Morning Comments November 3, 2022

Fall family future

The wheat market reacted swiftly to reports Russia was back in the grain corridor deal, losing 56 cents on the day. Corn was caught in the middle of bearish corridor news and bullish concerns over shipment disruptions in Brazil, paring losses midday, closing down 10. Beans had support throughout the day on Brazilian supply concerns, closing up 4.

Though Russia was clear yesterday their return to the corridor was only through the end of phase one and that negotiations needed to continue for an extension, the fact they were willing to return at all was seen as a positive sign for future developments.

The UN, Turkey, Ukraine, and Russia are reportedly working together to determine what needs to happen to accomplish the extension beyond the November 19th deadline, with the UN, Turkey, and other countries around the world continuing to emphasize the importance of uninterrupted food supplies to global stability.

Russia continues to push for a rollback of sanctions they say are limiting their ability to ship grain and fertilizer. After getting guarantees in writing that Ukraine will not use the corridor for any type of military operations, it is likely they are pushing for something more formal when it comes to the facilitation of their needs on the export side.

Many will argue the sanctions are doing what is intended and that a rollback would be foolish, but with Russian grain analysts claiming Russia’s wheat crop was over 100 mmt and that there is around 600 million bushels or more of additional wheat to be shipped this year versus last, the need to reduce food prices may trump most anything else.

Speaking of food price reduction, Fed chair Jerome Powell confirmed trader expectations with a 75-basis point rate hike yesterday. In addition to the expected rate adjustment higher, Powell indicated the rate increases would likely get smaller and potentially stop in February.

At first, this seemed to be viewed by outside markets as a confirmation of the much-anticipated pivot. However, Powell went on to further add that though the increases will slow, he fully expects rates to remain elevated at a much higher level than initially expected, for much longer.

Markets are now pricing in a move towards 5% for the benchmark rate, the highest since 2008. Interesting to note though, in 2008 rates were in the process of decreasing in order to help ride out a liquidity crisis, with some analysts saying the Fed is actually working now to create such a crisis.

Bolsonaro, Brazil’s current president, finally made a public plea to his supporters to unblock roads and stop protesting in ways that could disrupt the economy, saying he too was unhappy with the results of the election. Stories circulated late yesterday that upwards of 250 road blockades had popped up across the country with protests spreading. However, official figures point to around 126 active locations where blockades were seen yesterday afternoon, a figure that is down from 190 seen the night before.

With most old crop supplies having already been shipped to ports over the last several months, major disruptions are unlikely without the protests lasting into late January and beyond. Cash offers out of Brazil for December soybean shipments are running 20 cents cheaper than US offers, indicating most exporters there don’t seem to be worried.

Speaking of Brazil, China published a list of exporters able to ship corn and soybean meal into the country yesterday, indicating a start to shipments is likely to happen soon. Brazilian offers remain significantly cheaper than US offers, likely indicating a major shift towards Brazil for supplies may take place.

Looking ahead we will get export sales this morning, with traders looking for a continuation of strong bean demand and some signs of life for corn and wheat.

Corn down 3 to 8

Beans down 12 to 17