Morning Comments September 29, 2022

Cornboard Field 042221

Corn and beans bounced off lows at key support levels, while wheat saw strength aided by worries over Black Sea production and export potential as well as a weaker dollar into the end of the day. At the close, we saw wheat up 31, corn up 3, and beans unchanged.

After surging to new highs with talk of even greater strength, the dollar fell off a bit hard yesterday as the Bank of England found itself forced to change course on short-term monetary policy. Worries over a possible collapse of several pension funds, with some losing over half their value in a matter of days, forced the Bank of England to step in and purchase long dated government bonds, while also delaying a planned start to the selling of bonds they already have on their balance sheet. 

England has found itself in tremendous financial trouble in part because of several plans floated by the three-week-old Truss administration, in which 100’s of billions of unfunded government spending, including tax cuts and other support to consumers because of high energy costs are included. The unfunded spending, worries over entrenched inflation, and a lack of a plan to truly tackle high energy costs even has the International Monetary Fund expressing concern about the country’s financial future.

In addition to moves by the Bank of England to prop up long-term bonds, we are seeing the People’s Bank of China instruct several large state banks to be prepared for intervention in their currency. According to reports from Reuters, the country is preparing to sell a large portion of its dollar holdings and purchase its own currency, like what we saw in Japan a week or so ago, with one source reportedly saying the selloff could be “substantial.”

In addition to watching how government intervention begins to impact the currency markets around the world, we will be watching developments in the Black Sea. Another leak in the Nord Stream pipeline was discovered overnight, bringing the total to four.

All parties agree the destruction was caused by sabotage, with European security officials saying Russian ships were spotted in the areas of damage prior to it being discovered and the Kremlin saying the waters are controlled by NATO, implying the US is responsible. The talk is the pipeline will be empty and able to be inspected over the weekend. At 100 meters below surface and encapsulated in concrete, many around the world remain curious about just what took place and how or even if it can be fixed. 

In other news, yesterday’s ethanol production figures were disappointing and the lowest on record for the week in several years. Downtime due to maintenance and slower grind due to poor margins and even worse logistics has plants using less corn. Margins should improve as harvest ramps up in areas with solid production, possibly helping put a floor under ethanol demand losses.

Traders are holding their breath ahead of the USDA’s Quarterly Stocks update. While bean figures are relatively easy to guess due to clearer use statistics, i.e., updated crush and export figures monthly and weekly, corn remains a wildcard as the margin of error is far greater throughout the year and we never have a solid feed usage indicator. Expectations going into tomorrow are we’ll see the final bean carryout come in around 242 million bushels for the crop year, with corn carryout around 1.512 billion.

Looking ahead markets are higher this morning on the back of possible Chinese currency intervention and talk we could see even more stimulus provided to consumers and developers by the Chinese government. The dollar is holding on to minor gains overnight while energies are up slightly. 

Corn up 1 to 3

Beans up 8 to 12