Morning Comments November 8, 2022

Cornboard Field 042221

Markets were weaker yesterday as traders debate the impact China continuing its zero-Covid policy could have on grain demand. At the end of the day, beans were down 11, corn was down 5 and wheat was down 2. 

Covid cases continue to rise in China, hitting the highest level seen since April 30. Local officials continue to struggle with containment, with places like Inner Mongolia still seeing case counts climb even though they’ve been sealed off since early October. 

As mentioned yesterday, the lockdowns are impacting grain movement, creating spikes in prices paid for cash supplies in certain areas, and creating confusion in the market. Local traders continue to contend demand is weak with corn processing and soy crush running well below capacity and local prices paid near record highs befuddling onlookers. 

The lowest inbound soybean shipments for October since 2014 have depleted port supplies, though a large amount of Argentine beans purchased in September and the big chunks of US beans shipped in October will be arriving soon.

Speaking of soybean shipments, a strong shipping pace was seen yet again last week with 95 million bushels shipped. Nearly half of those went via the Gulf, as recent rains are beginning to help reverse what was a dire situation along the river. Water levels remain well below normal, with lower drafts continuing, but freight has fallen off significantly from its highs and bottlenecks seem to be easing. 

China took 71% of the bean bushels shipped last week, with the lion’s share of their shipments going out of the Pacific Northwest.

Corn and wheat shipments were abysmal yet again, with corn shipments running 40 million bushels below the amount needed each week to meet USDA expectations at only 9 million bushels shipped. Wheat shipments at 6 million bushels were 10 million bushels below the amount needed to ship each week. Mexico was the biggest recipient of US corn taking 88% of the bushels shipped, while the Philippines was our biggest wheat customer.

On the global demand front, GASC, Egypt’s state grain buyer, canceled its first public tender for wheat since July, saying prices offered were too high. Egypt used to be well-known for its government tenders, using the tool to purchase most of its imported supplies. The invasion of Ukraine and subsequent fracture of the global market has pushed Egypt to use a more direct negotiation model, with much of their supplies continuing to be purchased from Russian traders as we used to see in the tenders, but now done behind the scenes.

Crop progress released after the close yesterday showed soybean harvest is all but complete at 94% done, with corn 87% harvested. Winter wheat is 92% planted, which is a touch behind average, but conditions did increase slightly from last week to 30% good to excellent, though they are still running 15% below last year.

In Brazil, the soybean crop is 56% planted, behind last year’s 65% pace, but in line with the average pace of 54%. The slower start versus a year ago is mostly because of the uptick in moisture seen in Southern states, with Parana planting running 10% behind last year. Looking at forecasts, the planting pace should be able to progress decently again this week, with the early moisture reported in the south likely to be much needed as forecasts turn off dry there to finish out November. 

Farmers in Argentina continue to struggle with dryness, choosing to delay plantings in the hopes of improved moisture conditions. Rains are expected late this week into next with a breakdown of global trade winds, before La Nina comes roaring back, turning much of the area back to dry to wrap up November into December. 

Models continue to point to a major breakdown in La Nina come January, with a big change in global weather patterns to come if realized. 

Looking ahead, it’s election day and we have a USDA report out tomorrow, likely keeping today’s moves somewhat muted. 

Corn down 2 to 5

Beans down 7 to 11