Morning Comments October 5, 2021

Individual Grading Corn

Soybeans are mixed this morning while corn and wheat is trading a bit lower to start the day. 

We continue to watch what is taking place across the commodity space as a whole as the continued surge in energies, metals, and certain agricultural commodities has sent the CRB index (a basket of 19 commodities) to its highest level on record. 

In the energy sector, crude continues its epic march higher hitting its highest level since 2018 after Opec+ announced it will not make a drastic move to increase production, instead working to slowly roll back previous production cuts between now and April 2022. 

In a press conference yesterday the Biden administration said it will do everything it can to help lower fuel prices. However, according to experts in the industry the only thing left to do there really is tapping into government reserves while also working to incentivize domestic drilling, something that may come as counterintuitive to the administration and its environmental goals.

Globally we continue to see struggles with energy supplies as logistics and production issues hamper availability. Interesting to note that European natural gas prices continue to surge, pushing to levels never before seen, with one expert claiming current values equal to $215/barrel oil. While over in China the government has made it clear companies and government entities there need to do whatever it takes to source coal ahead of winter. 

Meanwhile in grains, things seem to be moving at a much slower pace as we work our way through harvest in the Western Corn Belt with a bit of a rain delay in the east. Harvest progress last night showed 29% of the corn crop is harvested with 34% of the bean crop off. 

October production guesses are starting to work their way through the marketplace ahead of next week's updated supply and demand numbers. Well-followed brokerage firm StoneX (formally FC Stone) took overall corn yield down a bit from last month to 176.6 bpa, though overall production came in a touch higher thanks to the increase in planted acreage provided by the USDA last month. They increased soybean yields a touch to 51.3 bpa from 50.8 last month.

Another well-followed private analyst has U.S. corn at 175 bpa, with soys at 50.3. We will continue to get updated estimates throughout the week, though at this point many of these reports seem to indicate no real major shift lower or higher in USDA production expectations.

Export inspections were markedly improved yesterday for corn, coming in above pre-report expectations. While the majority of bushels went to Mexico, we did see China take 5 mbu of corn last week, a good sign after they had been noticeably absent the last few weeks.

Soybean exports were in line with expectations, but as we work our way into the marketing year it's becoming increasingly obvious just how different this year is than last. While it's obvious we didn't have hurricane damage to contend with a year ago, the sales pace to start the year just isn't there. With yesterday's inspection figures factored in we are now running 193 million bushels behind last year's pace for soybeans with corn behind some 65 million bushels. 

Of course, with Brazil's relatively decent start to planting compared to a year ago as well it's important we recognize how quickly this year's export window could close and what that could mean for demand as a whole if we don't see a significant increase in shipments soon.

We did see wheat off a bit overnight after the Russian ag minister all but confirmed an export quota, claiming the country will export 31.5 mmt of wheat, down from 38.5 mmt last year. Interesting to note the current forecasted reduction in Russian exports would be offset by an equal increase in Ukrainian wheat exports. We're currently trading at the high side of the range, with decent rain in the forecast for the areas in the Southern Plains that need it, though folks in the Soft Red Wheat Belt could use some drier weather to finish putting the crop in.

Looking ahead we will continue to monitor what is happening in the commodity space outside of our core ag products, as well as what is happening from a geo-political standpoint. China remains on holiday this week, likely keeping things mostly quiet on that front.

Corn down 3-4

Beans down 1-2