- HEADLINES: Chicago weakens on dollar strength; US economy grew in third quarter; Corn export demand disappoints.
- Chicago ag markets have turned lower at midday amid disappointing corn export sales, the US dollar’s recovery at chart-based support and amid concern over economic growth in emerging markets. Third quarter GDP growth in the US was released this morning at 2.7%, which follows contraction in the first half of the year. The Dow at midday is up 300 points at a newer monthly high. But the Egyptian pound has fallen 17%, in one day, as the IMF’s agreement to loan the country $3 billion requires a more flexible, free market exchange rate regime. The US being a relative safe haven for investment provides structural support to the dollar index. Confidence in other markets is lacking.
- US corn export sales through the week ending Oct 20 totalled just 10 million bu, vs. 16 million the previous week. This is nearly 20 million bu below the pace needed to meet the USDA’s 2022/23 target and also accounts for just 26% of annual projected exports. On average US corn commitments as of mid-Oct account for 35-37% of annual shipments. Pace analysis suggests USDA must lower its 2022/23 forecast by 100 million bu at minimum.
- US soy and wheat demand fared better last week. Wheat sales totalled 20 million bu, vs. 6 million the previous week and were the largest since late August. Soybean sales were 38 million bu, vs. 86 million the previous, but total commitments are in line with the USDA’s 2022/23 forecast. China secured 41 million bu. US meal sales were a decent 217,000 mt.
- Soy sales have picked up in October amid seasonally strong/absent Brazilian offers, but it is unlikely that WASDE moves to increase soy complex or wheat exports in future reports. Some 200+ million people this week are stuck at home via China’s ongoing zero-tolerance Covid policy. China’s Party Congress last week reiterated its unwavering commitment to this policy, which over time will have an impact on total food consumption there.
- The choppy nature of the markets continues. It is difficult to be bearish amid firm energy markets and elevated processing margins. Spot crude has extended its overnight rally to $1.20/barrel. But fear over tight stocks/use is diminished without the potential for sustained export demand.
- S America’s cash corn market has been unmoved in the face of rising Black Sea tension and the rapidly approaching deadline to extend the export corridor. We expect Black Sea exports to be challenged Nov onward, but that Brazilian exporters remain aggressive is telling. Gulf premiums are unlikely to improve, with Mississippi River level contraction still indicated beyond the next 24 hours.
- The midday S American GFS weather forecast is consistent with the morning solution. Heavy rains fall across Parana and Sao Paulo in Southern Brazil over the next 4 days. Scattered showers impact central and northern regions of Brazil. Arid weather will be in place across the whole of Argentina into Nov 10. A dry pattern also envelops a majority of Brazil in the 6–15-day period, which for now is viewed as a positive. Soy seeding will advance rapidly, and drier conditions will be cheered by producers in areas of S Brazil inundated by heavy rainfall in October.
- Markets have found equilibrium. The USDA’s Oct balance sheets have been fully digested, and even wheat markets are aware of future Black Sea export issues. Weak importer currencies weigh on demand. US basis levels imply ongoing supply issues.