Morning Comments October 24, 2022

Fall family future

A rather mundane end to the week as the range we seem to be trading in continues to narrow. On the day we saw wheat close a penny higher, beans close up 4, with corn unchanged. For the week we saw wheat lose 9, corn lose 4, while soybeans were up 11. 

Fresh news was limited yet again Friday, as Turkey had its say regarding the Black Sea corridor, saying it saw no reason an extension wouldn’t take place. Cash traders in the region are not taking any chances, however, with offers beyond the first of November limited, effectively closing the corridor even without an official decree. 

Movement of the ships loaded has been slowed as well, with reports of Russia refusing to send their share of inspectors to Turkey in order to keep an orderly flow. Hundreds of ships are reportedly sitting in a lineup that could take weeks to clear at this rate.

The main market focus it seems to start the week will be what is going to happen in China now that the People’s Party Congress is over, and we know who will make up China’s updated leadership. The removal of those seen challenging Xi’s policies if they felt they were anti-market, as well as other changes that will consolidate Xi’s power has Chinese markets and geopolitical experts concerned. 

Over the weekend Xi made a couple of moves of importance, the first being inserting his political ideology into the party’s charter. The charter, which is updated once every 5 years sets the tone for the country’s leadership and outlines its vision. Xi became the first sitting leader since Mao Zedong to insert his ideology into the charter, something that is important as any questions of Xi directly can be viewed as questioning the party. 

In addition to changes to the charter and a greater focus on nationalism, Xi also managed to remove several members of the country’s leadership committee who had focused on economic reforms and free markets, replacing them with men viewed as Xi allies—one of which oversaw the Shanghai Covid lockdown debacle earlier this year and remains a steadfast zero-Covid proponent.

In addition to the changes that came out of the party congress over the weekend, moves to try and curb the spread of Covid in Guangzhou, home to 19 million and considered a hub of manufacturing are concerning. Many had thought the party congress would pave the way for reopening, but that does not seem to be the case at this point. 

The flurry of news pushed China’s currency to its lowest level on record versus the dollar overnight, as many fear China will turn further away from its pro-market policies. 

One bright spot was better than expected GDP growth for the country, with increases in manufacturing activity more than offsetting losses in retail sales and property. 

Looking ahead we will get updated export inspections this morning with traders continuing to focus on bean movement. Last week’s loading figure was much higher than many traders were expecting with a big push of beans out of the PNW as the Western Corn Belt harvest has been rolling on in earnest. River levels have continued to deteriorate, with some much-welcomed rain expected mid-week, though major improvement to the situation is unlikely. 

We will also get updated crop progress figures, with many traders expecting to see bean harvest all but complete across a good portion of the Corn Belt as farmers turn their attention to getting corn out of the fields.

Yield reports continue to be decent, with one private analyst known for having a wire consisting of hundreds of yield reports centered across Iowa and Illinois finding only a slight dip from last year’s yields. While the sample size is small, this could set the stage for some uptick in the USDA’s production outlook as yield projections transition from surveys to counts.

Corn down 4 to 6

Beans down 10 to 18