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Special Market Update

Grain Market Commentary

Tuesday, December 7, 2021

by Zach Kelly, Associate Merchant, The Andersons

As harvest comes to a finish across the United States the market has battled many supply and demand factors, and potential market shocks (COVID). We saw corn and soybean prices lose 32 and 53 cents respectively from their highs to start the month of November and then rally all the way back to new highs by mid-month! The new Omicron variant sent shocks throughout all markets in late November and erased most of Novembers gains in a few days. After the market had time to digest the new variant, we have seen corn and soybeans each nearly erase the late November sell off. As December progresses the market will be focused on the Omicron variant and how that will impact processor margins, export pace, and South American crop conditions. We will also see the monthly WASDE report released on Thursday December 9th.

The corn market is very dynamic right now. We are seeing a debate of current corn worth given supply and demand values today, but also what the value should be if corn acreage is lower next year. Input costs are up roughly 85% year over year and mostly driven by nitrogen costs. In theory, this would cause acres to be reduced next year. We are currently projected a carryout out of 1.493B bushels for this crop year. That would make it the second lowest since 2013, only behind last year. So already tight corn stocks with the potential to have another smaller crop has been a huge driving factor in the price of corn. As of last Friday, funds are long over 300,000 contracts of corn, while just 31,000 in soybeans. Having said all of that, the current demand picture for corn isn’t great. Export sales to China are down significantly from last year, both the Ukraine and South America are producing great crops and will be move competitive on price, and we are heading into winter with more COVID concerns. The ethanol space has seen historically high margins and driving demand has been solid, but we could see that start to turn around in the coming months. This month’s WASDE report is expected to have very limited changes as December typically does. If anything, a small decrease to exports and a small increase to ethanol usage would be justified. The most important piece will be Ukraine’s production and export estimates to China.

Soybeans have seen less life than the corn market. The potential for lower corn acres next year means potentially higher soybean acres… something has to be planted right! China bought some boats for December shipment in the middle of November however COVID headlines took away that rally. Much like corn, soybean exports are down from last year and current export pace points to another potential cut to export estimates on this month’s WASDE. Total Oct/Nov Chinese imports are down 25% from last year. This sparks the question: do they need to buy more soybeans, or did they buy too many last year? With Brazil planting ahead of schedule harvest looks to be 2 weeks early this year. Beans should start to hit the ports in late January and arrive to china by late February. Can china hold off long enough on current supply or will they need to turn to the US for more? That’s the golden question. Domestically we are still seeing great soybean processor margins. Current board crush is $1.53, off the highs of around $2.10 in mid-November. Managed money will be watching new crop acre estimates in the US and South American weather in the coming months.

This month’s WASDE report shouldn’t create any major fireworks in our commodity markets. The most important things are keeping up with export pace and crop conditions in South America. Look for continued estimates on new crop planted acre numbers. The corn number is in a huge debate and estimates range from the upper 80’s to the upper 90’s. These estimates are astronomically different and will be the driver of the grain and oilseed complex over the next year and a half. Make sure to stay in touch with your local grain merchant for all the latest news in the market and follow along on twitter @andersonsgrain.