11 March 2022

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  • HEADLINES: Doubts emerge of any quick solution to Russian war; Spain said to be seeking US corn; US rejects MFN (most favoured nation) status for Russia.
  • Chicago values came under early pressure due to an unspecified comment from Russian President Putin of “positive movement” in the cease fire/peace talks with Ukraine. Putin’s “positive movement” comment came shortly after Putin said that he would bring in 16,000 Syrian fighters to bolster his troops in Russia’s war with Ukraine. Guessing what Putin meant by positive movement and adding troops at the same time has everyone guessing.
  • Russia did expand its push into Western Ukraine and is focusing on breaking supply chains that flow from Poland. No one (but Putin) understands the direction of the war, but Russian history doubts that Putin is ready to relent without a clear change of political Ukraine leadership. Putin will not leave Ukraine President Zelinskyy in charge. And if Putin relented to economic sanctions at this early date, it would change war tactics forever. Russia does not want to bow to coordinated western economic pressures.
  • Finally, NATO/the world will not relent on economic sanctions anytime soon if Putin stays the President of Russia. If Putin battles to control of Russia, or there is a cease fire, the economic sanctions including SWIFT shutdown will be maintained. Putin is going to have to likely be exiled from Russia before the sanctions would end. This means closed/complicated Black Sea ag trade for an extended period. World grain demand is pushing to reliable suppliers, including the US/EU/Canada and Australia.
  • President Biden and EU members will be revoking the US’s “Most Favored Nation” status for Russia. The move is largely symbolic but offers additional levers to pull should Russia’s war aggression continue with tariffs to rise from its current 3%. Some expect that import tariffs could rise to 20-30%. The problem for Russia is once MFN is revoked, its often difficult to get it back. Putin is creating longer term economic hurdles for Russia.
  • Chicago brokers estimate that funds have sold 2,500 contracts of wheat and 3,800 contracts of soybeans, while buying 3,300 contracts of corn. In the products, funds have sold 5,200 of meal while buying 2,500 contracts of soyoil.
  • USDA reported that 264,000 mt of soybeans were sold to China for 2022/23 and 128,900 mt of corn for 2021/22.There are rumours that India has made a new purchases of US soyoil due to the discount of US soyoil vs palmoil. China is asking for offers on old and new crop soybeans. And there are inquires for US corn due to switches from Ukraine. No one can confirm Chinese demand just yet, but Chinese feed importers will likely get shorted by 5-6 million mt and will likely look to the US for replacement.
  • Amid growing US export demand, cash movement from the US and S American farmer is just not enough and cash basis bids are rising. Central IL corn basis is bid at 25-30 cents over with soybeans at 10-15 cents over. Brazilian farmers are selling limited tonnages from their expanding soy harvest. Cash basis and futures spreads must work harder to secure cash supplies.
  • There are ongoing rumours that Spain is scouring the world for corn to avoid running out of feed in May. The EU is extremely tight on feed supplies with wheat exports increasing following the Russian war on Ukraine. The demand being rumoured is said to be 1.5-2.5 million mt. We see the entirety of the EU potentially being a large US corn importer if Brussels were to approve GMO.
  • The midday GFS weather forecast is like to the overnight run with parched conditions for Argentina over the next 10 days while near normal rain falls across most of Brazil. The winter corn crop in Brazil is in good to excellent condition and the coming rain will boost growth rates. S American weather is declining in market importance other than Brazilian winter corn.
  • Chicago futures have bounced following the opening with wheat being the upside leader as traders doubt that Putin will end the Russian war anytime soon. The US is seen as a reliable supplier of grain/oilseeds/vegoils to the world as a host of other countries halt their ag exports. The path of least resistance stays bullish with Central US weather conditions to grow in importance in the weeks ahead for Chicago.
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