Commodities decline sharply overnight

After a firm start on the evening session, grain futures tumbled in the early morning European hours as the sanctions were released, and agricultural and energy products were not on the list. It was widely suspected this would be the case, but apparently, the market thought otherwise prior. This means as soon as the Russian/Ukrainian military operations/conflict is resolved (weeks or months?), Russian/Ukrainian grain exports will return to the marketplace. When the 2011 embargo on Russian wheat ended, Russia dropped prices well below prevailing world values and recaptured market share.

It’s anticipated that Ukraine was already getting close to the end of its 2021/22 wheat exports but has some 14 MMTs of corn to export. Russia will quickly want to return to normal commerce to support the economy, which is greatly impacted by grain trade.

It’s being considered that China will rotate soybean reserves due to existing tight domestic supplies. There are rumors that China will sell off 4 MMTs of reserve soybeans in the weeks ahead to aid domestic crushers. Once those soybeans though are sold, they must be replaced within 120 days. This is a way for China to play the old crop-new crop soybeans spread which is out to a 1.90/bushel to aid their crush industry.

South American weather has showers falling across Southern Brazil and Argentina with totals overnight of .25-1 .25”. The rains are anticipated to be ongoing across some of the driest regions of southern Brazil with high temps in the 80s to mid-90s. Needed rains are expected to continue over the next 10 days for Argentina, and Rio Grande do Sul of Brazil with expectations of 1.50-4.50”. These rains are anticipated to stabilize the crops in those areas that had been in continual decline.

The cattle trade finished sharply lower on Thursday, anticipating a firmer start on the stock market recovery and weakening of the grain trade overnight. Cash trade yesterday was steady with the prior week at $142. A stronger trade in the north had cattle at $144. Box beef trade was lower yesterday with the choice declining $1.64 to $259 and select was down $4.41 at $255. April cattle fell through the 50-day moving average yesterday giving up support at 143.00, with now significant support at the January low just below 140.00, which matches the 200-day MA, critical. The COF report is out after the close today at 2 PM.