Morning Comments October 7, 2022

Harvest 4

Some believe that the country’s Zero Covid policy will be abandoned after Xi cements his third term, with many continuing to feel a strong return in Chinese demand will take place late in the fourth quarter into the first quarter of next year. Others feel we could see continued slow demand as the country’s consumer habits have changed substantially from what we were used to pre-covid.

Demand as a whole is starting to come into question with another week of poor export sales for corn and wheat, and decent but not exciting soybean volumes. Corn sales on the week were 8.9 million bushels, with the US needing to sell around 40 mbu a week to meet USDA expectations. October is not traditionally a strong corn selling month as soybeans tend to take center stage, but with the new crop corn sales pace as poor as it is, we are going to need to see a sharp uptick in sales soon.

China and Brazil are in the final stages of ironing out their export agreement, with Brazil currently the only country with a positive import margin for Chinese buyers. 

Of course, continued worries over our ability to meet sales on the books remain, with river levels sitting critically low and no relief in sight. Spot barge values are trading at never before seen levels across the whole river system, with grain movement reportedly costing around $4.50 a bushel in the spot market. 

The inability to source spot barges and a wide open weather forecast is prompting elevators along the river system to start piling as much grain as they can as they buy cheaper November barges and pray for rain. As it stands currently there are nearly 2100 barges stuck at a choke point in the river waiting for the go ahead to make the trip south to NOLA, with some barge companies starting to say they just won’t be able to meet their obligations. 

Looking ahead, traders are starting to talk more about how tight their projections for new crop corn carryout are ahead of Wednesday’s supply and demand report. The average trade guess has corn carryout at 1.124 billion bushels, down from 1.219 in September. Many traders are leaning towards another production cut, though some objective yield data in many portions of the country coming in better than expected may temper any major declines. 

Soybean carryout is expected to come in much higher after the surprise bump to stocks last week, but traders are expecting the Chinese to come in as big buyers next week when they return from holiday, likely lending support to the bean complex today. 

We get non-farm payroll data this morning, with some additional Fed speakers likely giving us some direction today. Russia remains oddly quiet as well after expectations of fireworks after last week’s referendum announcement, leaving many observers left to wonder just what their next moves may be.

Corn up 1 to 3

Beans up 2 to 5