Morning Comments January 21, 2022

Winter Bales

Soybeans soared to the high side yesterday, trading up another 30 cents on the day and taking us 80 cents higher than Tuesday's low. Corn and wheat struggled with weakness early, though both recovered to close on either side of unchanged. 

While the influx of outside money and uptick in outside interest when it comes to agricultural commodities is something we are growing accustomed to after the last 15 months or so, the volatility and uncertainty over what will drive the market on any given day seems harder to pin down for even the most seasoned trader.

Yesterday's run higher in beans was attributed to a renewal in interest regarding renewable diesel and sustainable aviation fuel, weather concerns and supply cuts in South America, as well as Chinese buying interest. In the end, it seems with the current inflationary market structure we're trading in, any market that shows signs of strength or is working near contract highs seems to catch a bid.

On the corn front, we got updated ethanol production figures on the week, showing a slight uptick in production. Stocks grew on the week as well, with Midwest stocks record high. Though as we discussed yesterday ethanol margins are down substantially from their highs seen late in 2021, with some concern over movement of finished supply, risk managers will still tell you margins are good.

In addition to ethanol figures, we got updated crude and gasoline supply figures yesterday as well. Crude soared higher early in the day, trading to new contract highs, before posting what analysts are calling a key reversal and closing much lower on the day. Some are attributing an unexpected uptick in unemployment to the weakness, while others pointed to the unexpected uptick in supplies.

Interesting to note, active U.S. oil rigs are up significantly to 492 from our August 2020 low of 172.

Looking ahead, U.S. Secretary of State Blinken will meet with his Russian counterpart today in Geneva. The U.S. and Germany were quick to walk back President Biden's incursion comments from Wednesday night, saying any and all Russian aggression, incursions included, would be met with swift and harsh punishment. 

Russian troops arrived in Belarus late yesterday for “exercises”, further creating concern. 

Putin continues to contend he is free to do whatever with his military he would like within his borders and the borders of his allies, saying the U.S. is only contributing to 'hysteria.'

We will also get updated export sales figures this morning. We saw continued talk of Chinese purchases yesterday, with the size of the purchases seemingly increasing in size. We saw no flash sale announcement yesterday morning, though the traders in the know say it could take weeks before we see these sales announced. 

In addition to exports and geopolitical strife, we will be watching outside markets closely. As mentioned, there have been some signs of concern starting to show in the economy, with folks really starting to feel the squeeze of inflation. Some of these concerns, tied to increasing costs across a whole host of industries has led to some pressure in tech stocks and others. 

While we are still trading at phenomenal levels overall, the downturn in gains and concern over whether the easy money is now gone will likely start to create more in the way of liquidation. 

A sharp selloff late in the day yesterday attributed to a very weak open on the overnight for grains, and while they have recovered most of their losses at the time of this writing, we will definitely be watching today's action as weather conditions in South America improve and traders turn their attention elsewhere.

Corn down 3 to 4

Beans down 7 to 8