Commentary
Last week in my opinion, grain prices reacted to LA Nina drought conditions in major growing areas in South America. Last week, Corn finished up over 20 cents, beans over 40 cents, and almost 50 cents in KC and Chicago wheat. Wheat prices had rallied roughly a dollar in 11 days, largely on the Russia/ Ukraine conflict in my opinion. Now the debate is whether the current rally priced in an incursion by Russia or not? Geo-politics tends to be buy the rumor and sell the fact many times in my opinion until it is not. But for wheat, has the recent rally simply offered the Bulls a reason to take profits leaving the option with buying more given the headlines amid an inflationary backdrop. Corn supplies are vulnerable as well, if there is an invasion in my view, but not to the extent of wheat. As such, corn price action is caught between trading the Russia / Ukraine conflict and weather events in the Southern Hemisphere, which for now is less threatening than it was a few weeks ago given rains in Argentina and S. Brazil. That said, Soybeans and Bean Oil have continued their upward ascent this week, with March beans hitting 7 month highs today. Another leg higher could push new crop Dec corn to 6.00 and new crop Nov beans to 14.00. Should that occur, I think you will see producer selling on the Board. To date, producers, have been tight-fisted in selling beans and corn both here and in Brazil. In my view that issue will abate come Spring, early Summer to a greater extent in my opinion. February is the key development time for Argentina’s corn and bean crops, while combines roll in Brazil harvesting a sizable crop. Caution at these levels is warranted.
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