Morning Comments September 20, 2022

Harvest gif

Corn spent much of the day battling the pull from a much weaker wheat market, managing to close unchanged. Soybeans found strength from worries over global meal supplies this winter and a China flash purchase, closing 13 higher. While wheat sold off on concern US supplies are uncompetitive in the world market, closing down 29.

What was bearish late last week is seen as bullish this week in the bean market as massive Argentina farmer sales that have translated into big export sales over the last handful of weeks has traders wondering how crushers in the country will source supplies this winter.

The introduction of the soy dollar and the need for Argentina to make a few billion dollars in a hurry to satisfy the terms of their IMF loan has changed the dynamics of the global soybean market to a certain extent. Prior to the change in policy exports of whole beans were relatively limited out of Argentina, with the USDA pegging full year exports at 4.7 mmt.

Current sales are already estimated to be within shouting distance of that figure, with many expecting full year exports to exceed projections by 2 mmt or more.

This increase in the sale of whole beans is bringing into question how crushers will source the difference. Argentina is one of the world’s largest exporters of soybean meal, with some estimating the US and Brazil will not have enough excess supply to cover the shortfall in finished product. This of course assuming there is no reduction to demand.

Speaking of demand, Chinese corn imports for August were down 44% year over year, with the yearly import total sitting at 16.9 mmt, down 21% so far for the calendar year. Wheat imports in August were lower as well, as were pork imports, with beef imports continuing their strong run, up nearly 12% this calendar year.

There is some excitement regarding potential rollbacks in Covid policy stimulating a strong Chinese recovery floating around the market place this morning as well, as the Chinese government released some suggested changes to regulations aimed to bolster tourism along its border. China’s border has basically been closed since the discovery of Covid in 2020, making this a major shift in policy, leading some to believe Covid lockdowns could soon become a thing of the past.

With signs pointing to government policy changes working to help spur the restart of many stalled property projects, some analysts are wondering if we could see a US or Europe style hard recovery from the country in the coming months. While current interest and economics do not point to any major increase in corn purchases especially, the market will remain hyperaware of what is taking place in China for the foreseeable future.

In other news, German Producer Price Index data for August shocked to the high side today, coming in 45.8% higher than a year ago and up 8% month over month. Traders were expecting a 1.6% monthly increase. With energy prices over double what they were a year ago many manufacturers are being forced to shut down, with reports of a toilet paper company made insolvent by the sudden surge in energy values.

Sweden’s Central Bank surprised analysts as well by hiking rates 100 basis points overnight, with another 75 point rate hike likely in November according to officials. Our Central Bank meets this week, with Powell’s rate announcement on Wednesday the first of nearly 12 additional rate announcements from around the world. All are expected to raise rates, with China the only hold out, leaving their rates unchanged overnight.

Weather-wise the US looks to dry out for the rest of September, with below normal precipitation expected well into October. There is a risk of frost showing up into next week for northern tier states, though confidence is low, with the threat only present a day or two before warmer temperatures move back in. Wetter than normal conditions are expected across much of Brazil as an early start to monsoonal flow has been seen, dryness remains an issue in Argentina, though it is still very early in their growing season.

Wheat and corn are higher so far this morning, with beans mixed to higher.

Corn up 1 to 3

Beans down 3 to 5