Morning Comments May 31, 2022

Grain

Corn, soybeans and wheat all found buyers before heading into the long weekend, with soybeans even pushing to new contract highs in the July before falling back slightly and closing up 5. Chicago wheat was up 14 on the the day while corn was up 12.

Traders are no closer to having a clear answer as to whether we will see Ukrainian ports reopen for grain exports this morning than we were at the end of the week last week. Russia continues to push for a rollback to sanctions, claiming the West is restricting global access to much needed food. 

At this point however, the opposite seems to be happening, with the EU finally agreeing to a Russian oil embargo that will reduce their demand for Russian oil by nearly 90% at year end. Hungary, Slovakia and the Czech Republic were all granted some type of loophole that would allow them to continue to access oil supplies via pipelines, as access to alternative suppliers is limited in landlocked nations.

While progress appears to be limited so far in reopening Ukrainian ports, conversations appear to still be taking place, with Putin claiming Monday he is willing to work with Turkey to find ways to allow Ukraine to ship grain. In the meantime reports of continued grain theft by Russia out of Eastern Ukraine, with talk of pirated bushels being sent to Syria make their rounds.

The UN continues to estimate without a reopening of ports nearly 20 mmt of grain is at risk of spoilage. In addition to spoilage risks, some are worried about where all of the expected grain production in the year ahead will go if many bins remain full. 

As the world waits for official production figures from Ukraine, expected this week or next, many private analysts feel the wheat crop will be nearly as large as what was seen a year ago, thanks to an uptick in spring wheat plantings and decent weather. Corn plantings are expected to come in around 81% of last year's acreage, much larger than early estimates of 30% or so. 

Meanwhile wheat production in Russia still looks poised to be a record, with many now expecting to see over 40 mmt of wheat available for export, up from 34 mmt expected this year.

In other news, Shanghai is poised to reopen much of the city Wednesday June 1st, with analysts turning bullish again on raw commodities as a result. China is working on different types of stimulus throughout the economy, with officials clarifying their focus on food and energy security over the weekend but also working to give citizens tax breaks on new car purchases and investments in property. 

China's loosening of its monetary policies have proven to be an interesting juxtaposition against other economies throughout the world that are working to cool inflation. Eurozone inflation data released overnight shows continued increases in consumer prices with figures coming in above pre-report expectations and at a new record high of 8.1%.

Here in the US stocks were able to stop their slide last week, finding buyers on the idea the Fed will begin to backtrack from its monetary tightening plans after two expected 50 point rate hikes in June and July. Many traders feel China's loosening will put the Fed in an interesting predicament where staying the course on tightening may prove difficult. 

As it stands currently consumer confidence continues to falter with personal savings rate as a share of disposable income falling to its lowest level since September of 2008.

Weather-wise, the window for planting in the Northern Plains closed again on Sunday, leaving corn and spring wheat acres as they stand and leaving growers in the wettest regions scratching their heads as to what the next best steps may be. Traders will be looking to tonight's crop progress figures to get a better feel for what is likely left unplanted in each state as a dry window remains in the Eastern Corn Belt through today into tomorrow. 

Looking ahead we will also be watching export inspections this morning. Some traders are talking about the slower than needed pace of corn shipments, though last week's figures were a multi-week high, with shipments to China at or near a marketing year high. We will be looking today to see if the strong pace was an outlier or an indication of what we can expect into the summer. 

Corn down 3 to 5

Beans up 6 to 8