Perspective: Mid-Day Commentary for October 27

By: Arlan Suderman, Chief Commodities Economist

Thu, 27 Oct 2022, 16:43

Perspective: Midday Commentary

Arlan Suderman

Chief Commodities Economist

October 27 - The tech sector remains under pressure this morning, after a worrisome earnings report from Meta, following other concerning reports from other tech firms earlier in the week. Yet, the Dow Jones Industrial Average pushed notably higher again today, supported by positive GDP data released this morning. The VIX is trading near 27 at this hour, while the dollar index is trading near 110.3. Yields on 10-year Treasuries are trading near 3.93%, providing an additional boost for stocks, and for many of the commodities. Crude oil prices are 2% higher, while the grain and oilseed markets are trading lower. Today's corn and soybean rally ran out of buyers near the top of the recent trading range, triggering selling as the dollar firmed. Wheat tried to hold onto notable gains following a positive day on the charts on Wednesday, but it too was eventually pulled under - unable to sustain the rally.

Exporters sold 37.7 million bushels of soybeans in the week ending October 20, along with 19.6 million bushels of wheat, 10.4 million bushels of corn and just 0.04 million bushels of grain sorghum. The best of the four was the relatively high wheat sales for this time of year, which featured sales of 7.7 million bushels of white wheat and 7.1 million bushels of hard red spring wheat. Argentina's early harvest results suggest that production may fall below 14 million metric tons, meaning that we may see Brazil come to the U.S. for wheat in the year ahead. Australia has a bumper crop, although perhaps not as big as first thought, but much of it will be of feed quality due to excessive rains. That provides an opportunity to possibly increase demand for U.S. hard white wheat.

Soybean export sales for the marketing year to date total 1.122 billion bushels, as shown below, up from 1.068 billion the previous year, but roughly 50 million bushels below the seasonal pace needed to hit USDA's target for the year. We saw a surge of sales a couple of weeks ago as Chinese buyers pushed to fill needs, but buying has slowed again since that point, falling further below the seasonal pace needed to hit USDA's export target for the year. Barge freight rates on the Mississippi River came down from their highs that send Chinese buyers back to South America looking for supplies, but they're still reluctant buyers via the Gulf due to worries about whether their contracts would be filled. Instead, they're focusing on what they can get via rail to the Pacific Northwest, as well as on remaining old-crop supplies in Argentina and Brazil. China was listed as a buyer of a net 41 million bushels of U.S. soybeans in this morning's weekly export sales report, but 24.4 million bushels of that total was a shift from previous purchases by "unknown destinations." China continues to release soybeans from its reserves, but crusher supplies are at a new modern-era low of 3.24 million metric tons, with soybean meal stocks the lowest since 2015 at 305K tons. Feed producers are replacing soybean meal in rations with amino acid supplements to get by until new-crop Brazilian supplies become available early next year. Nonetheless, the current focus on soybeans has year-to-date corn sales lagging the seasonal pace needed by nearly 300 million bushels.

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