Morning Comments September 8, 2022

Grain Corn Pile Closeup

Wheat traded nearly 50 cents higher at one point yesterday, taking corn and soybeans with it for a short time before an epic drop in crude proved too powerful to ignore. To end the day, we saw December wheat up 27, December corn down 5, with November soybeans down 15.

Wheat soared on comments from Russian President Putin regarding the grain corridor, saying the world had been duped into supporting an agreement that did not actually benefit impoverished nations. Putin went on to claim only 2 of the initial 80 vessels shipped went to needy countries, saying the bulk of shipments are going to Europe instead.

With just over 2 months left in the initial agreement, Putin’s claims bring into question whether there will be an extension to the agreement, or if Russia will refuse to allow it to continue. Another alternative in the eyes of traders would be Putin forcing a narrowing of the agreement, potentially limiting shipping destinations in the future.

Of course, Ukrainian officials contest Putin’s claims, saying nearly 2/3rds of grain set to be shipped via the corridor in the coming weeks will head to Asia, Africa, and the Middle East.

Interesting to note so much fuss over the Black Sea corridor when we continue to see massive growth in exports via the alternative methods put into place shortly after the invasion. According to Ukrainian officials just over 3 mmt of grain was shipped via road, rail, and the Danube in the month of August. This up over three-fold from its pace at the start of the invasion.

In other export news, the plan out of Argentina to provide farmers with a much stronger currency conversion rate than current market values has worked to incentivize sales. Traders estimate upwards of 2 mmt of beans have been sold by farmers in the initial days of the deal, with reports of 10-20 cargoes of beans sold by exporters to China this week for September/October shipment.

Brazilian corn exports were up 74% year over year in the month of August as a large increase in available supplies from a year ago has put Brazil in the driver’s seat for the next few months when it comes to global corn trade.

Looking at demand, traders remain concerned over what is happening in China as an estimated 65 million people are under some type of lockdown or seeing restrictions. Late last week another group of tourists found themselves stranded as a flair up of the virus prompted a lockdown of the city they were visiting.

Stories of entire buildings being sealed off after the discovery of just one case continue to circulate in Shanghai, with officials from the National Health Commission urging folks from all over the country to limit travel and avoid unnecessary social gatherings. Demand destruction from the lockdowns is becoming evident as imports in the month of August fell off substantially.

Oil imports from January through August were down nearly 5% year over year, with August imports down over 9% from a year ago. As we mentioned yesterday, a sharp drop in soybean imports were seen as well, with inbound soybeans in August falling to an 8 year low.

While new crop soybean purchases by China are up year over year, the recent slowdown in purchasing pace has become concerning, especially as the dollar continues to strengthen.

Looking ahead, we will continue to monitor developments from Russia and Ukraine as world leaders try to stabilize global relations. The European Central Bank will meet today with traders expecting to see a rate increase, while other US central bank members will have a slew of different speaking engagements across the country.

Many eyes will be on crude after a nearly $5 drop yesterday. With WTI trading below its 200-day moving average for the first time in two years bulls will need to step up to avoid another round of selling.

Corn down 1 to 3

Beans up 2 to 4