Morning Comments August 4, 2022

Grain Corn Pile Closeup

Markets were weaker throughout the day yesterday, though the selling pressure seemed to back off a bit as we worked through the day, allowing corn to close higher and wheat and beans to settle well off their lows. On the day we saw December corn up 2, November soybeans down 16 while September wheat was down 11.

We continue to monitor what is happening with China, as yesterday was a surprisingly quiet day it seemed considering all the noise leading up to Speaker Pelosi’s arrival. Overnight we saw the kickoff of China’s announced military exercises, with experts saying the scope and scale of what we are seeing is unprecedented. 

What is being described as live fire drills and missile tests have encapsulated the island, prompting ships to reroute and aircraft to avoid the airspace. In addition to creating havoc through one of the world’s busiest shipping channels, having seen nearly half of the world’s container fleet pass through it over the past year, we are now seeing a Chinese military presence in territorial waters previously claimed by Taiwan.

Chinese leaders continue to contend they are still working on countermeasures for the US, with additional plans in the works to “punish” Taiwan as well. 

In addition to what is happening in the Taiwan Strait we are continuing to watch developments in the Black Sea where Turkish officials and UN experts say the number of ships able to leave Ukrainian ports will bump to 3 a day as channels and procedures become clearer. The increase in ships will push the amount of grain able to be moved out of the country via ports to around 2.4 mmt a month, up substantially from yesterday’s discussed 1 mmt a month pace.

If realized, and other avenues that have been opened recently for exports remain open, we could see upwards of 4.1 mmt of grain leave Ukraine a month. This of course would be down from the pre-invasion pace of 5-6 mmt a month, but far better than initial ideas of limited shipping capabilities.

UN officials also clarified some nagging questions surrounding shippers, insurance and the risk associated with moving grain out of a war zone, saying they will provide financial support to shippers if needed. Adding they have went as far as guaranteeing insurance underwriters additional support if an issue were to arise. 

Production estimates out of Ukraine continue to grow from early season estimates as even farmers within striking distance of the fighting work to gather winter wheat and barley. Much of the country’s corn production is removed from the areas closest to the fighting and weather has been decent enough the Ukrainian government felt comfortable bumping their overall grain production expectations to 65-67 mmt, up from their most recent estimate of 60 mmt and much higher than the current USDA estimate of 50 mmt or so.

Looking ahead we will get some important economic insight when it comes to the job market over the next couple of days, with tomorrow’s jobs report becoming the focus for many. The Fed has claimed a soft landing is possible due to the robust job market, so of course any signs of weakness in the employment sector may begin to test that claim. With Walmart and other large companies beginning to ‘streamline’ or ‘reconfigure,’ ie, laying people off, some anticipate this month’s job numbers may hold some surprises.

Markets were stronger for much of the overnight, before selling off around 5am eastern, outlooks are incredibly mixed as geopolitical tensions continue to grow. Weather-wise, rain continues to miss the areas that need it the most but seem to be plentiful in the once dry Eastern Corn Belt and Delta. Meteorologists continue to call for a transition towards cooler, wetter weather late in the 10 day and beyond, something that is much needed, though many wonder if it may be too late.

Corn. Up 1 to 3

Beans. Up 15 to 20