Morning Comments September 23, 2022

Red Barn Behind Field

Continued concerns over what happens next in Ukraine kept support under wheat and corn, while harvest pressure and lack of Chinese interest kept beans under pressure for much of the day. At the close, we saw wheat up 7, corn up 3 with beans down 3.

Russian forces kicked off the start of their “referendum” in four Ukrainian territories today, with “voting” being held through Tuesday. Air quotes are being used at Ukrainian request as they claim Ukrainian citizens in the areas in question are being forced to take part at gunpoint in some instances, with UN officials claiming any type of referendum held during an armed conflict is not to be recognized.

Nearly all major leaders around the world have said they will not acknowledge Russia’s expected claims of victory, though Russia’s threats of doing whatever it takes to defend what they consider their territory does bring with it pause.

On the plus side, Putin has not mentioned the grain export corridor outside of repeating previous complaints about the lack of sales or shipments to impoverished nations. The Russian wheat crop is estimated to be a record this year, at 100 mmt, up nearly 25 mmt (918 million bushels) from last year and putting the country in an interesting predicament. 

Putin has power through the corridor but shutting it down is likely to further hinder shipments of Russian grain and fertilizer at a time when the country has burdensome supplies and needs cash.

In other geopolitical and economic news, the dollar continues to press higher, hitting highs not seen since May of 2002. The surge in the dollar is creating even more problems for other economies around the world as their weaker currency limits buying power, raising prices, and keeping inflationary pressure present. With central bankers saying they will raise rates until inflation begins to wane, the worry becomes rates continue to rise but inflation remains elevated, creating an environment that inhibits economic growth and reduces overall demand.

Speaking of demand reduction, yesterday’s export sales from the USDA triggered a lot of talk about the strong dollar and what it may be doing when it comes to foreign interest in US products. Actual sales for corn, soybeans and wheat came in below expectations.

Year-to-date sales for soybeans so far remain ahead of the average pace for this time of year, though the gap is starting to shrink as early marketing year interest remains limited. Early Chinese purchases had put us well ahead of normal, with a top five sales pace for new crop seen just a handful of weeks ago. However, with China reportedly purchasing 3.5-4 mmt of Argentina beans for shipment during what is usually gut slot harvest in the US, buying interest for additional supplies has seemingly dried up.

Corn sales remain concerning as well, with corn commitments running less than half of last year’s pace. To meet current USDA expectations, we need to sell around 950,000 tonnes of corn a week, we sold 182,000 tonnes last week. The most glaring difference in demand comes from China with the current purchase pace nearly 10 mmt less than last year. 

Wheat exports came in below expectations as well at less than half the amount seen sold for the same week last year, with cancellations of soft red wheat purchases noted. The current pace for the marketing year is the slowest since 2009/2010.

The US remains the most expensive supplier in the global marketplace, with continued expectations of dollar strength unlikely to change that any time soon.

Looking ahead, overnight markets appear to be in risk off mode with energies, grains and outside markets trading or looking to open lower, while the dollar rips to new highs versus the Euro. It’s been a solid week for grains in the face of an outside market rout, so a ramp up in selling pressure today would not be a surprise, though uncertainty over what happens with Russia next week will likely provide some support.

Corn down 10 to 15

Beans down 13 to 18