Morning Comments July 19, 2022

Beans 062419

Big up day yesterday in beans and wheat on talk of big new crop bean purchases by China Sunday night, talk of US wheat being a part of GASC's tender, and a feeling China may work to support struggling property developers. To end the day we saw corn up 8, September wheat up 36, and November soybeans up 38.

Traders continue to go back and forth when it comes to Chinese sentiment. Yesterday, the idea the government would do all that it can to prop up struggling property developers and help accelerate construction projects across the country was seen as a bullish development. 

Talk of government support to struggling industries and a stabilization of the economy gave bean buyers enough confidence to step up and make purchases, buying a reported 10 cargoes of beans for new crop, with rumors of upwards of 800,000 tonnes of beans purchased by Chinese buyers over the last couple of days.

However, excitement over economic support in the real estate industry continues to be tempered by increases in Covid cases and subsequent lockdowns. Experts estimate over 15% of China's economy is being heavily impacted by lockdowns and restrictions, with unemployment surging across the country. 

After having claimed it defeated Covid, Shanghai is back to testing 13 of its 16 districts this week as well. Continued concerns over lockdowns have changed the attitude of the Chinese consumer in many ways these last few months, with restaurant spending continuing to struggle, while at home food consumption continues to soar. With such a drastic difference in food types consumed as well as overall demand with less food wasted at home, the impact on vegetable oil and meat demand is becoming evident.

Export inspections yesterday were quite a bit better for corn than what we have been seeing, with 42 million bushels shipped on the week. China was in for nearly 18 million bushels of that, up substantially from the last couple of weeks as well. Going forward we need to ship 67 million bushels of corn a week to meet USDA projections.

Soybean shipments were decent seasonally but disappointing as a whole as they still lagged what is needed to ship each week, with only 13 million bushels shipped versus the 34 million bushels needed. Wheat shipments were disappointing as well at less than half the 15 million bushels needed to ship each week, though it's early enough in the marketing year to make up differences relatively quickly.

Crop conditions released after the close left corn conditions unchanged on the week, with soybean conditions down a point but in line with expectations. Spring wheat condition improved another point to 71% good to excellent, while winter wheat harvest is 70% complete.

Looking ahead we will be watching the weather closely. The much anticipated wetter break in the pattern is starting to show up in week 2 models, with an expectation the ridge blocking much of the Western Corn Belt from rainfall will move even further to the Southwest. 

In the meantime, however, we will continue to see extreme heat in the Southern Plains trying to work its way into the heart of the Corn Belt over the next few days making that week two rainfall that much more important.

We also got news overnight that the European Union will roll back several restrictions on Russian banking thought to be limiting food exports. In addition to rolling back sanctions, EU officials will help facilitate shipments from ports said to be avoided by traders currently due to fear of sanctions. 

In addition to those rollbacks, we got a surprise notice yesterday that the International Trade Commission is dropping duties on imports of Russian UAN, saying new evidence has been found showing these imports do not hurt US producers.

Markets are down hard this morning on wetter weather and concerns over Covid in China. We will see where support comes into play.

Corn down 12 to 15

Beans down 13 to 18