Morning Comments March 24, 2022

Grain Bins

Corn and wheat both seemed a bit more subdued yesterday as wheat fell victim to selling pressure by midday, closing down 12. Corn maintained decent strength, supported by strength in beans and the idea it may have a story of its own, with May corn closing up 4. Beans were strong throughout the day, with May beans breaking through $17 and November beans trading above $15, finishing 20+ higher.

The stalemate continues when it comes to Russia and Ukraine with world leaders saying a lot but providing little in the way of progress. President Biden is meeting with the leaders of the European Union today, working out another round of sanctions as well as trying to convince the group a ban of Russian energy products is the obvious next step to take. 

According to reports, EU leaders and Biden are working on a deal that would lead to the U.S. supplying a large amount of liquified natural gas exports to Europe in an attempt to break the dependence on Russian products. At this point it appears there will be little in the way of guarantees when it comes to amount and price, likely resulting in an increase in business, though whether it will have a measurable impact on future demand out of Russia remains to be seen.

Not to be outdone, Putin announced yesterday he had instructed his Central Bank to formulate a plan that would force 'unfriendly' countries to pay for their energy purchases in rubles. This move would be an interesting one as it would in a sense force the countries making energy purchases to support the Russian currency. Many argue that contracts and prior agreements would keep Putin from being able to make such a move, though one must wonder why anyone would believe a contract would mean much when looking at our current state of affairs.

China and India are already making purchases utilizing direct currency swaps to purchase oil, according to industry insiders. India has purchased well over 15 million barrels over the last handful of weeks, while Chinese buyers are choosing to fly under the radar, negotiating in private.

Looking at ag-centric news we are starting to see more in the way of conversations regarding food shortages and what that may mean in the months and years ahead. Many global leaders are talking of impending doom, with headlines daily discussing a “nightmare scenario.”

This concern over a loss in food availability is starting to bring the use of biofuels in question, with leaders in the EU currently debating the future of biofuel blending requirements. According to one industry insider monitoring the situation, opponents of blending requirements are calling for land currently being used for biofuel feedstocks to be used for “food production.”

With continued news of lost food supplies and rising costs at the grocery store, it is likely only a matter of time before we start to hear similar calls here in the U.S.

South American weather continues to be mostly conducive to second crop corn production, with cash values starting to show cheaper Brazilian offers July forward, hopefully filling some of the gap lost out of the Black Sea. 

Ethanol production figures released yesterday show we continue to grind corn at a strong pace. Production was up to its highest level in over 8 weeks, though the increase in production and slowdown in demand has stocks continuing to build, hitting their highest level since early April 2020. 

Looking ahead, we will get updated export sales figures released this morning. There continues to be talk of lots of quiet export business getting done under the radar, so expectations are for another big week of corn sales. Bean and wheat sales are expected to come in around average levels for this time of year. 

Late yesterday, U.S. officials quietly lifted tariffs on 352 products that had been targeted during the trade war. With the lift coming on over 60% of products listed, one could argue the trade war quietly ended with little in the way of fanfare last night. 

Volatility will continue as the level of uncertainty over what happens next continues to plague the market as a whole.

Corn down 3 to 6

Beans down 10 to 15