Perspective: Mid-Day Commentary for October 14

By: Arlan Suderman, Chief Commodities Economist

Mon, 14 Oct 2024, 16:12

Perspective: Mid-Day Commentary

Arlan Suderman

Chief Commodities Economist

October 14 - Happy Columbus Day! The markets are open, but government offices and the banks are closed, reducing the amount of fundamental data available to the markets to trade today. The tech sector led gains on Wall Street this morning, although traders remain cautious ahead of a string of earnings reports due out this week. But that was contrasted by generally weaker commodity prices, as China's economic data, as well as stimulus talk, continues to disappoint. The VIX Is trading near 20 at midday, while the dollar index trades near 103.2. The Treasury market is closed for the Columbus Day holiday today. Crude oil prices are down by more than 2% following today's news out of China, while the grain and oilseed markets are mostly weaker. Wheat prices may have found the top of their trading range near-term until we see if Russia's winter wheat belt ever sees rain again and/or Russia limits exports, but those risks should also provide underlying support for the market going forward. Corn and soybean prices continue to feel seasonal harvest pressure as two big crops seek storage space. Corn demand is solid, while soybean demand is soft. The overall negative tone for the commodities as a whole today creates additional headwinds for the grain and oilseed sector. Export inspection and crop progress data normally released today will be released tomorrow due to the holiday.

U.S. soybean sales turned notably higher in recent weeks, providing some support for the market to partially offset the overriding seasonal harvest pressure currently being seen in the markets. Additional headwinds come from the good rains falling across many dry areas of Brazil, which are expected to continue in the weeks ahead. Thursday's USDA weekly export sales report showed another 46.5 million bushels sold in the week ending October 3 - the period covered by the report, although that was a marketing year low for new sales. Marketing year sales to date to all destinations totaled 740 million bushels in Thursday's report, up from 714 million bushels at the same point last year, but still 137 million bushels below the seasonal pace needed to hit USDA's target for the 2024-25 marketing year. The biggest reason for the disappointing sales pace continues to be a lack of demand from China. The graphic below shows marketing year sales of U.S. soybeans to China, currently at 298 million bushels as of Thursday's USDA weekly sales report, down from 328 million bushels at this same point last year, and down from 812 million bushels at this same point in 2020. The only recent year that had a slower sales pace at this point was the 2019-20 marketing year when sales totaled just 176 million bushels at this point in the season. That was the time of the trade war, although I would argue that the greater impact came from African Swine Fever, which had destroyed nearly two-thirds of China's massive hog herd over the previous year. As of last week, we estimated that China still had better than 500 million bushels of soybean commitments to make yet for its needs through January, but buyers appeared to be waiting to see if rains in Brazil would free up supplies from farmers there, who still own roughly the last 10% of last season's crop. China also had large reserves of soybeans that it can draw on if it so chooses to do so.

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