Morning Comments October 25, 2022

Cornboard Field 042221

Worries over shifts in Chinese policies and ideas continued strength in the dollar will weigh on exports pressured the markets yesterday. At the end of the day, we saw wheat down 12, corn down 3 with soybeans 23 lower. 

The overnight rout in Chinese stocks continued with the opening of US markets yesterday morning, as US listed Chinese stocks had one of their worst days on record. Concern over what happens next as Xi has consolidated much of his power and in many ways has become the lone man in charge of a country with massive influence in global market direction and commodities demand weighed heavy on a whole host of markets yesterday.

Thoughts the country’s leadership will adhere to zero-Covid policies well into 2023 is negative for commodity demand as well, with flight and restaurant data indicating many consumers are now choosing to stay home. 

The sharp drop in the country’s currency has also prompted officials to question banks on their sentiment and positioning in the currency market. Chinese officials have become more vocal over the last month threatening market participants against shorting the currency, saying any speculative selling will be dealt with harshly. This week’s drop to new lows was prompted by ‘malicious shorting of the yuan,’ according to officials, hence the move to investigate bank positioning. 

In other Asian currency news, the Bank of Japan has spent an estimated $36.95 billion dollars trying to support the yen versus the dollar to no avail. Another large intervention is thought to have happened at the opening of business Monday, again with a muted response. Both Japan’s central bank and its governing body feel stimulus and low interest rates remain necessary, leaving it and China as the outliers in a global economy focused on monetary tightening.

Here in the US outside markets have staged a sharp recovery as of late, with the Dow surging to 4-week highs yesterday as hopes a Fed pivot is soon to come and optimism regarding the US economy remains.

It is interesting to note we are starting to see some signs that increased rates are beginning to weigh on demand. US business activity in September contracted more than expected, falling 4 out of the last 5 months. Home sales and building permits have fallen off significantly as well.

Demand is not in question when it comes to soybeans, at least in the short-term, as this week’s export inspections figure was one of the largest on record at over 2.8 million metric tons or over 100 million bushels shipped. The split was more even this week with 1.277 mmt leaving the Gulf and 1.22 mmt going out through the PNW. 

The dredging activity and the reopening of the southern flow last week helped to get a good slug of beans into position for loading out of the Gulf, though concerns remain going forward as river levels continue to fall to near record lows throughout the system. 

Corn and wheat shipments were abysmal comparatively speaking, with corn coming in less than half the amount needed to ship each week, but in line with expectations. Wheat shipments came in below already low expectations at just under 5 million bushels shipped for the week. 

After the close we got updated crop progress information with corn harvest pegged at 61% complete. This is up 16% from last week and ahead of the 5-year average of 52%. Last year we had 64% of the corn crop harvested at this point. 

Soybean harvest is considered 80% complete nationally, this up from 63% last week and ahead of both the 5-year average and last year’s pace significantly, thanks to drier than normal weather across much of the Corn Belt for much of the last month or more. 

Winter wheat planting is 79% complete, up 10% from last week and in line with last year’s pace and the 5-year average. Widespread rains across much of the Soft Red Wheat Belt will be welcome this week to aid early establishment, with expected drier conditions likely to aid increased plantings in the Northern Soft Red Wheat Belt this year versus the last 2 years when poor October weather was a limiting factor. 

Looking ahead, we’re likely to remain range bound for much of the week as fresh market news may be limited. Developments out of the Black Sea and China will remain catalysts for a breakout. 

Corn down 3 to 5

Beans down 1 to 4