Morning Comments October 13, 2022

Harvest gif

The USDA released its updated supply and demand numbers yesterday, surprising the market by lowering soybean yield when traders were expecting a slight increase. Most other numbers are relatively close to pre-report expectations. At the end of the day, we saw corn close unchanged, wheat close 11 lower, while beans were up 22.

Ahead of yesterday’s report traders felt confident national soybean yield would stay in line with last month’s figure, with even a slight increase expected by some. The USDA did not agree, citing lower pod counts as the reasoning behind their 0.7 bushel per acre yield cut from last month. The reduction in the overall production of 65 million bushels more than offset the beginning stock increase seen in the September stocks report.

On the demand side of the ledger, the USDA reduced exports by 40 million bushels due to the expected larger crop out of South America and the mundane start to our bean export season. Some of that reduction in export business was offset by an increase in an expected crush. When all was said and done, ending stock projections remained steady from last month’s 200 million bushel figure, lower than pre-report expectations of 248 million bushels. 

Globally, ending stocks came in slightly higher than expected. Brazilian production was bumped 3 mmt (110 million bushels) on an anticipated increase in acreage. If realized, we would see a 918 million bushel increase in production for the country year over year. Interesting to note, however, though it is early, most anticipate Argentina bean production to come in closer to 49 mmt than the current USDA estimate of 51 mmt due to dry conditions and the price competitiveness of corn.

Corn ending stocks figures came in slightly higher than anticipated as the USDA cut production as expected, but also made a somewhat aggressive 125 million bushel cut to export expectations. A reduction in gasoline demand was noted as well, as corn used for ethanol was lowered by 50 million bushels. However, the reduction in available wheat for feeding and indications seen in last month’s quarterly stock numbers made for a 50 million bushel increase in feed demand. 

In the end, a corn carryout of 1.172 billion bushels, though slightly higher than the pre-report estimate of 1.129 billion is still considered pipeline minimum with a historically low stocks to use ratio.

Global corn ending stocks were reduced on the US adjustment lower, and a reduction to Ukrainian ending stock projections from last month on better than expected export pace so far.

Wheat figures came in close to expectations with the USDA making production and beginning stock adjustments as indicated from the figures released on September 30th.

Wheat caught a bounce overnight on rumors Argentina will look to limit wheat exports to 9 mmt due to a reduction in production. Considering the country had already limited exports for the year to 10 mmt, it’s not clear how much of an impact it will have on the global market. 

Looking ahead we will get updated CPI data this morning with traders expecting an 8.1% year over year increase in consumer costs. This morning’s report was cited as one of the most important factors in the Fed decision making process, with the next rate decision just over 2 weeks away. With employment data running hot, it is likely a CPI print in line or higher than expectation will all but cement another 75-point rate hike. 

In addition to CPI data, we will get a look at energy information. Oil has fallen off decently from its Opec+ decision rally, now trading in the middle of its range, with gas prices remaining elevated. Ethanol production has been weak as seasonal shutdowns and slower grind due to poor margins have been evident.

Markets were mostly quiet overnight but have the potential to see increased volatility after we get today’s inflation figures.

Corn down 2 to 5

Beans down 3 to 7