Perspective: Mid-Day Commentary for December 11

By: Arlan Suderman, Chief Commodities Economist

Mon, 11 Dec 2023, 18:20

Perspective: Mid-Day Commentary

Arlan Suderman

Chief Commodities Economist

December 11 - Stocks are generally quiet ahead of this week's anticipated inflation, retail sales and Federal Reserve headlines. The VIX is trading below 13 at midday, while the dollar index is trading near 104.2. Yields on 10-year Treasuries are trading near 4.28%, while yields on 2-year Treasuries are trading near 4.76% - both very near this morning's levels. Crude oil prices are modestly lower after failing to see follow-through buying interest above Friday's high, while the grain and oilseed markets are mixed. Soybeans are putting weather risk premium back in prices, while wheat sells off hard on a lack of fresh export sales news, with corn prices caught in the middle, lacking news of their own currently. Day-trading Algo traders appear to be magnifying the moves in both soybeans and wheat.

USDA inspected 36.2 million bushels of soybeans for export shipment in the week ending December 7, as shown below, along with 28.0 million bushels of corn, 13.4 million bushels of grain sorghum, and 10.4 million bushels of wheat. The portion of the above that was inspected for shipment to China included 18.5 million bushels of soybeans, 5.6 million bushels of corn, 12.1 million bushels of grain sorghum, but no wheat. We need to see shipments of wheat to China pick up the pace, based on recent sales, because marketing year to date wheat shipments to all destinations fall short of the seasonal pace needed to hit USDA's target by 64 million bushels halfway through the year.

Marketing year to date soybean export inspections total just 725 million bushels, down 140 million or 16% from the previous year's pace, and now 7 million bushels below the seasonal pace needed to hit USDA's target. Note that we had a strong start to the soybean marketing year shipping pace, but things have really fallen off fast over the past seven weeks as buyers have leaned heavily on Brazilian supplies. Marketing year to date corn export inspections total 361 million up 99 million bushels or 35% from the previous year's pace, but still 23 million bushels below the seasonal pace needed to hit USDA's target for the year. We saw a surge in corn shipments last week, but thus far that looks like a one-week aberration. Ukraine is expected to continue to ship 2 - 2.5 million metric tons per month, while shipments from Brazil should slow once it shifts its focus to soybeans in the next 45 - 60 days. That should allow U.S. corn shipments to increase, but a doubling of corn shipments in the first quarter of the calendar year is normal, so we need to see something more than that to excite this market.

China's official crop report cut soybean crush for the previous marketing year to 95.93 million metric tons, although that's still above USDA at 95 mmt. Soft feed demand is the primary reason for the downward adjustment. China increased its 2023/24 soybean import target by 2 mmt to 102 mmt, while keeping crush for the current year unchanged at 98 mmt, reflecting an expectation that it will build supplies by 4 mmt during the year. There's even some question whether it will crush 98 mmt in the current year, considering the hog liquidation currently in place, as well as China's attempts to reduce soymeal inclusion in rations. Yet, there remains a possibility that China will continue to push imports to further build its reserves due to ongoing geopolitical tensions that it may fear could put future imports at risk.

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