Morning Comments October 26, 2021

Cornboard Field 042221

The bean market started the day higher yesterday and never looked back as we continue to see some improvement to the Chinese demand outlook, at least in the short-term.

Chinese hog prices over the last year have experienced an epic collapse as folks there brought hogs to market in earnest when rumors regarding a renewed spread of ASF became concerning. This flush of hogs into the market put tremendous pressure on the hog market itself, pork values, and crush margins in the country as they found themselves with far less mouths to feed than anticipated. 

The drop in pork values prompted the government to purchase large amounts for government reserves, helping to put a floor under values. This support has spilled over into Chinese hogs as values there have gained 30% this month with limit up moves sprinkled throughout. 

The support in hogs has obviously spilled over into crush, bringing margins there back into the black after spending much of the summer in the red. 

This improvement in values across the board has helped bring China back to the table. Much of yesterday's strength was contributed to Chinese buying, with 5 cargoes reportedly traded yesterday out of the PNW for March shipment. 

China returning to the market is vital as we look out at what is taking place across the global market. Brazilian bean planting is off to one of its fastest starts on record with monsoonal moisture anticipated to stick around. Current crop forecasts of 144 million metric tons are over 250 million bushels larger than the country produced a year ago. 

With the likelihood of U.S. crop production growing in the next USDA update as well, it is imperative we continue to see strong demand as it is likely with current input cost projections for corn we could see a further increase in bean acres next spring. 

Export shipments for the week were stout for beans at 77 million bushels, of that 57 million went to China. Corn inspections came in lower than expected and well below what is needed to meet current sales on the books as well as USDA projections--but with the large amount of beans moving that is not necessarily concerning just yet. 

Wheat inspections were a marketing year low as U.S. wheat really remains uncompetitive in the global market on purpose.

Harvest progress came in close to expectations with not much in the way of gains expected this week after Mother Nature has made a point to dump solid rains just about everywhere. 

These heavy rains likely limit any further wheat planting in the Soft Red Wheat Belt, potentially creating yet another production story there over the next several months.

Looking ahead, we will continue to monitor outside market movements and money flow. Inflation chatter remains at the forefront with oil and other energies continuing on their epic run. These markets are going to have a hard time moving anywhere solidly with so much uncertainty though support will definitely remain a present force until the inflation problem is 'solved.'

Corn down 1-2

Beans down 1-2