Outside market pressure on continued worries over the global economic outlook weighed heavy on corn and beans throughout the day Friday, while worries over Putin’s next move provided support to wheat. At the end of the day, we saw wheat up 15, and beans down 3, while corn finished the day unchanged.
Headlines from last week’s much-anticipated Shanghai Cooperation Organization summit were fleeting, with little in the way of substance discussed it seems, or at the very least little in the way of substance discussed in the public eye. It was worth noting Putin acknowledged ‘concerns and questions’ from China about his invasion of Ukraine, but beyond that much of the story remains the same.
Over the weekend Putin claimed Russia would be capable of exporting 30 mmt of grain by the end of the year, with many in the industry wondering if he meant calendar year or marketing. With the current pace well below the country’s pre-invasion capabilities and less than half of what would be needed to meet a 30 mmt by end of the calendar year prediction, it seems a difficult task to accomplish.
In addition to promises of major export capacity, Putin continues to express displeasure with Ukraine’s use of the export corridor, again claiming a small percentage of ships leaving Ukraine’s ports are destined for countries in need. The UN and Ukraine continue to dispute Putin’s claims, with loading information supporting their assertions.
Ukraine’s counter-offensive has slowed but remains strong with reports of an explosion taking out a large number of Russian troops late yesterday and continued stories of Russian soldiers retreating. The worry has now become how Putin reacts to the counter-offensive, with it seeming unlikely the situation ends quietly.
In addition to Black Sea developments, we are continuing to see worries over global demand for goods and commodities as the economic outlook remains poor just about everywhere. The International Energy Association predicts we will see zero global demand growth for oil in the fourth quarter as continued Chinese covid restrictions and other slowdowns weigh heavy.
Speaking of China, the country’s Ministry of Agriculture and Rural Affairs in conjunction with the government and industry groups continued to outline a plan for soybean meal demand reduction in the country. Using a mix of just plain cutting the usage of the product in rations and in-depth substitution plans, the agency and its cohorts believe they can substantially reduce meal demand across the livestock industry.
According to officials involved in the project, the usage of soybean meal in aquaculture was cut 2.5% from 2017 to 2021, resulting in the reduction of 14 mmt worth of soybean demand.
Looking ahead much of this week’s attention is going to be focused on the Fed meeting and what officials do with rates. Coming into this week most analysts agree a 75 basis point rate increase is the most likely outcome, though some caution a 100 basis point increase is on the table with last month’s labor and CPI figures.
The increase in rates is having real effects on the consumer, with mortgage rates now sitting at 6%, the highest since 2008 and crossing the threshold of affordability for most first-time home buyers now according to market watchers. As a result, the outlook for the housing market and all of the industries tied to it looks bleak in the short term.
Outside of what the Fed does we will be watching harvest reports and South American weather closely. It looks like rain will fall across much of Brazil outside of its Northeast regions over the next 2 weeks. With soybean planting just now able to get underway in the country, the moisture and incoming monsoonal flow will be much welcomed.
Dryness in Argentina has become concerning, with some farmers claiming they will stop corn planting due to dry conditions. At this point, much of the dryness is centered in Buenos Aires where rainfall rates have been much lower than normal for much of the summer. Farmers in Argentina generally have two windows for corn planting, one now and another in December. Last year over half of the country’s corn was planted in the later window, with us likely to see the same this year.
Wheat was down overnight, with corn and beans both higher and lower throughout. Energies are weaker this morning.
Corn Down 3 to 5
Beans Up 3 to 6