Morning Comments March 31, 2022

Combine and Tractor in the field for Soybean Harvest

The market recovered some of its losses from Tuesday yesterday as talk of a failed Russian de-escalation and rumors of Chinese buying interest helped push prices back up from the brink of a technical breakdown. For the day we saw May wheat finish 13 higher. May corn was up 11 while December corn was up 3. Both old and new crop beans gained 21.

The good feeling traders had about the situation in Ukraine Tuesday all but evaporated yesterday as ground troop movement out of some areas surrounding Kyiv was more than offset by heavy shelling throughout the city. 

Peace talks are on hold currently as both sides reflect on the other's demands to achieve peace and work to sort out what the next steps should look like. Both sides say they will resume tomorrow. 

In the meantime, Russia is continuing to work on its plan to require “unfriendly” nations to pay for energy purchases and other goods in rubles. Overnight the Russian Union of Grain Exporters followed suit, requesting the Central Bank work to implement a way foreign purchases can buy supplies using rubles, with reports Nigeria and others are interested in making purchases. 

Gazprom, the Russian state-owned energy company, is also reportedly studying how to halt supplies to countries who refuse to follow new currency rules. 

Russia's foreign minister is expected to travel to both India and China in the coming days as well, with reports Russia is willing to offer heavy discounts on oil purchases as the country's refiners are running out of storage space. 

Here in the U.S., we had reports China had come in and made purchases of old crop corn and beans in a big way yesterday. This would be the fourth or fifth time since the start of the year we have heard about big China corn purchases only to get nothing in the way of confirmation in the subsequent days after the supposed business has been done. With Chinese corn processors still struggling with implications from Covid and weak margins, it will be interesting to see if this time is different.

Looking ahead, today is a big day for corn, beans and other ag markets as we will get updated quarterly stocks and acreage figures. 

Quarterly stocks are important as they give us insight into on-hand supplies, whether they are in the hands of the farmer or a commercial and whether they are higher, lower, or on track to come in in line with USDA carryout estimates based on extrapolated usage data and past supply estimates. 

A higher-than-expected number tends to indicate we could be using less than we are anticipating or that perhaps the crop was larger than previously estimated, while a lower-than-expected number indicates the opposite could be true.

While quarterly stocks give us insight into old crop supply and demand, acreage will give us our first glimpse into the new crop outlook. Ahead of today traders are expecting to see 92 million acres of corn to be planted with around 89 million acres of beans.

Using the average acreage figures projected, trendline yield, and keeping most other things constant for demand, next year's corn carryout would come in around 1.7 bbu with next year's bean carryout around 281 million. Both figures obviously are leaving limited room for error. 

The oil market was down hard overnight as the White House is reportedly looking at a massive 180-million-barrel release of crude from strategic reserves. Goldman Sachs analysts say a release of this magnitude, the largest in the reserves’ nearly 50 years, would help to align domestic oil supplies with demand, potentially allowing a rebalance in the short-term.

Ethanol production on the week was lower with yet another build in stocks. 

We will have insight into what the report said after the numbers are released. Use this morning to get target orders in place, things are likely to be all over the place today providing some good chances at decent catch-up pricing if you feel so inclined.

Corn steady to 1 higher

Beans Steady to 1 higher