Morning Comments May 3, 2022

Corn Emerging 360X240

Despite the thinner holiday trade, market action was far from subdued yesterday as we begin to see a bit of a battle line forming when it comes to price positive supply and demand figures versus a potentially price negative economic outlook. On the day we saw wheat close basically unchanged, corn close down 10, though recovering well off its lows, and beans down 39.

Beans seemed to take the holiday the hardest yesterday, with the two greatest catalysts contributing to up moves lately being closed for much of the week. Chinese pricing and buying interest have provided solid support to the market in recent weeks, as buyers there have scrambled as of late to get coverage for their nearby needs out into the summer.

In addition to Chinese buying interest, Indonesia palm oil export changes have, of course, also provided significant support. Analysts still believe that the Indonesian palm oil export ban will be short lived as stocks are already nearing max capacity, with only a handful of weeks’ worth of production capacity available. 

In addition to a closure in global markets, traders are waiting to see if any changes have been made to the EPA's suggested biofuel blending outlook from their initial figures released in December. Analysts anticipate updated figures will be announced early this week giving us insight into past blending obligations as well as what the administration will put in place for the year ahead. 

Soy oil was extremely heavy yesterday, potentially giving some insight that the numbers may be less than friendly. However, at the same time soy oil has been on a parabolic move to the high side, so yesterday's move simply could have been a correction that got a little overzealous.

Export inspections for the week were solid, with corn seeing a marketing year high for shipments at 66.3 million bushels loaded on the week, above the 58 million bushels or so needed to meet USDA projections. China accounted for just over 18 million bushels of the total. Soybean inspections came in at 22 million bushels, in line with what is needed to ship each week, while wheat came in below the number needed to ship each week still, but in line with pre-report expectations.

Speaking of exports, concern is starting to develop when it comes to India's ability to export as much wheat as initially expected in the year ahead as a late season heat wave has cut the country's crop potential significantly from February estimates. Reports of wheat coming in at 9% moisture due to heat and low humidity as well as reports of fires have proven disappointing for those hoping to see India export over 10 mmt of wheat in the coming year.

Government officials had been slow to acknowledge the potential production reduction, though now many in the industry agree the export outlook will probably come in closer to last year's pace than set a new record.

Here in the U.S., growers are wishing for heat as cool and damp conditions remain in place across much of the heart of the country. As a result of the slow start to Spring, corn planting pace remains the slowest since 2013 at only 14% of the crop planted versus 33% on average. 

Bean planting came in at 8% done, also slower than average, with spring wheat planting running 9% behind the 5-year average at 19%.

Weather wise, this week looks to be a wash for many, with a large system slowly working its way across the country. Models remain in agreement, however, that dryness will work its way into the Eastern Corn Belt after this week, opening a window out to the 13th of May and bringing with it warmer temperatures as well. 

Longer term outlooks appear to want to flip towards a drier and much warmer finish to the month of May, but at the same time it feels as though a drier and warmer turn to the pattern has been forecasted since late March.

Brazil remains dry as monsoonal flow is all but a wrap for the season. An estimated 40% of Brazil's safrinha crop is thought to be under some type of moisture stress, though the exact extent of the concern is uncertain as the maturity of this year's crop is much further along than we were last year at this time.

One well followed private analytical group reduced their safrinha outlook by nearly 4 mmt yesterday due to the expected loss in production, but similar to what we discussed last week, even in the face of a relatively decent sized cut, they still expect total corn production to come in around 116 mmt or nearly 30 mmt (1.2 bbu) higher than last year's crop.

Looking ahead, today is the last day for traders to get their affairs in order ahead of tomorrow's Fed decision. The market has basically priced in the expected 50 bps cut and quantitative tightening, so it may prove difficult to see a hawkish surprise.

I'm not going to say it's a turnaround Tuesday, but it's Tuesday and so far corn and wheat are higher while beans are mixed.

Corn 3 to 5 higher

Beans Steady to 1 lower