Morning Comments March 28, 2022

Grain Bin Landus Cooperative

The markets kicked their recent pattern of going into the weekend weaker Friday as the midweek selloff seemed to have removed anyone who was uncertain. On the day, wheat finished up 16, beans were up 9, and corn was up 5. For the week, we saw May corn gained 12 with December corn up 24, while Nov beans added 30.

The stalemate continued over the weekend as little in the way of progress towards peace could be claimed. Ukrainian leaders claim Russian troops are beginning to withdraw from the area around Kyiv, with continued reports of gains in certain cities and losses in others all weekend. 

Peace talks between the two nations are set to resume this week in Turkey with Ukrainian President Zelensky saying peace is the ultimate goal. He went on to add though that while compromises will be made to get there, lines have been drawn when it comes to some of what Russia is demanding. It appears at this point Russian focus may return to Eastern areas of Ukraine where the vote to declare Russian backed separatist territories as neutral started it all.

Outside of what is happening in Ukraine, traders are watching what is happening in China as Omicron continues to spread at a far faster rate than the country has seen before. Over the weekend city officials announced a split shut down of the city of Shanghai. The Eastern side of the city will be closed first with only essential services such as grocery or food delivery allowed. All public transportation and unnecessary travel is banned while officials work to provide mass testing.

The Western side of the city will shut down Friday, with similar rules in place. In total, over 25 million people will be impacted in one of China's biggest and most important cities. In addition to shutdowns in Shanghai we are seeing major disruptions in other sections of the country, with impacts being seen as logistical snarls create supply hiccups throughout.

The shift in consumer demand caused by Covid is becoming clearer as pork prices continue to see pressure due to reduced demand and margins continue to struggle. The increase in the price of raw goods and regulatory crackdowns have reduced Chinese processor demand as well as of late. 

According to a private Chinese analytic group, corn processing in China slowed again last week, down to 56% of capacity. Last year processing was running around 65% of capacity at this time, with 70-80% of capacity used on average between 2017 and 2020.

Looking ahead, it's likely we could see some position squaring ahead of Thursday's Quarterly Stocks and Acreage Report from the USDA. While traders aren't expecting much in the way of surprises from USDA forum acreage estimates, the fact that fund length in agricultural commodities is at a record high makes every piece of news that much more important.

We will get updated export inspections this morning. Traders will of course be looking closely at corn numbers as we need to ship around 58 million bushels or so each week on average to meet current USDA estimates. 

We will also be watching the weather closely, as yet another storm system is expected to work its way through some of the drier parts in the center of the country, hopefully working to recharge some parched soils in the region.

Corn down 8 to 10

Beans down 15 to 20