Morning Comments November 9, 2022

Harvesting Soybeans

Even with what seemed to be limited fresh fundamental news, corn and wheat saw a bit of a sell off yesterday, with wheat finishing 18 lower and corn down 8. Beans spent much of the day trading either side of unchanged as traders debate how much additional Chinese demand can be expected, as US offers become competitive for export business in December and January. Soybeans finished the day up 4.

The Black Sea grain corridor has 10 days until phase one expires, with political leaders from around the world reportedly negotiating ways to finalize an extension. Ukraine’s deputy of infrastructure says Ukraine is looking to expand the ports covered by the deal, wanting to bring Mykolaiv into the agreement.

Mykolaiv was responsible for over a third of Ukraine’s food exports prior to the invasion but sits near significant fighting. Its proximity to battle and history of having infrastructure, or worse yet, civilians as reported last week, may make adding it to the corridor a difficult feat. 

In addition to adding Mykolaiv, the deputy infrastructure minister said Ukraine wants to guarantee the corridor is open for a year this time as opposed to a handful of months.

Updates from Russia have been sparse, though their claim limited progress has been made on facilitating their side of the deal remains prevalent in any discussion. Russia has demanded sanctions impacting their main agricultural bank be rolled back, saying it is limiting who they can sell grain and fertilizer to, thus limiting global supply.

In addition to watching what is happening with the Black Sea corridor, we continue to monitor what is happening in China as the Covid outbreak there continues to worsen. Covid case counts remain at their highest level since late April, with many cities trying, but seemingly failing to limit the spread.

China’s manufacturing hub of Guangzhou announced mass testing of 19 million people in an attempt to find and isolate any hot spots of the virus. Schools and other public institutions have been shut down in certain districts, with one district of 3 million people placed under strict lockdown for the next several days. 

Rolling lockdowns and government interventions have pressured the Chinese hog market recently, with values hitting their lowest level since the end of July. Edible oil futures have been under pressure in the country this week as well, with demand impacts from zero-Covid and increases in palm oil supplies likely to weigh heavy on prices going forward. 

Here in the US, we are getting ready for a supply and demand update from the USDA due out today at 12 eastern. The November report is the last production update of the year and the last estimate before a final production figure is released in January. Outside speculators are coming into today’s report unusually long from a seasonal standpoint in both corn and the soybean complex, with the estimated fund long in corn equal to nearly 1.4 billion bushels.

The fund involvement in the market makes any type of surprise out of today’s numbers potentially more explosive, though at the same time the old adage a bull needs to be fed every day could come into play if the commodities trade becomes boring versus other investments. 

Ahead of today’s figures traders are expecting limited adjustments to production, with most anticipating a slight increase in corn, wheat, and bean domestic carryouts due to a whole slew of different reasons depending on the trader. 

Corn export demand, or the lack thereof, is starting to get attention, with this year’s poor start giving a bearish lean to future demand outlooks.

We will also get updated CPI data tomorrow, likely keeping the outside markets on their toes, and any major moves in the dollar limited.

Corn down 2 to 4

Beans down 3 to 6