Morning Comments November 23, 2022


Another down day on limited news in a thin holiday week trade. At the end of the day, we saw wheat down 8, corn down 3 with beans 7 lower.

While noise in the markets is plentiful, the actual news is limited with shipments from the Black Sea resuming pre-Russian grain corridor withdrawal levels and negotiations remaining ongoing with limited developments. 

Traders are watching what is happening in South America as the weather in Argentina and portions of Southern Brazil has turned dry and is looking to likely stay dry into December. There is rain in the 11-15 day timeframe for the driest regions, though confidence in that remains limited. Meteorologists continue to expect a breakdown in La Nina as early as March, though the continuation of its presence in the atmosphere looks likely to keep dry risks in place in the already dry portions of South America into January.

Planting pace has been slow in Argentina due to the drought, with soybean and corn planting running well behind average. Many analysts and traders in the country say there is limited worry from farmers until we get into late December, though obviously, the dry start does bring with it concern.

In addition to the weather, we are watching political developments in both Brazil and Argentina with very different short-term implications. News of Brazil’s incumbent president’s defeat in October run off brought with it a concern since Bolsonaro has been an outspoken critic of electronic voting machines, saying they are rife with fraud.

After the election Bolsonaro remained quiet for two days as protests spread across the country before approving the transition of leadership, giving Lula’s team access. He still has not conceded the election though and late yesterday we got news his election coalition is officially contesting the results.

According to reports, the group has 24 hours to produce all evidence in order to avoid Brazil’s Supreme Court throwing out the request. Many political analysts in the country say an overturn of the results is highly unlikely but the act of contesting the results alone is likely to bolster Bolsonaro supporters who are reportedly continuing to block roads and limit shipments.

In Argentina talk of the return of the ‘soy dollar’ is growing louder, with Chinese buying interest as of late falling off considerably on the idea Argentina will have another round of cheap soybeans to sell. Analysts believe farmers will likely let go of around 7 mmt of beans this time, less than the reported 12 mmt+ sold last time, but still enough to likely cheapen export offers significantly and displace a chunk of global demand.

The ’soy dollar’ as it is called provides an alternate exchange rate for the country’s currency, providing farmers with more value for their beans than would be received otherwise. This higher price incentives movement generates cash for the Argentine government, something it needs in order to stay in compliance with the terms of its IMF loans.

Looking ahead, we will be looking closely at updated meeting minutes from the Fed gathering held earlier this month. Traders will be scouring the report in hopes to find a shred of evidence a pivot is on the horizon, though that likelihood is limited.

Speaking of pivots, less than two weeks after the Chinese government introduced relaxed Covid rules prompting analysts to say the government was changing its approach to the virus, we are seeing lockdowns spread and testing requirements increase.

Overnight Beijing announced a ban on indoor dining, asking citizens not to leave the city and to stay home. Live hog prices have fallen off hard as the spread of the virus and subsequent lockdowns continues to dent demand.

We will also be watching negotiations from the G7 countries when it comes to a Russian oil cap. As mentioned yesterday, major Western countries are working out a plan to limit Russian profits from oil exports.

Overnight reports indicate the cap implementation will now be delayed, with the punishments for ignoring the cap much lighter than initially proposed. In addition to the easier terms, it appears the cap will limit prices somewhere between $65-70/barrel—which happens to be where Russian crude is currently trading.

After today the grain markets will be closed until Friday morning at 9:30 eastern.

Corn up 2 to 4

Beans steady to 2 higher