Morning Comments January 28, 2021

Soybeans Farnhamville

We saw March soybeans trade to new highs yesterday as concern over supply shortages and money flow continue to provide support. Corn was again pressured early by wheat, but recovered, closing at its highest level since early May. Wheat continued to lose much of its Russian invasion premium on the day, though it managed to close off its lows.

Overall, we are trading the same news, just on a different day. The Fed waiting until March to make a move on rates has been viewed as dovish and was not aggressive enough in the eyes of traders to do anything to cool price increases.

Interesting to note, according to Bloomberg, the S&P 500 has erased gains of nearly 2% to close lower twice in the last two days, a feat that has only been achieved one other time, in October of 2008.

With increasing volatility and uncertainty in the outside markets, it is very possible folks could see commodities and the inflation trade as a type of safe haven, further increasing money flow potential.

Outside of the stock market and inflation, we continue to monitor what is happening between Russia and Ukraine. We received conflicting reports after a call between President Biden and Ukrainian President Zelensky.

The Biden administration said the call went well and important issues were discussed. The Zelensky administration agreed that the call went well, though went on to say that he had instructed Biden to ”'calm down the messaging”, saying Ukrainian intelligence has a different view of the Russian invasion risk than the U.S.

We did receive news from Moscow yesterday that Russian forces will leave Belarus after military drills are completed sometime in late February. Russian troop presence in Belarus had been concerning to the U.S. and NATO, as the country flanks a different part of Ukraine than where Russian troops are currently residing and is close to the Ukrainian capital of Kiev.

Export sales yesterday came in better than expected for beans and corn. Japan was the biggest buyer of the week for corn, with China noticeably absent, though a sale was made to unknown on the week. Shipments, of course, were a marketing year high.

Bean sales continue to show some Chinese buying interest, though some of that could be attributed to reporting as boats get loaded, not necessarily because of new sales. However, we are seeing U.S. values work back to parity versus Brazilian values now in July as a smaller crop in South America will likely provide U.S. beans another opportunity for good movement late summer into harvest.

Traders are watching Brazilian cash values closely. Some of the recent run up in values has been attributed to a complete lack of Brazilian farmer selling. Farmers were burned selling too early last year, and with talk of uncertainty regarding crop size many are holding tighter than usual to the supplies they are gearing up to harvest.

Harvest progress is currently around 10% complete, and with much of the reduction in production happening in areas where large crush capacity resides with close proximity to ports, the lack of local supply is keeping the pipeline relatively low until beans from the north are able to make their way south.

Looking ahead, we will continue to watch the same things we've been watching for much of the last couple weeks. There are some signs of continued drier risks in Argentina into February and potentially beyond, though heat risks seem to be much lower than seen in December and early January. The market will remain on edge and incredibly volatile as we move ahead. Don't forget to utilize target orders to capture quick moves to the high side.

Corn up 2 to 3

Beans up 10 to 12