Morning Comments November 25, 2022

Grain Bin Landus Cooperative

Markets were stronger going into the holiday Wednesday on a thin trade and somewhat limited news. At the end of the day, we saw wheat up 2, corn up 6, with soybeans up 6.

Minutes from this month’s Fed meeting and other economic data got much of the attention Wednesday as a more dovish stance from members of the US central bank is seen as a sign a shift in monetary policy could soon come. Some members of the group mentioned concern over continued large hikes and financial stability, while several were adamant the large 75 basis point increases we have been seeing should be behind us.

While none of that information could be considered surprising or brand new, it was reassuring to traders to see it confirmed in writing. In addition to a more dovish stance from Fed members, we got some interesting economic news that weighed heavily on the dollar. Unemployment claims came in a bit higher than anticipated, showing a potential slowdown in the job market is on the horizon. Global and domestic PMI came in lower than expected too, indicating a contraction in manufacturing both here and abroad.

Outside of overall economic data, the global grain movement is getting a lot of attention. With the grain corridor confirmed back open for the next 120 days, shipments out of Ukraine are beginning to pick up a touch, though the inspection pace through the straits in Turkey has again slowed. The lineup of ships waiting to be cleared has climbed back up to over 100, with only 2 ships per day making their way through the backlog.

Ukrainian officials blame Russia for slowing shipments by providing limited or incompetent inspectors, Russia for its part has refused to comment.

Nonetheless, shipments are doing their best to continue, with many analysts in the region expecting sales pace to pick up over the next several weeks as buyers regain confidence in Ukraine’s ability to perform.

When it comes to the extension of the corridor, both sides continue to negotiate separately with Turkey and the UN. Russia is pushing for a rollback of sanctions against its major agricultural bank and on logistics, while Ukraine wants to add Mykolaiv to protected ports and to have an agreement for at least one year in place. 

South America is not looking to be left out of the conversation, with political developments in Brazil receiving attention as protests have reportedly limited grain movement. The Brazilian Supreme Court threw out Bolsonaro’s election coalition’s request to overturn the election results, fining the groups behind the filing several million dollars for doing so.

Though unconfirmed social media reports continue to push the narrative of protests creating major disruptions to grain and other exports, industry groups so far say interruptions have been minor and short-lived at best.

Argentina’s finance minister confirmed the country will reintroduce the soy dollar, saying details on how and when it will be implemented will be released Monday. The country continues to struggle with dryness, with limited rainfall forecast through the middle of December. The concern over dryness and production potential could limit the impact of bushels sold in this round of the program, though many analysts still anticipate up to 7 mmt of additional sales will be seen.

Finally, looking ahead traders will be watching what happens in China over the weekend closely as Covid cases have hit a record high level, with local officials in an estimated 48 cities trying to honor the government’s request for a more dynamic approach to Covid control, while limiting the spread. 

The struggle with Covid and problems in the country’s property sector have forced the government to introduce new stimulus measures to help the ailing economy. China announced overnight they will reduce the amount of cash reserves banks need to have on hand, injecting an estimated $70 billion into their economy.

The battle between stimulus and collapsing demand due to restrictions or outright fear of contracting Covid is likely to continue to create an interesting market dynamic.

Grain markets will reopen this morning at 9:30 eastern, with export sales out prior. Traders are expecting huge corn numbers after last week’s big sales to Mexico, with large bean sales and decent wheat figures also expected.

It will be a short trading day for grains as well, with markets closing at 1:05 eastern.

Corn up 4 to 8

Beans up 6 to 10