Grains ended the day lower on Tuesday:

Dec Corn – 7 cents/bu (5.32 ½ )

Nov Soybeans – 10 ½ cents/bu (12.77)

Dec Chi Wheat – 15 ¾ cents/bu (7.06 ½ )

Cdn $ -0.00365 (78.86 cents)

WTI Crude Oil -0.85/barrel (74.60)

Grains traded the overnight session mostly higher, in low volumes, as traders looked at inflationary pressure and the rising cost of farm inputs as good reasons for grains to continue to rally.   However, when the opening bell rang this morning, grain futures were quickly on the defensive, as outside markets traded lower, with US equities particularly weak, and leading the way down.  Federal Reserve Chairman Jerome Powell told the Senate Banking Committee that inflation is larger and longer lasting than anticipated.  One of the ways to battle inflation is to raise interest rates, which would not be viewed as friendly to businesses.  Of course, grains also face the reality of a rapidly progressing USA harvest, and the fact that yield reports coming out of the Western Corn Belt are indicating that any drought disaster was clearly averted in 2021.

The acreage battle for 2022 has begun in earnest, and with anticipated 2021/22 US ending stocks relatively tight for all grains, none of the major grains can afford to lose acreage.  As it stands today, with crop input costs, specifically fertilizer, as expensive as they are, new crop soybean values have a distinct advantage over new crop corn prices.  In Ohio yesterday, the difference in variable returns per acre favor soybeans over corn to the tune of $80, when one factors in the rise of fertilizer costs.  That return differential has analysts believing that corn prices have to rally relative to current bean prices in order to maintain 2022 corn acreage.  A switch of one million US acres from corn to soybeans could push next year’s bean carryout to a comfortable 330 million bushels, while such a drop in corn acres could push carryout to as low as  1.25 billion bushels, if one assumes record corn yields.

Having said that, corn futures gave up half of yesterday’s gains today, as there was no confirmation from the USDA of any Chinese corn business in the past 24 hours, despite rumors of buying interest yesterday.  As well, the fact that corn condition ratings did not drop yesterday added to confidence that current USDA production projections are in the “ballpark”.  The government did confirm a 150,000 tonnes sale of corn to Mexico, but that failed to bring much support to the market today.

With bean conditions unchanged yesterday, there was no pressing worries about the status of the 2021 soybean crop to trade today.  The fact that there was no Chinese bean business reported today also weighed on the bean complex somewhat.

Wheat futures had an awful day, giving up 4 days of previous gains.  The world is said to be reacting to Argentina’s decision to embrace GMO wheat production.  Brazil has already threatened to never accept Argentine wheat imports if GMO is grown, and Brazil will likely be one of many countries making that assertion.  Argentine wheat could become unmarketable in export channels because of GMO, which would ultimately trim world carryout numbers, which one would expect to be market friendly.  However, in the short term, the market is expressing it’s disdain for GMO wheat.

Midday weather maps showed a solid harvest window for he USA Midwest, once we get past some rain late this week.  Maps also showed good rains for Brazilian corn and soybean production areas during the 6 to 15 day time frame.

On the day today, funds were believed to have been sellers across the board, liquidating an estimated 5,000 corn contracts (now long 220,000), 5,000 soybean contracts (now long 52,000), and 10,000 Chicago wheat contracts (now long 5,000).