Morning Comments September 1, 2022

Harvesting Soybeans

The wheat market recovered from early morning weakness, managing to close 11 higher on the day. Corn and beans were able to find support and rebound from early lows but were unable to muster enough strength to turn positive, with December corn closing down 6 and November beans finishing 10 lower. 

News felt somewhat limited with a lot of attention being focused on further outside market weakness and added messaging from members of the US and other Central Banks from around the world, emphasizing their desire to rein in rising consumer prices.

Wheat caught much of its bid on reports of Russian missiles hitting grain silos near Ukraine’s Mykolaiv port. The port is not a part of the Black Sea export corridor agreement and sits on the edge of the active invasion, so missile strikes are nothing new. Some reports had indicated Ukraine was hoping to add that port to the list of functioning Black Sea loading locations, though with where the city sits in conjunction to military activity it seems the proposal would have been a non-starter.

Updated oil numbers showed a sharp drop in both oil and gasoline reserves on the week, but also showed a continuation of the troubling gasoline demand situation, with another week of gas demand sitting at 2020 early Covid recovery levels. 

On a positive note, it appears oil production out of both the US and Opec countries has returned to pre-Covid levels.

Ethanol production figures showed another decline in production on the week, with a decline in stocks seen as well. Currently, it appears the USDA could adjust old crop corn used for ethanol lower by 20-25 mbu, but that may be something they do only after September’s quarterly stocks figure confirms it’s necessary.

Overnight we got news China was locking down Chengdu, the capital city of the Sichuan province and home to over 21 million after 157 new Covid cases were reported on Wednesday. The lockdown starts Thursday night with no definitive ending date, though city officials said they will be conducting mass testing of the entire city over the next 4 days. 

Chengdu is home to many auto and tech manufacturers and was already facing a struggling industrial sector due to recent reductions in power usage because of heat and dryness curbing energy supplies.

Looking ahead, Thursdays are typically when we look to weekly export sales data to get a better idea of what is happening behind the scenes when it comes to export demand. Last week the USDA announced the launch of a new export sales reporting system, rolling out a ‘new and improved’ version of the old system. Unfortunately, the new system did not seem to be improved as several fatal errors were discovered only after the public launch.

As a result, the USDA retracted last week’s numbers and has suspended the release of new reports this week and next as they work to fix the formulas providing bad data. The suspension of the reports was viewed as incredibly frustrating to traders at first as export demand data is important, especially this year. However, the promised quick remedy and the fact that the flash system still seems to be working without issue provided some comfort.

As it stands currently China continues to buy beans at a solid clip, with purchases from the US, Brazil and Argentina being reported in the last several days. Corn purchases remain slow, however, with limited interest reported from any of the big 3 suppliers with exportable bushels available. 

Markets are weaker this morning on reports of Chinese covid lockdowns and worries over what that means to commodity demand.

Corn down 9 to 12

Beans down 15 to 20