Morning Comments November 18, 2022

Grain Bins

The grain markets were able to fend off a good share of their early weakness yesterday, recovering into the close as uncertainty over what an extension to the grain corridor actually means, and a general feeling of being oversold helped values recover off their lows. When the day ended, we saw corn up nearly 2 cents, wheat down 11, with beans down 12.

Much of the focus yesterday was on the Black Sea grain corridor being extended for another 120 days and what it means for global supplies. With the uncertainty surrounding the corridor’s extension over the last several weeks offers for grain out of Ukraine had all but dried up. No one wants to buy grain they aren’t sure they can get, with the same going for a seller not wanting to fall short of their obligations.

Offers are beginning to pick up again, with transactions reportedly taking place, though the hesitancy when it comes to being confident in performance remains.

Ukrainian agricultural consultancy APK Inform put out their expectations for full season exports recently, presenting an optimistic scenario with the corridor staying open and a pessimistic one, with the corridor being closed.

In their optimistic scenario, they see corn exports out of Ukraine at 24 mmt this marketing year, with wheat exports at 13.8 mmt. In a pessimistic outlook, without the corridor, they put corn exports at 14.1 mmt, with wheat at 8.1 mmt. These outlooks provide a nice range for expectations, with the USDA currently projecting 15.5 mmt of corn exports and 11 mmt of wheat.

Ukraine and Russia continue to negotiate the extension of the corridor with UN officials and Turkey independently. Ukraine wants to have a guaranteed one year extension and to add Mykolaiv to approved ports, while Russia continues to push for their main agricultural bank to regain access to the SWIFT payment system.

In addition to developments with the grain corridor, there is more talk Russia wants to negotiate a peace deal, though as it stands currently Ukraine remains adamant the only way peace can be brokered is a complete withdrawal of all Russian troops from all of Ukraine—including Crimea.

In other news, we are starting to watch South American production potential closely, with worries over what is going to happen in Argentina as dry conditions persist and forecasts remain drier than normal through December.

Planting pace for both corn and soybeans is the slowest on record in the country as farmers hope to see a repeat of the last couple of years where though conditions started somewhat dry, rains kicked in throughout December into January helping to bolster crop prospects.

Southern Brazil is dry as well, though not as dry as Argentina, with forecasts remaining dry there on and off into the end of the year. Northern Brazil has some signs of drier-than-normal conditions wanting to develop but with the average rainfall in Mato Grosso sitting at over 7” a month in December, January and February, below average is relative.

Export sales yesterday were incredibly strong for soybeans, coming in nearly double the average pre-report expectations with 3 mmt sold, the largest weekly sale reported since September 2020. Of those sales we knew of 1.1 mmt, meaning a large amount of business had been done under the threshold of 100,000 tonnes a day. Over half of the week’s bushels were sold to China, with a large chunk reported for ‘unknown.’

Corn exports were strong as well, at just over 1 mmt and a marketing year high. Of those sales, we knew of over 900,000 tonnes that had been reported sold to Mexico previously.

Wheat exports were at a 4-week low, with 290,000 tonnes sold.

Looking ahead, we will continue to watch developments out of the Black Sea as well as what is happening in China where case counts in some major cities continue to surge, and local leaders are expediting the construction of hospitals and quarantine facilities.

Grain markets are stronger this morning, trying to finish the week on a solid note. 

Corn up 2 to 5

Beans up 5 to 10