Another lackluster day of trade as fresh fundamental news remains limited, and all markets seem content maintaining their recent range. At the end of the day, we saw wheat up 6, corn down 1 and soybeans unchanged.
Talk of a Fed pivot remains at the forefront of the outside markets. After a recent string of bearish economic data, continued yesterday with rising inventories indicating reduced demand, many traders expect signs of a Fed pivot as soon as next week.
The idea the Fed will pivot sooner rather than later has stoked optimism as of late, this only further fueled by the Bank of Canada citing recession concerns before announcing a smaller than anticipated rate hike yesterday.
Ideas that the Fed will soon change its focus away from rate hikes, back to economic stability has pressured the dollar as of late as well. Yesterday’s smaller than expected rate increase from the Bank of Canada, combined with the bearish inventory data, pressured the dollar to a 5-week low, pushing it below the 110 level that had been support, before buying resurfaced.
We will get updated US GDP data this morning, with trade consensus indicating expectations of 2.8% growth seen in the third quarter. This of course is a vast improvement from signs of an economic slowdown in Q1 and Q2. Others caution the growth will not be as good as expected, potentially weighing further on the dollar.
In addition to US GDP figures we will get an update on rates from the European Central Bank. Traders are expecting a 75-basis point hike there as well, with anything less likely bringing a shock to the market.
In other news, traders continue to monitor what is happening when it comes to wheat production in the Southern Hemisphere, as a third round of La Nina continues to wreak havoc. The Rosario Grain Exchange lowered its Argentina wheat production estimate again yesterday, down to 13.7 mmt from 15.5 mmt estimated last month, as continued dry weather across the country has limited wheat production potential significantly.
If realized this would be down substantially from last year’s 22.5 mmt of production, a loss of 323 million bushels in the region. Argentina exports a significant amount of their wheat, with much of it going to neighboring countries.
It is interesting to note, Brazilian wheat production is expected to be up 110 million bushels, or around 3 mmt higher than its production a year ago, potentially limiting some of the local market impact of the reduced Argentina crop.
Heavy rains falling across portions of Australia’s wheat production regions have crossed over from a blessing to a curse, with many worried a large amount of wheat production there will be downgraded to feed. Much of this talk is reminiscent of a year ago when La Nina fueled rains delayed harvest and downgraded nearly a third of Aussie wheat production.
According to the USDA Australia is on track to produce its second largest crop on record at 33 mmt, this down from last year’s 36 mmt crop, but is expected to be its third near-record crop in a row.
Winter wheat plantings in the Northern Hemisphere will be watched closely as well. Ukraine’s ag minister announced earlier this week winter wheat plantings are expected to fall by nearly a third due to the invasion in eastern areas. The drop in plantings is substantial, however, when compared to the final harvested acreage seen after the invasion this past summer, winter wheat area is only expected to be about 1.5 million acres lower.
Above normal temperatures with above normal precipitation is expected across much of the US over the next two weeks, this hopefully helping ease drought and river level concerns as well as aiding the early start to wheat development.
Ethanol production figures released yesterday showed another uptick in weekly production, coming in at a marketing year high and meeting the amount needed each week to hit USDA projections for the first time since September 1st. Stocks saw a slight uptick, with a build in the Gulf.
Looking ahead, we will be watching the outside market news discussed earlier, as well as get new export sales data from last week. Traders are expecting another solid bean sales figure, with what could be described as hopeful optimism when it comes to corn and wheat sales.
Corn up 3 to 5
Beans up 4 to 8