Morning Comments February 8, 2022

Beans 062419

Corn, soybeans, and wheat managed to keep the strength from Sunday's overnight session going throughout the day yesterday, with wheat up 5, corn up 14, and soybeans up 25 on the day. It is incredible, when looking at market performance as of late, to realize that since mid-January, March soybeans have gained over $2 while March corn has gained just over 30 cents.

The story again remains the same, we continue to struggle to quantify production losses out of South America and what they will mean for the global balance sheet. We got another big flash sale announcement to unknown yesterday morning, with bushels purchased split between old and new crop. 

With the recent spate of purchases, many traders are moving from the mindset that we need to see a sharp cut in the export outlook to one of potentially seeing an increase in old crop bean exports and a subsequent cut in ending stocks. While it is early yet, this is definitely something we will continue to watch as we would need to see a continuation of strong demand well into summer and beyond.

As we discussed yesterday, Chinese hog producers continue to struggle as feed prices in the country remain elevated and hog prices remain near lows. Overnight we got confirmation that China will work to replenish their government pork reserves, helping to put at least a short-term floor under hog values and publicly traded pork producers.

However, margins still remain poor for both hog feeders and soybean crushers leading some to question potential demand growth out of China and what we could be seeing there as we work through the rest of the year.

Chinese corn demand remains a hot topic as well. We have discussed the difference in available Ukrainian corn and wheat supplies several times over the last few months, with many traders now recognizing just how much of the estimated 20-25 mmt worth of Chinese demand could be covered by their year-over-year increase in supply.

It is estimated that China has anywhere from 10-16 mmt of Ukrainian corn purchased currently. If accurate and Chinese corn import levels remain around 20 mmt, we could see the narrative shift from potential major increases in our export outlook to one of concern over potential continued cancellations. The additional twist of newly available Russian wheat and barley supplies will likely require us to remain diligent when it comes to shipment pace as well.

Speaking of export shipments, we got updated export inspections yesterday with wheat and soybean inspections both coming in slightly higher than expected, though wheat shipments still lag what is needed each week to meet current USDA expectations.

Corn shipments continue to lag the pace needed, coming in at 41.5 mbu, versus the over 56 mbu we need to see. Of the bushels shipped, just over 8 million went to China, with Japan in as our biggest customer.

Looking ahead, it appears our major commodities are taking a breather as of early this morning, with crude, corn, soybeans and wheat all trading lower. 

We continue to monitor outside economic indicators as last week's jobs number only further emboldened the calls for rate increases as we seem to be rolling quickly to full employment and an economy that could very well be overheating.

As we have discussed numerous times throughout this run-up, don't be afraid to utilize target orders, putting a marketing plan in place to sell small portions of your open old crop bushels or expected new crop production each time the market makes another leg to the high side.

Corn down 3 to 4

Beans down 10 to 12