Morning Comments October 6, 2022

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Another day of relatively mundane market action for corn, with a 12-cent daily range traded before December futures settled a penny higher. Wheat followed a similar path, closing down a penny, while soybeans saw some selling pressure after the early week rebound, closing 13 lower.

The recovery in the outside markets slowed a bit yesterday, as traders became less confident that a pivot from the Fed will soon be seen. Fed members continue their media appearances, unified in their messaging regarding the inflation fight and what they feel it will take to stabilize prices. 

Traders are understandably hesitant to believe the world’s central banks will allow any type of long-term downturn in economic activity or markets as over the last 14 years the focus has been nothing but doing whatever it took to support the global economy. 

Last week’s move by the Bank of England to delay their planned quantitative tightening and step in to support their long-term government debt market stoked thoughts that other central banks will be forced to do the same if similar situations arise. However, it is interesting to note that the market the BoE had stepped in to save is now working its way back to levels seen when the intervention took place.

Traders say the rebound in the market is an indication that the Bank of England did what it felt necessary at the time to provide stability to long-term markets but has since stepped back. Now, according to analysts and BoE members the focus will again be on raising rates and tackling inflation.

The change in sentiment put support under the dollar, or perhaps the dollar finding support helped to change sentiment, either way, the feeling of optimism regarding this global economic situation finding a quick resolution seems to be fading again. 

In other news, Opec+ came in with a larger-than-expected production cut. Ahead of yesterday’s meetings, many traders felt comfortable that the hike would be well over a million barrels a day, with most folks assuming the cut would come in around 1.8 mbpd. 

Opec+ members decided on a 2 mbpd cut, though once countries not meeting their quotas already are factored in, the cut amounts to around 1 mbpd, with over half of that loss coming out of Saudi Arabia.

The Biden administration is understandably frustrated with the group, having reached out to its leaders ahead of the meeting requesting they maintain production. Not long after the announcement regarding the anticipated drop in production, reports surfaced indicating the Biden administration is actively working to find ways to bring Venezuelan production back online, proposing rollbacks on sanctions that have limited oil production and exports from the country. 

Cash grain traders are watching what is happening along the Mississippi River as low water levels continue to limit grain movement. An estimated 1,600 barges are tied off just north of the Gulf waiting for the Army Corp of Engineers to dredge the river enough they can pass. Reports of spot Illinois river freight trading at 3000% yesterday indicates how dire the situation is for some, as spot river freight has never traded at a level so high for this time of year. 

What has started as a short-term cash problem is quickly transitioning into what could be a long-term overall market structure issue, with worries that our inability to perform on contracts this fall could have lasting implications in the eyes of world buyers. This not even mentioning the change we could see in balance sheets if we were to start to see cancellations pile up as some are beginning to expect could take place.

Soybeans are likely to see the biggest impact from this issue as our export window continues to shrink in size with the Brazilian crop being planted at a faster-than-normal pace so far this fall. 

Looking ahead, we will get updated export sales this morning, traders will be looking for signs of buying interest, though big sales are unlikely as we have the highest priced wheat and corn export offers globally and our uncertainty over our ability to move what needs to go has also kept soybean offers elevated. 

Corn down 3 to 5

Beans down 8 to 12