Morning Comments November 24, 2021

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Corn, soybeans, and wheat all started the day lower before finding some strength, letting corn and wheat close decently higher on the day. In fact, the December corn close was the highest we've seen since July. 

From a fundamental standpoint there is little in the way of fresh news and a lot in the way of speculation and uncertainty when it comes to what's going to take place over the next few months. 

Concerns over production losses in Australia continue to dominate the news cycle. The world is short of high quality, high protein wheat and was looking forward to the expected massive crop out of Australia to provide additional supply. Reality is there will still be a reasonably large crop coming out of Australia, with some private analysts suggesting the crop could be as large as 37 mmt, which would be a record by far. 

While it is unlikely we will see that kind of overall production print as the USDA is currently projecting the crop to be just under last year's record 33 million metric tons of production, the size is there, with the question now becoming quality.

One could argue quality specs should appear more in cash values than futures, and that will likely be the case in the months ahead. However, when a market is as bulled up as this one is, any additional fodder will be feasted upon. As a result, wheat has managed to make 6 new contract highs out of the last 10 trading days, with European milling wheat setting a handful of all-time record high values itself over the last couple of weeks.

As we discussed yesterday, spillover strength from wheat has kept corn and soys supported as well. Corn will especially remain supported as logistical snarls continue to push front end ethanol futures substantially higher and a threat of a Russian invasion into Ukraine keeps exporters on their toes.

Interesting to note, there is nearly 11 million metric tons (433 million bushels) of unshipped Chinese corn purchases on the books. While we did see China in taking shipment on just under 9 million bushels of corn last week, there is a definite need to see an uptick in shipments soon, which insiders say is likely to start the middle of December.

Some traders are talking about the possibility of the Phase One Trade Deal being extended beyond its January 15th end date. If so, of course, that would mean China would be in and buying American agricultural products big time in the first two quarters of the year.

Betting on a big uptick in Chinese demand was a winning position a year ago, with those who questioned the validity of those ideas definitely worse off as a result. At this point most will take a more wait and see approach when it comes to significant Chinese demand growth, but in a bull market as strong as this even the things we're uncertain of tend to be supportive to price. 

Looking ahead we will get an updated energy report this morning. We'll be looking for relatively stagnant ethanol production figures week over week, with a lot of uncertainty over what stocks will show. As we've talked about the last couple of weeks, logistical issues have millions of gallons of ethanol sitting on rail lines across the country trying to make their way to where they are needed.

The oil market rallied in response to President Biden confirming a 50-million-barrel release of oil out of reserves. Most traders chuckled to themselves at this announcement as 50 million barrels is enough oil to supply a day or two of U.S. demand. 

Though the coordinated effort of reserve releases by China, Japan, South Korea, India and the U.S. is commendable, traders now worry the response from OPEC+ may far outweigh the meager government releases. 

However, there is talk Iran and others will return to the negotiating table next week, potentially opening the door to Iranian exports helping to aid global supply needs.

The market closes at its normal time today and won't reopen until Friday morning at 9:30 eastern.

Corn 3 to 4 higher

Beans 3 to 4 higher