though all three markets closed well off their lows. 

The day started with a lot of focus on just what is taking place from an export standpoint. Much of the discussion late last Fall into early Winter had centered on just how many beans Brazil would be looking to produce and what that could mean for U.S. demand. Many were quick to expect a significant cut in U.S. exports, and for good reason as Brazil was expected to produce 3-500 million bushels more than last year's record crop.

However, that additional 3-500 million is off the table now, with ideas that final production could be 3-500 million lower than last year. Obviously not all this loss in supply will translate to an increase in U.S. demand, as even the most bullish export estimates for Brazil currently are only around a million metric tonnes lower than last year's figure. 

In the end though, the idea we would see a 200-million-bushel cut to USDA export expectations and a subsequent push to a 500-million-bushel domestic ending stocks figure is now unlikely, with some folks anticipating an increase in exports from here. 

With the U.S. still currently running behind the pace needed to meet USDA expectations pretty solidly, we're going to need to see some continued big interest from China on old crop purchases as we roll ahead. 

One final piece of what is happening in Brazil and what it means- there has been some talk recently that folks could be underestimating planted acreage by some 6 million acres. If true, the market could be in for a bit of a surprise, though confirmation of something like this taking place will take months and will come from the cash market and export flow this summer more than anything.

On the subject of export demand, we saw China make the largest one-day cancellation of corn purchases on record yesterday, with the USDA announcing a 380,000 tonne cancellation.

As we have discussed numerous times in the last several months, the expectation of additional major Chinese corn purchases seems to be baked into the market after last year. However, Ukrainian supplies are substantially larger and with the proximity of the two countries, so long as nothing hinders shipment, it makes logistical sense for China to look in that direction.

While it is early yet, we have seen what was a massive early season corn export book fall off substantially, shifting from well above USDA projections to well below. There had been some talk earlier in the week when corn first fell off that Chinese buyers were rolling purchases forward to take advantage of cheaper freight, though now it appears as though China may have used freight already owned for March/April shipment for bean purchases instead.

Over on the geo-political side of things, the Olympics kick off in Beijing officially today. President Xi and Russian President Putin held "long and productive" talks ahead of the Olympic celebration. The two have become close as of late and are looking at ways to grow together on the world stage. According to Reuters the two discussed trade, with some talk that China will now accept imports of Russian wheat and barley and will work together when it comes to energy production.

The outside markets were hit hard yesterday as the tech selloff continues. Meta, formerly known as Facebook, was down nearly 27% on the day after a surprise downturn in accounts and account growth. It is amazing to think about the billions in capital that has been wiped out in the tech space since the start of the year, with some harkening back to the burst of the tech bubble in the early 2000s.

Looking ahead, we saw some solid strength in the overnight markets, though some of that has been given back in the early morning trade. The USDA will update supply and demand figures next week, potentially providing some pause to the buying as these reports have seemed to rush in a change in short-term direction these last few months. 

Corn down 1 to 2

Beans up 3 to 4