Morning Comments October 14, 2021

Grain Corn Pile Closeup

It was another rough day for the markets yesterday as selling pressure in wheat pushed corn and beans lower as well.

The global wheat market continues to battle uncertainty as it appears there is enough wheat in the world to meet current demand, but prices need to remain elevated to not only encourage new production, but to also make sure we discourage any type of demand growth. 

Black Sea cash prices continue to firm as Russian and Ukrainian export capacity is reportedly booked for the next 3 months or so. It is interesting to note that Egypt's GASC floated a tender earlier this week but left it unfulfilled when prices came in higher than their last round of purchases.

There was a lot of chatter a week ago with experts surprised Egypt hadn't walked away from that higher priced tender, stating their standing in to buy was a sign of how bad they need supplies. The same folks are now saying this cancellation was a ruse, claiming they'll be back in as buyers, though their lack of appearance after yesterday's break could be seen as a bit of a head scratcher.

We did get a pretty decent chunk of bean sales announced yesterday morning to China, though this was already known, as Sinograin is in and buying for government reserves. Shipments are buyers call, likely to roll in February or so out of the PNW. Word on the street is U.S. beans store better, so we should see some continued purchases there as state entities work to rebuild supplies.

This is lots of head scratching in the bean complex as well though, as traders try to figure out just what China is doing. Coming into harvest there was a lot of chatter about how short the private Chinese crusher was and how badly they would have to come to the table to buy beans no matter the value. Much of the anticipation surrounding these expected purchases was part of what pushed us back above $13 in late September.

However, the private crusher there continues to sit on their hands, buying hand to mouth at most, with many actually slowing or shutting down crushing as margins in the country continue to be less than desirable. Sino intends to auction off 180,000 tonnes of beans from reserves this week, something market watchers will be keeping a close eye on as it should give us some insight into how deep interior demand possibly is. 

Of course, logistics remain a nightmare keeping U.S. bean offers a touch higher than some of our South American counterparts as we get deeper into the export season.

Logistics aren't only a nightmare when it comes to grain movement obviously, as container ships continue to stack up around ports. The Biden administration announced their desire to improve current logistics pushed the Port of Los Angeles to shift to 24 hours a day, 7 days a week unloading, as well as encouraged private entities such as UPS, Walmart and others to do the same.

While it sounds good, one must wonder what we will do with the extra goods we are offloading as it seems much of the issues at hand are coming from moving goods away from the ports and into the domestic market structure.

In addition to the moves to keep ports open and moving more efficiently, the administration says they are watching oil and gas prices closely and will do whatever it takes to keep those in check. This is politician speak for, "we're really hoping this goes away before the next election cycle."

There has been some chatter about encouraging increased domestic oil and gas production, as well as releasing strategic reserve supplies though nothing official has been announced at this juncture.

We will get updated energy information this morning. The last couple of weeks we've seen larger than expected builds in crude inventory, it will be interesting to see if this week makes it three. Ethanol production is expected to see continued growth due to stout margins and more available corn supplies, with stocks somewhat a wildcard.

Looking ahead, we will continue to hear about the Fed, monetary policy, and inflation concerns. Some talk yesterday from high level bank executives claimed the inflation we are currently experiencing is truly transitory. Whether or not, folks believe it will likely dictate our direction in the days and weeks ahead. 

Corn up 3-4

Beans up 5-6