Morning Comments November 4, 2021

Boxholm harvest

Everything was lower yesterday in what could only be described as a risk-off sort of day across the board, with everything take a breather from oil to wheat. 

Much of the focus going into yesterday's trade was what the Fed was going to say about inflation with traders looking for direction when it comes to a path to manage it. While Fed chair Jerome Powell confirmed inflationary pressure is concerning, he doubled down on the theory that much of it has come more from supply chain disruptions than monetary policy, again reiterating it is transitory more than anything. 

As expected, The Fed will taper or end their bond buying practices starting this month. A handful of analysts and market watchers were hopeful we would see some indication of when Powell expects to see rate increases, however he left the subject relatively untouched, making it clear the labor market needs to recover further before such moves are made. 

After the announcement, outside markets continued with business as usual, setting new record highs in some sectors. 

In addition to Fed chatter we will be looking forward to more insight out of this morning's OPEC+ meeting. A big portion of the sell-off yesterday came in oil, with folks moving to the sidelines just in case we were to see some sort of surprise ahead of today. 

While many expect the group to stick with their plan of measured production increases, the Biden administration has been putting pressure on some members both publicly and privately to make a much larger move. Some feel a continuation of the plan may push the administration to release supplies from the government strategic reserve, though at this point no one in DC will confirm or deny this is on the table. 

Wednesday's energy information showed another larger-than-expected build in crude stocks, though supplies at the ever-important Cushing facility fell to three-year lows. On the ethanol side we saw yet another bump to production, up 1000 barrels per day, with a slight build in stocks. 

Ethanol margins remain stout well into the New Year, with some in the industry taking advantage of the recent move higher in corn and a more willing farmer seller, booking solid margins on bushels delivered through March.

Looking ahead, we will of course be watching any developments out of the OPEC+ meeting set to start this morning at 9 Eastern. We will also get updated export sales figures from the last week.

With Brazilian bean offers for December now coming in lower than U.S. offers, it is imperative we see another good week of million metric ton plus sales as our export window is closing. Corn export sales are expected to come in around 800,000 metric tons, with Mexico and Japan expected to be our top buyers. Wheat exports around 300,000 metric tons are expected. 

Now that the Fed announcement is behind us and OPEC+ will be behind us we will begin to focus on what the USDA will say in next week's supply and demand update. Many anticipate a slight bump in carryout, with most private production estimates expecting an increase in yields from last month with minor adjustments to demand.

Corn up 1 to 2

Beans down 3 to 4