Morning Comments March 2, 2022

Beans 062419

Corn and wheat saw their old crop months trade limit higher yet again yesterday, hitting new contract highs for both, with wheat trading to its highest level since 2008. Old crop soybeans were up 40+ cents as well.

It feels like we have fully entered the point of no return when it comes to the situation in Ukraine. Even the world's greatest military analysts are struggling with what the end game in this situation looks like as Putin remains undeterred and Ukrainian's vow to fight for however long it takes.

Never before in modern times at least have we seen a situation like this, though many veterans of the industry continue to harken back to the 70's as a point of reference.

At this point all we know is the flow of grain from both countries will remain limited for weeks and months ahead, leaving the world to figure out yet another surprise supply hiccup best case scenario, with a major shift in production needing to be penciled in as the worst case.

Overnight we saw reports of Chinese buyers being instructed to cover any potential supply gap they could see in all commodities. The idea China may have found themselves on the short end of supply in this situation is interesting, especially considering China has been doing its best to buy and stockpile commodities for the last 18 months. 

However, we may witness a bit in the way of buying the rumor and selling the fact as it appears China has already been buying emergencies supplies, likely with some idea this situation could arise. In addition to an already stout pace of purchasing seen, we did get additional confirmation Chinese state-owned grain buyers had purchased several cargoes of soybeans for the March/April time period out of the U.S. as Brazilian harvest lags. 

China currently has over 200 million bushels of purchased and available U.S. corn supplies they can ship, with significant amounts of other grains purchased from a plethora of producers around they world still anticipated to arrive at their ports. So though Ukrainian supplies are unavailable currently, it is not as though Chinese buyers are left entirely uncovered. 

However, as the situation stands, new crop production out of both countries will be impacted and limited, putting that much more emphasis on what happens in South America over the next 3 months and North America 3 months beyond that. 

Outside of global grain flows, we are watching domestic demand. The USDA updated their January usage figures for ethanol grind and soybean crush after the close yesterday. Corn grind and soybean crush came in a touch higher than estimates for both, showing domestic demand remains stout. Currently corn used for ethanol remains above the pace needed to meet USDA expectations, with soybeans lagging a touch.

Looking ahead, we will continue to watch what is happening between Russia and Ukraine. A second meeting between the two countries through delegates was supposed to take place today, though it appears the Ukrainian delegation has stayed home, saying talks may take place later this week and that nothing is currently scheduled.

According to U.S. intelligence the situation is likely to get worse before it gets better as Putin ramps up troop movement--or at least the movement of the troops able to move as reports are starting to swirl that troops looking to take Kyiv are running low on both fuel and food. 

Overnight markets were extremely volatile with corn, beans, and wheat well off their highs at the time of this writing. Continue to recognize target orders work in these types of markets and don't be afraid to continue making small incremental sales if we continue to march to new highs. 

Corn down 5 to 6

Beans down 10 to 12