Perspective: Mid-Day Commentary for October 5

By: Arlan Suderman, Chief Commodities Economist

Thu, 05 Oct 2023, 16:33

Perspective: Mid-Day Commentary

Arlan Suderman

Chief Commodities Economist

October 5 - High interest rates and a tight jobs market again weighed on stocks this morning. The VIX is trading near 19 at midday, while the dollar index corrected lower to trade near 106.5. Yields on 10-year Treasuries are trading near 4.71%, while yields on 2-year Treasuries are trading near 5.02%. Crude oil prices are down nearly 2% at midday, while the grain and oilseed sector is mostly higher on chart-related trading. A surge in corn export sales lifted the lead December contract above chart resistance at the top of its recent trading range, tripping buy stops of major funds holding large short positions, with momentum-trading Algos amplifying the move. Wheat prices started the day consolidating higher within their recent trading range, with strength in corn providing some tail winds. Solid gains in both corn and wheat prices eventually pulled the soybean market higher as well, where speculative fund managers have been building short positions lately, but fundamentally, little has changed.

Exporters sold 95.6 million bushels of U.S. corn in the week ending September 28, with 71.5 million of that being for the current crop and 24.1 million bushels of next year's crop. The 71.5 million bushels of sales of this year's crop is the second largest of the past quarter century for the same week, and the largest for any week of the year since last March. The featured buyer during the week was Mexico, which purchased a net 45.2 million of the 71.5 million bushels of this year's crop sold, while accounting for all of the sales of next year's crop, although China added purchases of 5.5 million bushels of the current crop. The past week's large sales brought marketing year to date sales to all destinations to 566 million bushels, which falls short of the seasonal pace needed to hit USDA's target by just 54 million bushels, after being short of the pace by 89 million the prior week. The fresh export demand was enough to support a bounce in corn prices today, which hit buy stops once they broke through layers of chart resistance in the $4.88 - $4.90 range, triggering more buying by momentum-trading Algo computers.

Exporters sold a marketing year high 29.7 million bushels of U.S. soybeans in the week ending September 28, but that was still the lowest sales for the week in a dozen years. China was the featured buyer at a net 21.6 million bushels, including 6.5 million bushels switched from previous sales to "unknown destinations." Marketing year to date soybean sales to all destinations total 683 million bushels, which falls short of the seasonal pace needed to hit USDA's target by 158 million bushels, versus being short by 137 million the previous week. The fourth quarter of the calendar year is our prime export season for soybeans, and exports are thus far disappointing, largely due to an ample supply remaining in Brazil at competitive prices and low water levels at the Panama Canal and on the Mississippi River. There were 41 ships on the docket at Pacific Northwest ports this morning to haul soybeans to China, but just one currently listed at the Gulf. On a related note, USDA reported just 10 million bushels of wheat export sales last week, while milo sales were strong at 9.4 million bushels, with 7.5 million of those going to China. Brazil historically has very few soybeans to ship by October.

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