Morning Comments October 11, 2022

Taube Corn Pile

The wheat market soared to within a penny of limit up yesterday and closed 58 higher on news of Russia taking the war back to Kyiv. Corn traded to its highest price since the end of June on the news as well, before falling back slightly to close up 15. Soybeans rallied out of the gate in hope of a return in Chinese business, trading up to within 2 cents of $14 before a lack of interest pushed beans 24 off their high, finishing up 7.

Russia unleashed a barrage of missile attacks across Ukraine early Monday morning local time, hitting Kyiv and at least 12 other regions across the country. The apparent target of the attacks were hubs for energy and communications, with widespread internet and power outages reported throughout the regions hit. 

While many believed the attack was in direct response to the Crimean Bridge explosion Saturday morning, some intelligence appears to indicate Russia was already planning the bombings, though the bridge attack may have hastened the launch.

Russia claims that the ‘punishment’ was necessary, and that most of the bombings are done. However, overnight claims of more missiles taking aim at portions of Ukraine were reported, with the Ukrainian Armed Forces saying it had shot down at least 4 missiles in separate parts of the country. 

What was most interesting about the escalation in tensions yesterday was the lack of discussion about grain exports or the corridor itself. Many who had said the corridor wouldn’t work in the first place continue to contend it will be shut down at the end of November when the first phase of the agreement ends. 

With Russia needing to generate as much income as possible, and wheat reportedly piling up across the country after a record crop, it is highly unlikely they make any type of move that could limit their ability to export the grain and fertilizer helping keeping cash flowing into the country in a somewhat unrestricted manner. 

In other news, China’s ruling party gave some insight into its thoughts regarding zero-Covid overnight, disappointing those expecting a major reversal on the policy and subsequent spike in Chinese demand. 

People’s Daily, a newspaper owned by the Central Committee of the Chinese Communist Party and used to communicate the official position of leadership, published an article early Tuesday calling for more confidence and patience with current Covid policies. The paper went on to say zero-Covid is sustainable and ‘essential’ to China’s economic stability.

With massive cuts to demand being seen and economic growth grinding to a halt, it is interesting to note zero-Covid is considered essential to economic stability as many countries around the world found the opposite to be true. 

Domestic grain and feed prices remain elevated in the country, with soybean meal trading to new record highs, though demand remains reportedly sluggish, giving incredibly mixed signals.

Something to watch going forward that has remained under the radar thus far, the Biden administration announced a slew of policies set to limit China’s ability to grow in the tech industry. The policies which could impact China’s ability to compete in a whole host of next generation technologies including electric vehicles incensed the country’s leadership, with analysts calling the move an outright act of economic war. 

With China being our largest customer of a slew of ag products and the trade war barely a distant memory, this will remain something to watch.

Looking ahead, we will get updated export inspections this morning with many traders expecting to see clear evidence of last week’s clog along the Mississippi. Though river depths haven’t improved, the blockage that had grown to over 2000 barges appears to be easing as dredging work is making the river again passable. With limited rain in the forecast our river issues are not expected to get better any time soon with worries of an early freeze due to lower depths.

We also got a hit yesterday with one of the major unions voting down the proposed solution to the rail strike. Thoughts are now we could see others follow suit, though a strike would not be able to take place until late November at the earliest.

Markets are weaker overnight, with wheat leading the way back down on reports Russia may discontinue its grain export quotas.

Corn down 1 to 4

Beans down 2 to 6