Morning Comments October 3, 2022

Grain Bins

Friday's USDA update brought with it some surprises, helping to push corn back up to recent highs and wheat to new highs on the move, before selling off slightly into the close. Soybean figures came in outside of what traders were expecting as well, but with far more bearish implications than grains. 

On the day we saw corn close up 8, wheat closed up 25 and beans close down 45. For the week, we saw corn close up three-quarters of a cent, while wheat was up 41 and beans were 61 lower.

Friday's stocks figures came in lower than expected for corn, higher than expected for beans, and inline with trader expectations for wheat. On the corn front, we saw the 2021/22 crop year end with 1.377 billion bushels in the bin, 135 million bushels lower than what traders were expecting ahead of the report. 

Part of the drop in carryout came from a reduction in last year's production, as well as a bit of an increase in feed and residual usage. Overall, carryout is up 142 million bushels from a year ago, with 80% of that increase seen in on farm holdings as of September 1st. 

Soybean carryout came in 32 million bushels higher than trader expectations with the bulk of that coming from an increase in last year's production. Commercials accounted for the increase in soybean holdings, up 22 million bushels from last year, while on farm holdings were down, with year over year stocks up 17 million.

Friday's wheat numbers had many traders scratching their heads as the USDA cut overall wheat production substantially versus trader expectations. Total wheat production came in 128 million bushels lower than trader expectations, with cuts to production seen in all classes. 

All winter wheat production came in 87 million bushels below trader estimates, with both hard and soft red winter wheat coming in 42 million bushels lower and soft white down 2 million from trader predictions. Spring wheat production came in 32 million bushels lower than pre-report estimates, while durum production was 10 million bushels lower.

What was most perplexing about the sharp cut in wheat production from trader expectations was that stocks actually came in above the average trade guess. So while production came in substantially lower than what traders were expecting, actual available supply is in line with expectations, indicating demand is likely worse than we thought.

In other news, we are closely monitoring developments along the Mississippi River, as water levels remain the lowest in 10 years. News of barges running aground and dredgers working nearly 24/7 to keep the river open with little rainfall in sight over the next two weeks is not what exporters and shippers who rely on the river's performance want to hear. 

On Friday we discussed what the cut to loadings and tows means for grain movement. After further research, the bushel amount used in each barge in Friday's exercise was too low, with barge loadings actually coming in around 45-50k as opposed to 40k reported. Nonetheless, the cut to loadings and worries over even being able to access freight is creating a major backlog along the river.

Over the weekend reports of river terminals and inland crushers filling with beans and being forced to close until they are able to move bushels began to circulate. With an estimated 110 million bushels worth of soybeans needing to go to China alone out of the Gulf over the next few weeks, worries are beginning to arise about the ability to perform on contracts.

Freight values continue to surge as well, with freight for corn typically running 70 to 85 cents per bushel now running around $2.23 a bushel for the same move. This sharp increase has to be covered somehow, with buyers at the Gulf increasing bids hoping to cover some of the extra costs incurred, and inland buyers having to widen bids to cover uncertainty regarding the ability to ship.

Oil is up big this morning on talks of more production cuts from OPEC+ nations, with rumors of a 1 million plus barrel per day cut to production being floated. Considering the nations have struggled with meeting quotas as it stands, missing July's production target by over 3 million barrels a day, it is questionable as to whether or not this vote really means much to overall world supply. 

Looking ahead, we will get updated export inspections this morning at 11 eastern, with updated crop progress figures released at 4 pm eastern. Markets are stronger this morning, with beans a touch weaker. Energies outside of natural gas are strong, while the dollar remains near 20 year highs, though well off last week's peak.

Harvest looks to really roll on this week, with two weeks of nearly ideal weather expected.

Corn up 4 to 8

Beans steady to 2 higher