Monday, December 5, 2022|
Closing Markets: Corn -6. Beans -1. Wheat -22.
Trade remained mixed to start the week with soybeans on the plus side and the grains under pressure. A rally in crude oil supported the soy complex as did concerns over the Argentine crop. As crude slipped lower, so did the support the soy complex was receiving. Grains remain pressured by a lack of demand. This was compounded by a rebound in the US dollar today. Trade is receiving mixed news out of China as some Covid restrictions are going to be lifted but we have yet to see a timeline on when. The most notable one is citizens will not have to show negative Covid tests to travel or enter shopping centers. Crude oil rallied early today on news OPEC+ will maintain its plan on output reductions. Since this was already planned, the support was not long-lasting. The price cap that was placed on Russian oil at $60.00/barrel by the EU is being closely monitored as Russia has indicated it will retaliate in some manner. There remain concerns over the US economy as wages are starting to replace high food and energy costs as inflation factors.
Corn continued to grind lower today as that is the path of least resistance for the contract. Corn futures are technically oversold, but this has not prevented additional selling, nor has it attracted buyers. Funds have trimmed their long position for yearend, but it appears as though they want to further reduce it. A lack of demand in the corn market is the main source of pressure and prospects for a larger crop out of South America will likely continue to deter US sales, especially at today’s values. Ukraine continues to export a large volume of corn with seasonal shipments at 9.8 million metric tons (mmt). Several buyers claim to have immediate needs covered which may leave a small window for US sales before the next Brazilian crop becomes available in late spring. Improved weather outlooks for Argentina and larger Brazilian crop forecasts were also negative for corn futures.
Soybeans rallied early today, taking support from a firm crude oil complex. Crude softened as the session progressed, and as it did, so did the strength in soybeans. Thoughts that China may increase its soybean consumption as Covid restrictions are lifted was also supportive, especially with Brazil out of soybeans until harvest. This will open a very small window for the US to make additional sales. The US is likely to continue seeing smaller sales, but the bulk of our selling is done for the year. We did see a daily sale of 130,000 metric tons to China today.
The wheat complex struggled today as buyers continue to look elsewhere for coverage. Russia continues to export a large volume of wheat at a sizable discount to the US, along with most other sources. Australia is also exporting larger volumes of wheat. The La Nina is forecast to come to an end in the next few months and bring improved weather conditions to the US. As a result, risk premium continues to leak out of futures, even with the complex already technically oversold. Seasonal exports out of Ukraine total 6.9 mmt so far as movement continues despite the ongoing war with Russia. One source of concern in global production is Argentina where drought continues to impact the crop. Current Argentine wheat exports are the lowest in 8 years.
Export inspections for the week ending December 1st were mixed. Grain inspections for the week were up from the week before but still fell short of the volume needed to reach yearly USDA projections. Soybean loadings declined during the week but were still very strong. On the week the US exported 20.6 million bu (mbu) of corn, a 68.2% on the week, but short of the 50 mbu that is needed. Wheat inspections were up 17.6% on the week at 12.3 mbu but we need 15 mbu of weekly loadings. Soybean inspections were almost twice the needed volume with 63.6 mbu, even though the total was down 22.7% from the previous week.
China is seeing expansion in its hog herd, albeit at a slower pace. At the end of October China reported a sow inventory of 43.79 million head, an increase of 300,000 from September. This was up 0.7% from October 2021, but an increase of 6.6% from October 2020 as the country continues to rebuild from the African Swine Fever outbreak. This increase in sow numbers will lead to elevated hog numbers on a whole.
Have a great evening!
Emery Manager & Originator:: Topflight Grain Cooperative, Inc.
593 Emery Rd :: Maroa, IL 61756
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