Morning Comments November 10, 2022

Corn For Grain Advisors Invite

A relatively mundane update from the USDA did little to change market direction, with corn finishing the day 3 lower, while wheat was down 21 and beans were up 5. 

The USDA update to supply and demand had little in the way of surprises. Corn and soybean yields increased slightly from last month, with overall corn production up 35 million bushels and soybeans up 33 million. 

Ahead of the report traders were expecting to see a cut to corn export demand projections, as the US export sales pace is currently running less than half of a year ago. The USDA however, left their projections unchanged, choosing to instead increase feed and residual use by 25 million, offsetting a portion of the increase in production.

Corn ending stocks are projected to be 10 million bushels higher than last month’s figures. At 1.182 billion bushels, carryout came in slightly lower than trader’s pre-report estimates but well within the range of guesses. 

Soybean demand was increased slightly to offset a portion of the increase in production, with the USDA projecting 10 million bushels more will be used for crush than expected last month. Soybean ending stocks are now expected to be around 220 million bushels, up 20 million bushels from last month and slightly higher than traders were expecting.

Wheat figures were left relatively unchanged, with the only adjustments being a 7 million bushel increase in food use and a 2 million bushel reduction in seed. Wheat carryout at 571 million bushels was slightly below the 578 million traders were expecting, but again, well within the range of pre-report estimates. 

Global adjustments were minimal across the board, with only minor shifts in trade seen.

The lack of surprise from the USDA left the market a bit mixed after the data release, with trader attention now turning to this morning’s October CPI figures, as well as back to Black Sea corridor negotiations and China Covid developments.

This morning’s CPI data may not have a direct effect on Fed policy, as it seems listening to Powell and his cohorts, the plan to reduce the amount rates are being increased by as well as how often seems relatively set. It could however impact the direction of the dollar, with analysts believing a hotter than expected CPI drop could send the dollar back to retest October highs. 

In addition to what could happen next with the dollar, traders are watching as top UN officials plan to meet with senior Russian delegates in Geneva on Friday. Russia remains steadfast in its demand that sanctions against its major agricultural bank get rolled back, saying that it is the only to fully facilitate its fertilizer and grain exports. Recent messaging from the UN indicates its leadership may have the desire to concede, though reports indicate to do so it must first convince the US, UK, and EU. 

In China, Covid cases continue to surge, with the case count moving higher again overnight. China’s newly formed leadership group finally came out with a clear message regarding their approach to Covid, saying China must “unwaveringly enforce” Covid dynamic zero policy. It went on to add that local governments need to do their best to apply more targeted controls, with national leadership still working to avoid blanket lockdowns.

Traders will also closely be monitoring updates when it comes to Mexican corn purchases. Mexico announced last year it would move to ban the use and production of GMO corn in its country, something that could impact a good portion of the 670 million bushels of corn Mexico imports from the US every year. 

There is still a lot of confusion when it comes to how the plan will be implemented, but Mexico’s president said yesterday that the government will not be making purchases of US corn as a result of the ban, saying they recently told US sellers the same. While some point out this is likely a technicality as private entities make the purchases of corn, not the government, the concern remains that a large reduction of purchases from one of our top buyers could be on the horizon.

Markets are mixed overnight, though today could get interesting if there’s any surprise seen in this morning’s CPI data.

Corn down 3 to 6

Bean down 6 to 10