Morning Comments November 12, 2021

Winter Bales

Analysts and traders alike were a little befuddled by yesterday's moves in both corn and wheat, as both made their way to new highs early in the day before running into some strong selling. Soybeans were supported by some spread unwinding as well as news of Chinese purchases.

While the government was closed yesterday delaying the weekly export sales report and any potential flash announcements from the USDA, China was still in as a buyer in size overnight Wednesday. Traders say China was in purchasing 15 cargoes of U.S. beans out of the Gulf for Dec/Jan shipment as well as a cargo or two out of the PNW. 

As we had discussed earlier in the week, Sinograin had signed a frame contract indicating upwards of 8 million metric tonnes of soybeans would be purchased in the coming weeks. As you recall, we questioned whether it would be business already completed or new business; with China stepping in and making these purchases it's apparent it is at least going to be a little of both.

With soybean export pace still running well behind the pace needed to meet current USDA projections, we definitely need to see continued buying interest in the days and weeks ahead. However, when looking at Brazilian offers versus U.S. values out into late January and beyond it's unlikely we will see much of the buying interest centered on the U,S.

One factor in our lack of export competitiveness further out in the marketing year for not only beans but corn as well is the strength in the dollar as of late. Dollar weakness was one of the first major bullish developments in grains, as a cheaper currency of course makes us more competitive in the global market structure.

Ideas that the U.S. will likely be one of the first major countries to make a big rate move to combat inflation as well as indications that though our economy isn't showing extreme signs of growth, it's still growing more than Europe has pushed the dollar index up to its highest level seen since July of 2020.

The strength in the dollar would usually be a major factor in wheat, but with uncertainty over just what is happening in Russia, as well as concerns over what production could look like next year, wheat continues to push to new highs. 

Ukraine seems content in taking the lion's share of global wheat demand Russia seems uninterested in, though the idea the world's largest exporter is likely relinquishing that spot willingly still raises concerns over what long-term supply will look like. 

Looking ahead, we will get updated export sales figures for the week. Most traders are expecting relatively low sales figures as export business for the most part was quiet. As mentioned, we should see a big flash sale from the USDA this morning on beans being sold, but those bushels won't show up in an export sales report until next week.

Outside of exports, we will continue to monitor what the current administration intends to do when it comes to inflation. While their hands are relatively tied when it comes to policy, they definitely need to do something to make it look like they're trying, especially as the mid-term election cycle kicks off after the first of the year.

Anecdotally, the local news discussed inflation in depth last night. Many will tell you once it hits the local news cycle the story is on its way to being over, not so sure we could say that about this, but time will tell.

Corn 1 to 2 lower

Beans steady to 1 lower