Morning Comments August 19, 2022

Beans 062419

Wheat was in a world of its own yesterday, starting weaker and staying that way as the day wore on, closing down 31. Corn and soybeans caught a bounce on drier forecasts for Nebraska, Western Iowa, the Dakotas, and Kansas with corn closing 4 higher and soybeans up 15.

Headlines were plentiful but news felt limited as traders continue to debate the next move by the Fed, what developments we will see geopolitically, and just how much grain we will have versus demand.

On the Fed side of things, it seems most officials agree a minimum rate increase of 50 basis points will be seen in September, with updated CPI and jobs data set for release ahead the next vote likely the deciding factor in whether it is greater. Fed officials will meet in Jackson Hole, Wyoming next week for their annual policy meeting, with Powell set to update officials and the world from the gathering next Friday.

There were many rumors of possible ceasefire negotiations resuming between Ukraine and Russia yesterday, with Turkey and the UN offering to facilitate talks. Ukraine’s President Zelensky said late yesterday there would be no ceasefire until Russian troops leave Ukrainian borders, indicating the war could continue indefinitely at this rate. 

Overnight Indonesia’s president indicated both Chinese President Xi and Russian President Putin have been invited to and will likely attend the G-20 summit hosted by the country in November. Xi and Putin would join Zelensky, Biden, and other Western leaders in what would be the first in-person meeting of its kind since the invasion and recent tensions over Taiwan. 

In other news, we are continuing to monitor developments between Argentina farmers and their government as negotiations set to increase off-farm sales and subsequent exports are underway. The country’s newly appointed finance minister is working to meet the terms of a $44 billion debt deal the country put together with the IMF and is struggling to source the funds.

Agriculture accounted for 25% of the country’s economic output last year, and between scalping a percentage of the currency conversion on farmer sales and export taxes, it is the quickest way for the government to generate much-needed cash. For the Argentina farmer the estimated 23 mmt of soybeans sitting in storage and the incoming 53 mmt corn crop represents a hedge against inflation, and until government policies on currency conversion and taxes on income are changed, they plan to keep supplies primarily unsold.

Dubbed the Super Minister of Finance, Massa seems to have his work cut out for him, but claims he is close to an agreement with farmers and exporters, telling officials ahead of a scheduled trip to meet with the IMF that talks are going well, and a deal is in the works that will increase exports expeditiously. 

Speaking of exports, wheat and corn export sales for the week were inline with expectations while new crop soybean exports surprised to the high side, nearly doubling the figure traders were anticipating. It is interesting to note China was our biggest buyer, but less than half of the amount purchased on the week was large enough to trigger a flash sale announcement.

As it stands currently new crop soybean sales are the 4th largest on record but running over 7 mmt behind the record pace seen in 20/21. After last year’s scramble to source supplies in the midst of a deteriorating crop outlook for South America, it is no surprise Chinese buyers are working to hedge their bets a bit more aggressively this year.

Corn and beans are weaker this morning, with energies lower as well. Wheat has seemed to have found a bit of support after yesterday’s rout, though the current market feel could be viewed as shaky at best.

Corn down 1 to 3

Beans down 10 to 15