Morning Comments September 9, 2022

Harvest gif

Another day of back and forth trade with wheat at one point giving up all of the prior day’s gains before recovering from lows. Corn and beans both tested support levels, but saw buying resurface, letting beans close up 2, with December corn down 2. Wheat was down 15 for the day.

Russian President Putin will meet with Turkey’s President Erdogan next week to discuss the status of the grain corridor. Turkey’s leader has found himself in a position of power to a certain extent recently as Turkey is responsible for much of the oversight required to keep grain in the corridor moving. Erdogan echoed Putin’s calls yesterday for a removal of sanctions both say are limiting Russia’s ability to export fertilizer and grain, a claim Western leaders say is inaccurate. 

China’s President Xi is also planning to meet with Putin and Erdogan next week. The first such meeting between Putin and Xi since the invasion.

Speaking of China, we saw markets jump on rumors China may take steps to significantly relax rules regarding property ownership, with talk they may look to remove all ownership restrictions in some non-tier 1 cities. Stocks of Chinese property developers also jumped on a report 24 cities are looking at allowing parents to access the equity in their homes to help their children repay mortgages or make a home purchase as well. 

With some property developers continuing to struggle with limited capital, the relaxation of rules is viewed by the government as a way to help the developers access cash without necessarily having to supply it directly—something they were hoping to avoid. 

While the government may be finding ways to help reduce the impact of a struggling real estate market on the overall economy, they are still struggling with ways to reduce the impact their Covid zero policy is having on demand. It is interesting to note flights in China are down over 40% from this time a year ago, with overall domestic flights for the year down over 35%. 

In other news, grain markets saw support come from an announcement out of India overnight completely banning the exports of broken rice and adding an export duty to brown and white rice exports. 

Drier than normal conditions in some important rice producing regions in India has the government anticipating a 10-15 mmt drop in production from initial expectations, though they say late season rains may help reduce that anticipated loss. Broken rice exports have surged over the last two years, with China taking over 1 mmt last season to use for feed. 

The government noted the sharp uptick in Chinese broken rice purchases as part of the reasoning behind the ban, saying the supplies of broken rice were best kept domestically to use for ethanol production. With India responsible for upwards of 40% of exports from major rice producing countries, buyers may find themselves scrambling to source supplies.

Looking ahead, traders will likely spend much of the day squaring up ahead of Monday’s supply and demand updates. Traders have reduced their expectations for the US crop decently from last month, with yield estimates ranging from 170.6 to 174.9, down from last month’s 175.4. The USDA announced earlier in the week they feel FSA data is complete enough to update corn and soybean acreage in the September report as well, something that is traditionally done in October. 

While FSA data released in August didn’t indicate a major swing in acres for corn or beans, the fact that acres will be updated remains a bit of a wildcard. 

Going into the report it is interesting to point out traders have underestimated the USDA’s corn yield projection ahead of the report 13 out of the last 17 years, with soybean yields being underestimated 12 of those years. 

Markets are stronger this morning, with energies higher as well as countries around the world work to limit the impact of higher costs on consumers via stimulus.

Corn steady to 2 higher

Beans 8 to 12 higher