Morning Comments January 18, 2022

Corn Emergence 2

The markets return from a three-day weekend with a whole host of headlines to watch. 

The first and most obvious, it seems, when it comes to the grain markets in general is what is taking place in South America. The well-advertised and absolutely critical rains expected to fall across the driest portions of Brazil into Argentina over the weekend came to fruition, with more in the forecast to come over the next two weeks. 

Forecasters continue to scratch their heads to a certain extent as what has been a nearly textbook La Nina setup is beginning to act anything but. At this point, it does appear as though we could flip back into a drier south, wetter north pattern some time in February based on some atmospheric and oceanic indicators. However, current modeling suggests this shift doesn't happen to the extent it did in December into January, leaving plenty of moisture in the areas most recently parched by dryness.

With an estimated 70% of Argentina's corn planted in the later window and soybean planting just wrapping up, much of the country's production potential remains. 

One well-respected analyst pointed out yesterday that with the flip in the forecast going forward it is likely we have seen some of the lowest production estimates of the season over these last couple of weeks, with estimates likely to stabilize, if not grow, in the near future.

There has been a lot of chatter regarding drier-than-normal conditions in Northern and Central portions of Brazil over the next couple of weeks, with some folks trying to say this could impact Safrinha corn.

At this point, many locals would tell you the drier pattern in those areas is welcome as monsoonal flow started earlier than normal and hasn't really let up since late September. This drier window is providing ample opportunity to harvest the bean crop and get the second crop corn and cotton planted. As opposed to last year's late start to the Safrinha crop that ultimately ended in a near failure, farmers in the region are planting at a nearly ideal time.

While of course any sort of indication of a drier-than-normal pattern can be concerning when it comes to production, there are still several inches of rain forecast to fall over the bulk of the growing region over the next 2 weeks.

Outside of South America production potential, we are watching Russian/Ukrainian tensions and the spread of Omicron in China closely. 

Over the weekend we saw more signs Russia may be looking to take our current situation from a standoff to a conflict. Reports continue to indicate troop build ups along the Ukrainian border with talk that Russia is slowly evacuating its Ukrainian embassy. There have been other signs that Russia is no longer intending to play nice with the U.S. or other NATO members as well, with officials saying this is the closest to war the region has been in decades.

The last time we saw Russia and Ukraine engage in conflict we saw wheat prices spike nearly 20%. With Ukraine currently responsible for a large amount of global corn and wheat exports and Russia responsible for a large chunk of wheat exports, it is likely we will maintain some level of risk premium as we remain unsure as to what will happen next.

China continues to battle the Omicron variant, with another case discovered in Beijing yesterday. This case was found in a residential area that has now been closed off to the outside. Ports and factories in the country have been shut down as officials there work to battle something the rest of the world has seemingly given up on fighting.

Travel is starting to be further restricted, with officials announcing overnight that tickets for the Olympics will not be sold to the public. Consumer habits have already shifted with restaurant demand falling off over the last four weeks while grocery spending has skyrocketed.

Looking ahead, we will continue to watch headlines closely. Some central banks around the world are beginning to balk at raising rates after China cut theirs. Here in the U.S., oil prices continue to surge to new highs, while economic data from December showed some signs of concern.

We will get updated export inspections this morning at 11:00 a.m. Eastern. Again, we will be looking at corn figures closely as we need to ship around 56 million bushels a week to meet USDA projections.

Corn down 3 to 4

Beans down 11 to 12