Morning Comments March 22, 2022

Soybeans2

Buyers returned to commodity markets in a big way yesterday as we begin to recognize the much hoped for quick resolution in the Black Sea is slipping away and we start to think about what a long duration event could mean. Wheat was the biggest gainer, closing up 55 cents on the day after trading up the daily limit at one point. May corn was up 14 while beans were up 23.

Positive headlines regarding peace talks are all but gone now, with Russia seemingly becoming more aggressive both in their communication as well as their actions. While there has been little in the way of progress for the convoy outside of Kyiv, we are seeing Russian troops working to take over other large cities as well as the Russian Navy increasing activity in the Northern Black Sea. 

Reports of increased shelling of residential neighborhoods has displaced millions; global leaders are suggesting over a quarter of the country's population has been displaced, with over 3 million people leaving entirely.

The continued attacks will of course have big impacts on agriculture, with the Ukrainian Ag Ministry suggesting that 50% of spring crops will be planted, 30% will not be planted, and 20% remain a toss-up. A well-followed Ukrainian agronomist took these figures and applied them to his pre-war production expectations, creating what he believes is the most accurate outlook when it comes to new crop production.

At this point he believes this year's wheat crop will be around 64% of potential production, with nearly two-thirds of the country's corn crop potential lost due to planting of other crops, a lack of inputs, or Russian occupation. 

We are also hearing stories of Russia commandeering ships loaded with Ukrainian grain, though there have also been instances of Russian grain being taken by Ukrainian forces as it made its way across the country via train. 

Overall, it appears we have reached a stalemate with little in the way of light at the end of the tunnel to be seen in the short-term.

Outside of Black Sea developments Fed Chair Jerome Powell spoke yesterday, surprising some with his aggressive stance towards combating inflation. In late 2020 Powell was adamant some inflation was needed, though it appears he was not expecting "some" to become "a lot" with inflation figures now creeping up on four times his target rate of 2% at the time.

Powell reiterated the Fed's desire to increase rates, hinting that a 50-point increase is likely at the next meeting in May. Many experts who were initially under the impression that the Fed simply talking about unwinding its balance sheet and increasing rates would be enough to get inflation under control are now being confronted with the fact the Fed must do everything in its power to slow demand as the supply chain simply cannot keep up.

Many experts are now asking if a soft landing is even possible in the current economic environment, with many financial instruments pointing to an increased possibility of a recession, something Powell contends remains unlikely.

When it comes to grain-specific news, we continue to see struggles with logistics, though Spring is helping to open some Northern locks, and possibly helping with some grain flow. Barge freight fell off noticeably for the first time in many weeks yesterday, hopefully helping to ease some of the pressure we are seeing in interior markets.

The CP strike and lockout continues with representatives from the Canadian government now helping to moderate the discussions. 

Export inspections of all commodities were up from last week's lull, though all came in below the amount needed to ship each week to meet USDA export projections. At just over 57 million bushels shipped on the week, corn was just under the 59 million bushels needed to load out, with just over 18 million bushels going to China. 

Bean shipments were the lowest since September, while wheat shipments continue to fly well below the weekly amount needed to go each week as well. Sorghum shipments, however, were a marketing year high as we see China in buying any feed grain they can get their hands on that provides full animal bellies at a lower cost than corn or wheat. 

Looking ahead we will continue to monitor geo-political developments as well as what is happening from a global economic standpoint. It's not that the traditional fundamentals no longer matter in grain, but with the massive push of outside money rolling into the structure it is important to continue to monitor the headlines that may be driving their interest.

It looks like we will continue to see volatility and opportunities as we now find ourselves nearly 70 cents above spring insurance prices for both corn and soybeans.

Corn up 3 to 4

Beans up 6 to 9