Morning Comments October 12, 2022

DJI 0831

USDA October WASDE out at 11 a.m. Central time today.

A much more subdued trading day yesterday with limited fresh news and traders mostly focusing on consolidation ahead of today’s USDA supply and demand report. At the end of the day, we saw corn down 5, beans up 2, and wheat down 37.

Much of yesterday’s discussions were similar to the day prior, though talk that Russia would do away with the wheat export quotas it initially introduced late in 2020 was considered a bearish factor in the opinion of some. When introduced, the quota was one of the first moves made by Russia to limit its grain flow, sending wheat prices soaring.

No quota for this crop year had been established yet, making much of this discussion moot, but the idea that Russia will do what it can to keep exportable grain moving is a bit of a change in pace. Again, as mentioned yesterday, the lack of pointed comments regarding a shutdown of the corridor by Putin also remains a positive sign for global grain movement going forward, at least at this point.

We continue to get interesting developments out of China as well, as the country returns from a weeklong fall holiday and heads into its twice a decade gathering of the country’s communist party’s leadership next week.

Another editorial was published in the People’s Daily overnight supporting zero-Covid policies and asking the people of China to understand the need for the approach, saying leadership letting the disease go unchecked would be a far greater threat to the country than the economic consequences of lockdowns.

Speaking of lockdowns, Shanghai has been quietly placing restrictions back on citizens throughout the city of 25 million this week. Some school districts are returning to online learning with several places known for social gatherings again shut down. Apartment complexes and neighborhoods are seeing fences erected in areas declared to have elevated risk yet again as well, with other cities across the country finding themselves in a similar situation.

In addition to how the country is handling Covid, there has been an interesting shift in messaging from leadership over the last couple of years that is just now becoming very clear. For at least the last 20 years every Chinese leader has beat the drum of the need for continued economic growth. Economic growth was said to be the country’s top priority, something that was obvious via stimulus and other initiatives to support development.

Over the last year or so the messaging has shifted to emphasize the need for national security in addition to growth, with insiders saying it is likely at next week’s gathering we hear Xi push for the country to “balance development and security.” According to experts, the shift is seen as potentially major in the sense that for the last 20 years the country has focused on economic growth over everything else, with that now beginning to change.

Looking ahead all eyes will turn to updated supply and demand numbers released by the USDA today at noon eastern. Ahead of the report traders are looking for a reduction to corn ending stocks from last month due to the reduced carry in numbers from the September stocks report and another expected reduction in yield. The debate on what cuts the USDA will make to corn demand is likely to continue for much of the year as a slow start to export shipments and sales as well as concerns over how gasoline demand will influence ethanol production has many traders expecting the USDA to make cuts possibly throughout the year.

Soybean carryout is expected to increase from last month mostly because of the surprise increase in ending stocks in the September stocks report. Beyond an adjustment to beginning stocks traders aren’t expecting much in the way of big changes in soybean figures.

Wheat figures will have some adjustments made due to the reduction in production seen in the September 30th report as well. Ahead of today’s report traders are anticipating a 50 mbu reduction in ending stocks from last month.

Corn down 1 to 3

Beans down 2 to 4