Morning Comments November 3, 2021

Corn closeup

Corn and wheat showed signs of fatigue yesterday, stopping short and reversing their path after advancing to new highs early in the day. Soybeans were seemingly the benefactor of some long grain/short beans spread unwinding, with a surge in meal values helping provide some strength throughout the day as well. 

We started the morning yesterday with a lot of talk about just what is happening in China when it comes to Covid and other developments. The government announced its continuation of its anti-food waste program, pushing citizens to avoid ordering or buying more food than they need. In addition to looking to avoid food waste, leaders there were heard encouraging folks to stock up on daily necessities ahead of winter. 

The idea the government would encourage citizens to stock up is somewhat foreign to many even after Covid, causing many folks to wonder just what is taking place and how short some supplies could be. After last year, there is still an idea that Chinese demand for food and commodities will catch us off guard, keeping many on edge. Though one must wonder if the government was truly concerned by short supplies if they would encourage increased demand.

In addition to chatter about food waste and stocking up, we are seeing a resurgence in Covid cases in China. According to Bloomberg, Chinese Covid cases are the most widespread we've seen since the virus was initially discovered in Wuhan. Beijing announcing this morning a suspension of train services into the city from 23 different regions impacted by Covid, with more restrictions expected.

Interesting to note that over the last week meal sales at Chinese ports have fallen off a cliff, coming in well below 100,000 tonnes each day. This is a major reduction in demand from what we saw at the start of October and is significantly below the daily totals we were seeing a year ago. Chinese bean buyers were reportedly absent yesterday from both North and South America as well. 

Ocean freight falling to near 3-month lows making folks wonder if it is an indication of lacking demand for commodity movement going forward, or if it will help spur increased demand with cheaper transportation. At this point you could likely flip a coin and have the same chance of being right the experts do.

Looking ahead, we will be watching for this morning's energy data update. Ethanol production is expected to continue running hot as margins are the best we've seen for this time of year. Stocks will be important to watch as drawdowns have been the theme even in the face of larger production, helping keep ethanol values supported and margins fat.

In addition to ethanol production, we will be looking at crude supplies as well as gasoline demand to see if high prices are working to encourage production and discourage demand yet. 

In addition to EIA numbers, we will be looking ahead to tomorrow's OPEC+ meeting. The Biden administration has been putting pressure on the group to increase production, with some suggesting a failure to do so tomorrow will prompt those in DC to release supplies from strategic reserves to pressure prices. 

On top of energy data, we will get an announcement from The Fed this afternoon on just what their plan is to combat runaway inflation. Thoughts are we will see an official end to the bond buying program, or tapering. Many feel this start to tapering will lead us to a rate increase by next June.

Overnight, two major governor races went to Republicans, catching Democratic leadership off guard. It will be interesting to see what, if anything, this development does to Biden's Build Back Better Plan as some see these races as a repudiation of current leaders and political direction.

Corn down 2-3

Beans steady to 1 lower