Morning Comments September 17, 2021

Combine and Tractor in the field for Soybean Harvest

Markets a touch weaker this morning with beans leading to the downside after an uninspiring day of trade yesterday. 

The last half of September tends to be no man's land in the grain markets as we wait for harvest to really get rolling. As of Monday night, corn harvest was somewhere around 5% complete nationally, leaving a lot of folks to their imagination as we wait for yield reports from the rest of the 95% still standing.

As we talked about yesterday we are seeing a tremendous amount of variability this year when it comes to early yield reports as we have seen disease issues as well as pockets of extreme conditions scattered throughout the Corn Belt. 

In addition to the early variability, we are seeing some strength in corn basis values sprinkled throughout the country with a relatively strong correction in Gulf corn values from post-Ida lows. 

Fact of the matter is it always takes longer to refill a mostly empty pipeline than anyone expects and early harvest basis strength versus historical levels will likely stick around until folks start to see their bins and planned piles start to fill up.

Export sales yesterday were solid for beans with continued buying interest out of China. However, it is important to point out overall sales pace is lagging significantly from last year, with no real sign on the horizon that's going to change any time soon. Weak hog prices there keeping soybean demand tepid at best for a while yet. 

Export sales for corn were disappointing for the second week in a row. Last week's sales were the lowest ever for the week, with this year's sales coming in the second lowest ever for the week behind the drought stricken crop of 2012. 

Wheat sales were decent, but inline with expectations.

While talk of potential supply coupled with demand projections will take center stage in this market there are some developments happening in China from an economic standpoint the whole world will need to watch. 

Evergrande Group is one of the world's largest property developers and is responsible for a significant amount of the Chinese real estate boom. With over 300 billion in debt it is also one of the world's largest liabilities.

The Chinese government has recently announced a move to restrict corporate debt as they feel large corporate debt loads are a threat to overall economic health. Somehow this move to restrict corporate debt has put Evergrande in a perilous position, with insiders there saying interest payments due September 20th to several banks will be missed. This not to mention the thousands of investors in both the company and its properties left empty handed.

Concern over what an economic failure of a company this large could look like has a lot of folks on edge, with some saying this could be China's Lehman Brothers moment, saying Evergrande could be a contagion highlighting economic weak points around the globe. Others say the Chinese government will step in to save them, avoiding a crash.

Either way there are some real issues showing up in the Chinese economy as a whole, something that could have a definite impact on future growth. 

Weekend weather looks great for harvest to continue across much of the country, probably resulting in some overall harvest pressure on the markets to finish out the week as farmers scramble to capture some of that early harvest premium being offered in many places.