Morning Comments May 20, 2022

Spring application

Corn found itself trapped between a sell-off in wheat and a rally in beans yesterday while commodities in general were able to shake off a bit of the weight of the outside markets. On the day we saw wheat down 30, with Minneapolis wheat down 22. July corn closed nearly 2 cents higher, while December corn lost 4. July beans were up 27 while Nov beans gained 15. 

News seems to remain plentiful but limited all at the same time as we try to judge what a whole host of developments may mean for the market. On the weather front here in the US it appears as though the wettest portions of the Western Corn Belt will receive a much needed moisture reprieve, though the trade-off for the dryness is much below normal temperatures. 

The Eastern Corn Belt is expected to turn much wetter, which will be incredibly frustrating for those whose planting window has been much smaller than others throughout the region. 

Models continue to agree wetness returns to the driest portions of Western Europe, bringing with it rains that will likely save crop potential throughout much of France after stark warnings of significant production losses without rains were given early last week. 

Reports out of Brazil indicate frost loss was minimal at most, though dryness continues throughout much of the country's central and northern regions. Most feel as though loss there because of dry conditions will end up between 3-5 mmt without much in the way of fanfare as values continue to remain in line with global prices. 

Indonesia announced the roll back of their palm oil export ban yesterday, replacing it with export restrictions similar to ones seen earlier this year. Indonesia's president has been facing declining approval ratings due to inflation and is now requiring palm oil exporters to hold back a certain amount of supplies to maintain reserves. According to the country's finance minister, upwards of $407 million dollars in revenue was lost over the month palm oil exports were banned.

Speaking of vegetable oils, politicians in Germany put together legislation that would wind down the use of foodstocks in energy production, completely banning the practice altogether by 2030. 

Though UN officials appear to be trying and we are seeing an increase in top level conversations between Russian leaders and their counterparts here in the US, we appear no closer to a resolution to the situation in Ukraine. 

Officials have been working this week to negotiate a way to reopen Ukrainian ports for exports, subsequently increasing the country's ability to meet global demand nearly 3 fold. At this point it appears Russia has no desire to negotiate, saying it is Western Sanctions responsible for the increase in food and energy costs and that until they are lifted Russia has limited interest in further discussions.

Crop wise in either country, Ukrainian planted area is expected to come in around 76% of year ago levels, much higher than the initial dire 30-50% estimates discussed early on in the invasion. So far crop conditions in the areas able to be planted remain relatively good, with an optimistic production outlook. 

As we discussed yesterday, Russians continue to increase their crop outlooks as well as weather has been good and farmers have been incentivized to maximize production. The world faces a bit of a conundrum as Russia does appear to have the ability to supply a great amount of global supply shortfall caused by their actions. At some point, one must wonder if the need for inexpensive food begins to trump the desire to punish Russia.

Export sales bounced back solidly yesterday, with old crop soybean sales coming in at multi-week highs. New crop soybean commitments continue to run strong as well, standing at the third best pace on record for this time of year. 

Looking ahead outside markets are mixed, energies are a touch higher while wheat and corn are lower this morning. The market is making it clear the most recent runup in wheat and corn had more to do with European and South American weather concerns than much of anything else. The question now becomes how the pattern shift towards wetter weather across much of the US will impact the acres left to be planted as windows continue to get smaller.

Corn down 5 to 8

Beans up 3 to 5