Morning Comments September 15, 2022

Soybean Harvest Close Up 2016

Wheat again had a day of strength, closing 11 higher. Corn and beans continued to struggle after moving to new highs after Monday’s USDA report, with corn finishing 11 lower and soybeans down 24. 

Much of yesterday’s chatter surrounded the impending rail strike in the US and what it would mean if the country’s railroads were no longer servicing their customers. Worries of basis implosions, an inability to move finished product from processors and concerns over just what happens to the hazardous chemicals we rely on the rail to move every day were prevalent. 

Early this morning the White House announced a tentative agreement between the railroad and unions has been met after 20 hours of continuous negotiations. The agreement will now be sent to the unions in question for a vote, with the White House saying they are confident the agreement made fits the needs of members whose biggest complaint was lack of time off with weeks in a row of being on call. 

A collective sigh of relief could be heard across the nation, as a rail strike of the magnitude we were facing was estimated to cost the country’s economy close to $2 billion a day. 

All eyes are on the first in-person meeting of the Shanghai Cooperation Organization since the start of the pandemic. The group made up of China, Russia, India, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, Uzbekistan, and Iran is meeting in Uzbekistan today and tomorrow. 

Most attention will be paid to the planned bilateral meeting between Putin and Xi, though there have been rumors that with Turkey present an announcement regarding the grain corridor in the Black Sea could be pending.

Outside of what is taking place from a geopolitical standpoint, we will finally get an update when it comes to export demand, as weekly export sales reports from the USDA have been suspended since late August. This morning we will get a combined figure for the weeks of August 18 and 25, with the weeks of September 1 and September 8 reported separately.

Even with several weeks of data set to be released traders aren’t overly excited when it comes to what this morning’s numbers will show as interest in our exports remains limited. The strength in the US dollar combined with worries over an inability to move grain if a rail strike were to occur has kept US export offers stout compared to our competition.

While US offers remain elevated, a flush of new farmer sales thanks to Argentina’s soy dollar has changed the global market outlook in the short-term, with an influx of an estimated 6.7 million metric tons worth of beans into the global pipeline from the Argentina farmer in the first half of the month. 

Of those sales, China is reported to have bought over 20 cargoes of beans last week, with another 10 rumored to have been purchased so far this week. The beans purchased are reportedly set to land around the peak of what is usually gut slot harvest in the US and when the bulk of our export business tends to get done. As it currently stands Argentina beans remain over 60 cents a bushel cheaper than US values with basis levels in Brazil falling off hard over the last couple of weeks to remain competitive.

Looking ahead we will be watching any developments out of the Putin/Xi meeting, in addition to any signs of changes to the Black Sea grain corridor. Reports yesterday indicated the UN is currently working to broker a deal that would restart a large chunk of Russian ammonia exports via a pipeline through Ukraine. According to sources, Russia would move the ammonia to the Russian/Ukrainian border where it would be purchased by a US-headquartered company and transported to Odesa for export.

The parties are reportedly in the early stages of negotiation, but the report shows the extent of work behind the scenes to keep the corridor open.

In addition to the Uzbekistan summit, we will be watching energies. After trading below its 200-day moving average for the first time in two years, crude oil has rallied back, with a strong day yesterday on the news the SPR saw a record drawdown last week. With Bloomberg reporting the White House has plans to refill the reserve when the market trades below $80, some feel a large market short has been exposed, while others feel with an impending economic downturn the price target may not be out of line.

Markets are mostly mixed this morning. 

Corn up 1 to 3

Beans up 3 to 5