Morning Comments October 11, 2021

Harvest gif

Friday's early gains were erased by midday as soybeans and corn continue to struggle with an outside enthusiasm regarding their price direction that doesn't necessarily match up with fundamentals.

Inflation talk has returned to the market structure and economy in a big way, as supply chain disruptions and an idea that energy demand is far outpacing supply pushes oil, gas and anything else capable of powering the world on a scorched earth path higher. 

To a certain extent, one must wonder if all of this isn't a self-fulfilling prophecy of sorts as we are now officially one year into the inflation trade. Energy seemingly the last to be impacted, but most definitely the one commodity space where price jumps are noticed most directly by the consumer. It's almost as though the lack of reaction by the Fed and other Central Banks to what is taking place here has prompted some in the space to push values well beyond limits once thought possible.

What's most interesting about this move in energies is folks act like we've never been in a situation like this before, and with us experiencing a post-pandemic world for the first time maybe they are right. However, as in the past eventually prices get high enough that we encourage significant increases in production while discouraging any type of growth in demand and things level out before inevitably going too far the other way. At this point it's just a matter of whether we're in the 3rd inning or the 8th inning of this ball game.

Strength in crude and energies is spilling over into alternative fuel supplies as well. While vegetable oils aren't necessarily perceived as playing a role in fuel supply, they most definitely are and will be in the future thanks to growth in renewable diesel especially. 

The idea of renewable diesel growth has helped keep soybean oil well supported as it maintains a price level nearly double that of what the average value has been over the last 10 years. Fundamentally speaking, we have seen significant growth in supply availability while demand languishes somewhat, but in the words of an expert in the industry, "money flow continues to pile in on anticipated demand' as we wait for the Biden administration to release its plans for future fuel supply and RFS requirements.

Outside of inflation and energy talk we will likely see some folks square up their positions ahead of tomorrow's supply and demand update. Most folks are anticipating an increase in carryout for both corn and soybeans, while further cuts to wheat ending stocks are expected. 

Harvest continues to come off much slower than anticipated due to continued rain across much of the Corn Belt. This is definitely helping keep basis values somewhat supported as commercials use the rain breaks to get supplies tucked away. 

Looking ahead to today we will get updated export inspections this morning at 11 eastern with an expected continued uptick in shipments as the Gulf is able to increase shipping capacity and supplies replenish the pipeline. 

We'll also see crop progress today at 4:00 Eastern with continued harvest progress, albeit much slower than the previous couple weeks expected. With the recent bouts of rain, winter wheat planting pace will start to get some focus, as we definitely need to see a good start to the crop and have about 3 weeks left in the ideal planting window.

Corn- steady to 1 higher

Beans- 2-4 higher