Morning Comments August 5, 2022

Soybean Field Sunshine

Grains continued their roller coaster trade, moving back higher yesterday on talk of Chinese buying in soybeans and potential export interest in wheat. Continued forecasts for dryness in the Western Corn Belt were supportive as well. At the end of the day, we saw wheat up 18, December corn up 10 and November soybeans up 48.

The market started the day weaker as there was a significant amount of uncertainty over how China would react to Speaker Pelosi’s trip to Taiwan from both an economic and a military standpoint. The military exercises surrounding the island were of unprecedented scale, with even reports of several missiles missing targets and landing in Japanese territory. Cooler heads prevailed however, and the lack of escalation by the receiving party and subsequent winddown of Chinese operations was seen as a positive development.

This morning Chinese officials announced eight different countermeasures against the US as well as sanctions against Nancy Pelosi and her family as punishment. The eight countermeasures cut off government level cooperation and communication on a whole host of issues from military discussions to climate change and drug control.

In addition to the countermeasures, China has called upon delegates from the G7 and EU after representatives from those countries made comments in support of Taiwan. Leaders of other countries have been disinvited to meetings with Chinese officials as well for the same reason. In the meantime, the White House has also called upon the Chinese ambassador, asking the country to cease their military operations in the region.

Elsewhere, we will see three new ships loaded with corn set sail from Ukrainian ports this morning, with new ships set to arrive for loading in the upcoming days. Crop production outlooks for the country remain robust considering the situation, coming in substantially higher than initial thoughts, but still well-off last year’s near record production. 

Farmers in surrounding countries are dealing with the new influx of Ukrainian grain thanks to the shift in grain flows due to the shutdown of Ukraine’s seaports, reportedly creating some angst in the region. As it currently stands the backlog of grain is not going to get much better, even with the 2.4 mmt monthly uptick that could come from opened seaports, were they to remain as such. This backlog is creating low cash values throughout and starting to put the cash flow concerns of the Ukrainian farmer in the spotlight, with thoughts this fall’s regular wheat crop could go largely unplanted.

Here in the US, we saw poor export sales across the board for both old and new crop corn and beans, with wheat sales at a 7-week low. However, that information went largely ignored as Chinese buyers reportedly purchased a large chunk of beans from both the US and Brazil for September and October. Upwards of 13-15 cargoes were reportedly purchased this week, with at least 6 supposedly coming from the US. Some domestic traders in China question the volume of these rumored trades due to poor crush margins in the country, but as we’ve seen recently, when China’s government tells state owned buyers to make purchases, they buy.

Speaking of exports, it is interesting to note there is a tale of two export outlooks when looking at new crop corn and beans. New crop bean exports are now up 44% year over year, thanks to a much smaller old crop supply out of Brazil and active Chinese buying. New crop corn export sales on the other hand are down 55% year over year thanks to a larger crop coming out of Brazil and slow Chinese buying. 

Looking ahead a lot of the focus before we go home for the week will be on weather as the Western Corn Belt has a make-it-or-break-it chance at rainfall this weekend before heat and dryness builds back in. Conditions in the Eastern Corn Belt look to remain cool and wet for the next several days, with uncertainty regarding what happens next in the pattern extremely high. 

We will get the updated jobs number this morning, with many outside traders saying today’s figure may have incredible importance when it comes to the Fed’s next steps.

Corn down 2 to 5

Beans down 5 to 10