Perspective: Mid-Day Commentary for September 13

By: Arlan Suderman, Chief Commodities Economist

Mon, 13 Sep 2021, 16:55

Perspective: Midday Commentary

Arlan Suderman

Chief Commodities Economist

September 13 - It's an inside trading day for many of the markets today, in both the equities and in the commodity sector. The Dow Jones Industrial Average recovered a portion of Friday's loss, while the tech sector remains in the red as Democratic leaders outline their proposed tax hikes. Meanwhile, the New York Fed reported the results of its latest consumer survey, reflecting a median expectation of 5.2% year-on-year inflation 12 months out and 4.0% three years out. The VIX is trading near 20 at midday, while the dollar index is trading near 92.6. Yields on 10-year Treasuries are trading near 1.32%. Crude oil prices are modestly higher, while grain and oilseed prices are mixed to lower, although well-off their session lows at midday. The protein complex is under pressure again, with live cattle futures react to a fire in a Grand Island, Nebraska packing plant, while lean hogs continue to see soft demand amid rising supplies.

Several export facilities are open at New Orleans, but the bulk of the export capacity remains shuttered while waiting for the power to be restored, even as a couple of the hardest hit facilities are in various stages of repair. Entergy's website continues to show delays for power restoration for remaining facilities, but without cell signal in the area, information flow is hampered. As such, confidence in many of the projections coming from the city is low. Regardless, this morning's USDA's weekly export inspection report clearly reflected the problems at the ports of New Orleans, with virtually zero movement out of the city in the week ending September 9. Rail shipments of corn and soybeans into Mexico accounted for the bulk of last week's activity, while we also saw China take a load of wheat and a rare load of soybeans from the Pacific Northwest. USDA inspected just 5.4 million bushels of corn for shipments during the week, along with 3.9 million bushels of soybeans, 0.2 million bushels of grain sorghum, but 20.1 million bushels of wheat.

The bulk of the wheat shipments were either rail to Mexico, or went through the Pacific Northwest or to Gulf ports other than New Orleans. The graphic below shows weekly soybean shipments versus the previous year, versus the five-year average pace and versus the seasonal pace needed to hit USDA's target for the new marketing year. Shipments will need to quickly ramp up to more than 100 million bushels per week soon to get us back on pace. Today's data showed that shipments to China in the week ending September 9 included zero corn or grain sorghum bushels. We anticipate that next Monday's weekly report will reflect improving movement through New Orleans, with business normalizing over the next two to three weeks. Exporters are expected to pull significant quantities through the ports - especially soybeans - as facilities open to catch up on orders.

Soybean demand by China is the current focus. There are not a lot of soybeans on the water coming from Brazil to China currently, and even fewer U.S. soybeans due to the problems at New Orleans. Chinese port reserves for crush are near 6 million metric tons. Crush margins are quite good, but crush rates are only about 1.7 mmt per week currently. Nonetheless, crushers need boats on the water headed to China to fill demand for late October and later. Corn demand can wait, relative to Chinese needs. We expect soft demand for corn from China as the local harvest hits the cash market, and supplies of feed wheat remain adequate as well. We expect China to return early next year for U.S. corn, but the feed grain market will likely need to rely on livestock feed, ethanol and non-China export demand the next several months.

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