Morning Comments October 17, 2022

Combine Grain Cart

The markets corrected Friday across the board, taking back some of the gains that came from Thursday’s flash of optimism. For the day we saw wheat down 32, corn down 8 and beans down 12. However, on the week we saw corn still manage to add 7 cents, while soybeans were up 17 and wheat was down 21.

Friday’s retail sales data came in slightly weaker than expected but still strong in the face of rising rates, with consumer confidence also surprising traders by coming in at a 6 month high. The continued strength in data points traders know the Fed will use to make its next rate decision has many wondering if we could see a move bigger than the currently anticipated 75 basis point hike at their November meeting. 

Worries of a Fed overshoot are becoming louder as many feel by the time we will see the signs inflation is beginning to fade rates will be well into restrictive territory. As mentioned last week, mortgage rates have hit their highest level since 2002 with many home buyers finding their buying power more than cut in half over the last 6 months.

In addition to what is happening here in the US, traders are watching what is happening in China as the twice a decade Communist Party Congress kicked off yesterday with a two-hour speech from President Xi. While Xi did make it clear the country is still focusing on growth, his emphasis on national security and stability was obvious, with many analysts believing Xi is pointing towards an even greater shift towards nationalism in the years ahead. 

This adjustment from growth at all costs to a more measured pace is a major shift from what we’ve grown accustomed to seeing and, according to some experts, could influence commodity demand from China significantly as we move ahead. 

Speaking of growth, or lack thereof, China announced overnight that it will not release any of its third quarter economic data, including retail sales, property sales, GDP and others. This move is considered surprising by many, but with the continued economic hardships being caused by lockdowns and the country’s desire to adhere to its zero-Covid approach, the data is likely to show some severe contractions. 

In other news, developments between Russia and Ukraine were limited as Russia continues to struggle logistically with the loss of the Crimean Bridge and Ukrainian forces continue to push east. Putin reportedly met with the Secretary General of the UN and Turkey’s leader yesterday to discuss the Black Sea corridor and what it will take to keep grain moving. 

Ukraine’s Infrastructure Minister said Sunday the country does not care if Putin wants to keep the corridor open, that Ukraine will continue to ship grain with the support of the UN and Turkey. Having the corridor open combined with the additional export channels created after the invasion has increased Ukraine’s exporting capacity, with 6.9 mmt of grain shipped in September, a total greater than the country’s pre-invasion average.

Overnight reports of Russia using kamikaze drones to take out other key energy infrastructure sites in the country were seen as concerning, with worries the war is on the brink of a troubling shift.

Here in the US, the export situation remains concerning for corn and wheat, while a recent spate of daily flash sales announced for China have some traders optimistic about bean export potential. As it stands currently corn exports are down 51% from the pace seen last year at this time, while wheat’s export sales pace through the first four and a half months of its marketing year is the worst since 1990. 

Looking ahead, we will get updated export inspections this morning at 11 eastern, with crop progress out later this afternoon. Trade direction will likely be heavily influenced by outside market moves and sentiment throughout the day.

Corn steady to 2 lower

Beans steady to 2 lower