Morning Comments November 9, 2021

Combine and Tractor in the field for Soybean Harvest

Yesterday managed to cap off the biggest percent sell off in soybeans ahead of the November report in over 40 years as traders continue to eye the fundamental shift taking place in the bean complex. Wheat was higher on the day, while corn traded both sides of unchanged.

Coming into today's report the expectations of a bearish figure for soybeans has seemingly been priced in. In fact, one could argue when looking at trade expectations versus market movement, the move lower could be considered incredibly overdone, at least in the short term. 

While it is important to keep long-term fundamentals in mind and there is a real likelihood the USDA is overestimating export demand by 200 million bushels or more, a major adjustment to export pace or demand as a whole is relatively unheard of in a November report. Same could be said for yield adjustments, as many times the USDA waits for stock numbers and other insights, making any type of major production adjustment in their January report instead. 

Speaking of exports, bean export inspections for last week were seen at a marketing year high, coming in at the high end of trade expectations at 97.3 million bushels shipped. Of those shipments just over 66 million bushels went to China.

Corn inspections were disappointing, coming in at a 7-week low. At only 22 million bushels shipped on the week, we were less than half the 54 million bushels we need to see to meet current USDA projections. While corn still has plenty of time to shine when it comes to shipment pace, the fact that we started out with such an aggressive export program on the books makes current shipment pace a bit disappointing.

Wheat exports came in at the highest level seen in weeks, though still less than half the amount needed to meet USDA projections at just over 8 million bushels shipped on the week. 

Interesting to note, both Chinese grain buying entities signed frame contracts on imports yesterday. Sinograin, the group responsible for much of China's government driven soybean imports signed an agreement to import 8 mmt of beans with no origin specified. Cofco agreed to import $10 billion in agricultural products in the year ahead, though origins and commodities were not necessarily outlined.

One must wonder if this is new business being arranged or business already on the books getting government approval. 

European natural gas is looking to open lower today after spiking higher yesterday on concerns over Russian gas flow. Reports this morning that an agreement had been reached and that Russia's Gazprom will start working to fill underground storage in 5 different European regions helped to make folks feel a bit better about supply availability as we head into winter. European natural gas values have been influencing fertilizer production there, likely continuing to have a direct impact on potential price moves.

Looking ahead we will get updated USDA supply and demand numbers today at noon eastern. Traders are expecting slight increases to production for both corn and soybeans with soybean carryout expected to come in 40 million bushels higher than last month, while corn expectations are slightly lower with wheat carryout expected to come in relatively unchanged from October. 

We'll have the numbers and market reaction after their release.

Corn up 3 to 4

Beans steady to 1 lower