Morning Comments January 20, 2022

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Soybeans reversed course after the poor start to the week, surging higher with corn and wheat yesterday on rumors of Chinese buying and a general feeling of a continued desire of outside market participants wanting to be long grains. 

According to insiders, 1.7 mmt of soybeans and 1.3 mmt of corn was purchased by Chinese state grain buyers yesterday. Details remain sketchy at best, and while this isn't the first time we've watched the market move higher on unfounded rumors of Chinese purchases, it is the first time the rumors have been accompanied with an exact amount of bushels supposedly purchased.

Of course, those bullish grain demand say this is a sign of things to come, while others believe these contracts are simply frame contracts, more of an olive branch potentially than anything else. 

If the latter is correct, these would be the first frame contracts seen in several years, as they were something we had grown accustomed to in our pre-trade war days. A frame contract is basically just a mutual understanding that purchases will be made though price and shipping period remain open. It's a sign of goodwill and intent but not necessarily a sign of a shift in demand. 

If this isn't a frame contract type situation, it is most likely that these bushels are new crop purchases. We will be looking to this morning's USDA export sales flash window at 9:00 a.m. Eastern for more details.

In addition to excitement over a potential return of Chinese grain buying, we continue to monitor what is happening when it comes to Russia and Ukraine. During his marathon press conference last night, President Biden said, much to the shock of his administration and his Ukrainian counterparts, that a Russian incursion is likely to happen. He went on to clarify that an incursion is less concerning than an invasion and is likely not to last long and will not necessarily require the punishment his administration had previously laid out.

This news came as a bit of a shock to many observers, while others who feel a diplomatic split to Ukraine is currently being brokered seemed far less surprised.

In any event, it seems as though the world is poised for some type of disruption, though in true modern style we are starting to see folks already downplaying the severity of consequences.

Weather-wise, in South America the forecast remains relatively decent for most production areas. Heavy rain has fallen throughout Argentina up into Parana, though some isolated areas have continued to miss out on moisture. 

Extended forecasts continue to bring heavy rains in the driest areas over the next 7 days, with lighter totals expected in the 8-14 day. We will get an updated long-term outlook from Eric Snodgrass in the morning, hopefully providing more insight into Argentina's production potential as February into March weather will be key. Currently, forecasters continue to indicate low confidence in February modeling as what *should* happen when it comes to current atmospheric and oceanic conditions aren't necessarily taking place.

Looking ahead, as mentioned we will be looking for more confirmation of just what took place yesterday with Chinese purchases. We will continue to look to outside markets for a sign of direction as well, though some indicate we could be seeing a shift from stocks into grains as the Fed does look poised to make a rate move sooner rather than later. 

We will get updated ethanol production figures this morning, along with other energy data. There has been a lot of talk lately about the difficulty some plants are experiencing when it comes to moving finished product. Rail logistics are a nightmare and demand as a whole feels squishy. As a result, margins continue to slip, dropping exponentially from highs seen in November. 

Ask us about our averaging Contract that we have at Landus! Also, sign up for our virtual grain marketing meeting happening January 26th at 9:00 a.m. Sign up here: http://ow.ly/tQ1b50HsgxG

Corn down 1 to 2

Beans up 3 to 4