Morning Comments September 16, 2022

Combine Grain Cart

Outside market pressure and concern over lackluster demand weighed on the markets yesterday with wheat finishing the day 27 lower, corn ending down 4, and beans off 3.

The much-anticipated export sales data dump was incredibly underwhelming for corn as global feed grain demand remains depressed at best. The end of the marketing year brought with it Chinese cancellations of around 10 million bushels worth of old crop corn purchases, with minimal additional coverage added for new crop.

As it stands currently new crop corn sales on the books are less than half of what we were looking at a year ago with overall sales at 11.2 mmt vs last year’s early season pace of 24.2 mmt. Chinese purchases are lagging last year’s pace incredibly, running at 3.2 mmt for new crop versus 12 mmt on the books last year as of September 1.

It’s quite a bit different for soybeans versus last year as new crop export pace is running ahead of a year ago, thanks to an earlier than normal start to Chinese purchases late last spring. The reduction in Brazilian crop size earlier this year caught many bean buyers off guard, leaving them to be far more aggressive this year to ensure it won’t happen again.

The change in Argentina’s soybean purchasing policy however has all but erased much of the excitement traders had over a strong start to the new crop export sales season. The Argentina farmer is estimated to have sold 6.7 mmt of soybeans since the launch of the soy dollar program at the start of September.

This influx of supply into Argentina’s market has cratered values for both soybean and soybean oil exports and made Argentina the cheapest supplier of soybeans well into November. October is generally the time for the US export program to shine as traditionally our global competition finds themselves limited on supplies until new crop is harvested in February in Brazil. 

This influx of supply has pushed Argentina soy offers into China some 60 cents below current US offers for October. Some traders estimate this change in global supply may have cost the US upwards of 2.5 mmt or over 90 million bushels worth of export business. 

The increase in available beans to crush has also pushed the price of soy oil out of Argentina so low that some traders contend imports by the US would work economically as US flat price is running over 50% higher. 

Wheat export sales for the period came in close to expectations and in line with what is needed so far for the marketing year. 

In other news, there was limited fanfare after the initial kickoff to the Shanghai Cooperation Organization summit. Putin and Xi came together yesterday with many geo-political experts pointing to the change in power dynamics between the two. Putin acknowledged China’s concerns regarding the Ukrainian invasion, saying he understands China’s “questions and concerns” over the war.

Additionally, the language of unending friendship and partnership was noticeably missing with China saying now that it's willing to work with Russia to “inject stability and positive energy to a world in chaos.”

Looking ahead we will continue to watch what is happening in the outside markets. Crude has had a roller coaster week, erasing losses from early in the week Wednesday, only to wipe out those gains and then some yesterday. 

Worries over a Fed overshoot when it comes to policy are starting to arise, as mortgage rates climb above 6% for the first time in 14 years and consumer confidence is starting to erode. 

Markets are weaker this morning with corn and wheat currently looking at lower weeks if prices maintain these levels into the close, while soybeans remain 30 cents better so far.

Corn down 3 to 5

Beans down 8 to 10