Morning Comments October 21, 2022

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Markets were able to recover yesterday on rumors of the Black Sea grain corridor soon being blocked and excitement over the recent spate of Chinese buying. At the end of the day, we saw wheat finish up 8, corn closes 5 higher with beans up 19.

Soybean export sales for the week last week were 2.3 mmt, on the high end of the lofty pre-report expectations and nearly triple the prior week’s figure. With the recent string of flash purchases made by China and unknown, this week’s figure wasn’t surprising, but with worry just a week ago that we would start seeing cancellations because of the river situation, the buying interest is seen as supportive.

Corn and wheat didn’t fare so well, with weekly sales continuing to disappoint. Corn sales were again less than half of what is needed each week, with wheat sales pace so far for the marketing year half of what it was last year. Currently, corn exports are off to their worst start to the marketing year since 12/13, while wheat is setting records for its slow start. 

It is interesting to note when speaking of the current market structure, exporters say our traditional customers remain in the market as buyers but are going far more hand to mouth than seen before, making sure to only purchase what they know they absolutely need.

Speaking of exports, the Black Sea corridor’s status remains a great focus in the market, even with cash traders already effectively shutting the flow of grain down at the end of the month due to uncertainty. Rumor yesterday was that the corridor would be physically blocked after the first part of November, why and by whom remained unanswered, but traders were buyers as a result. 

In addition, to talk the corridor would be blocked, reports circulated that Putin said he will close the corridor if the UN were to decide to investigate drones currently being used in Ukraine that reportedly have been supplied by Iran. This threat another perfect example of the power Putin knows the corridor has in his negotiations. 

French analytical group Strategie Grains cut their EU corn production outlook yet again after drought ravaged the region this past year. At just over 50 mmt, the crop is down over a quarter from last year’s production. The group went on to say more available and cheaper supplies from Ukraine and Brazil will soften the blow of the production loss, but that continued imports will likely be needed in the year ahead. 

Argentina continues to battle a drought as well, with Buenos Aires at the heart of the driest conditions. The lack of precipitation has resulted in one of the slower starts seen to corn planting on record, with many farmers choosing to wait until the later planting window, hoping moisture returns by December. Analysts are lowering their corn production outlooks already because of the dryness, with their wheat outlook continuing to be trimmed as well.

Current local wheat production outlooks put the country’s crop at 15 mmt, with many claiming further reductions will be needed. This would be down substantially from last year’s record crop and likely put pressure on regional importers to source supplies elsewhere. 

In other Southern Hemisphere wheat news, Australia is on track to produce another massive wheat crop, thanks to the third year of La Nina-influenced weather patterns. However, heavy and nearly continuous rainfall in some parts of the country is likely to result in a write down in quality, with many estimating upwards of 5 mmt of wheat will be downgraded to feed at harvest. 

November options expire today, potentially providing fireworks in the bean pit. Markets are weaker overnight on limited news, with the dollar stronger on political turmoil seen spreading throughout parts of Europe. 

Corn Down 2 to 5

Beans Down 8 to 12