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Limit Up

By Tori Uhland

October 20, 2023

It’s becoming increasingly more frequent that I sit down to write this and I’m not sure at all what to say. This isn’t because of a lack of news, it is because there are so many ongoing situations and surprise events to keep track of—on top of the normal fundamental and technical details. The current market environment really demonstrates the close relationships between commodities, currencies, energies, geopolitical events, and the weather. It can be a little overwhelming while deciding which are the most important things to say, and it can be a challenge to not open a can of worms when discussing them.

Last Thursday, for the first time in two months, the December 2023 corn contract reached the five dollar level for the first time in more than two months. This was brought on by technical buying, healthy export demand, and dry weather in Brazil. Though corn export shipments are behind, sales are trending above last year’s pace with 157.5 million bushels on the books. Gains in crude oil and weakness in the U.S. Dollar have also helped add a positive tone to grain futures. In some bearish news for corn, we are still looking at a carryout of over two billion bushels. Those hefty supplies will likely limit further gains in the corn futures.

Dryness in Brazil and low Amazon River levels is increasing demand for US commodities. The drought in South America has also caused disruptions in barge shipments and planting. The shifting of all of these shipments causes a ripple effect. There are delays in loading vessels, which is also impacting the exports of commodities like coffee and sugar. There are reports of trucks and container availability being tight and long load times, all of which are straining Brazil’s export hubs. The logistics challenges in Brazil could create a window of opportunities to improve US corn exports.

In an effort to boost local yields and reduce dependency on imports, China has approved 37 different GMO corn varieties and 14 different GMO soybean varieties. It is unclear whether or not these GMO varieties will be commercially available next year, but within five years, much of the country will be planting the new varieties. This is not positive news for U.S. exports, and long-term won’t be bullish for corn or soybeans in the United States.

Soybean futures have found strength in spillover support, especially from soybean meal. Soybean meal prices—both basis and futures­­—have been screaming higher this month. Soybean meal exports have been on fire and the September crush was a record high for the month. The market is tight, and it will be interesting to see when things will start to shake loose as new crush plants come online. The solid export demand comes from the poor crop in Argentina due to their dry weather.

Wheat prices have been trending higher, partially on spillover strength and the other part due to strong export data from the USDA. Total sales last week were on the higher end of estimates, though cumulative sales are trending below last year. Shipments are also lower than the previous four-week average.

Almost half of Argentina’s 2023-24 wheat crop is in fair to poor condition due to the drought in their important agricultural areas. Argentina is a huge global wheat exporter, and the historic drought has left their farmers reeling and trying to recover from a harvest that was less than 50 percent of the previous year.

The geopolitical events around the world are still big things to consider. The strains in the Middle East have led to higher fuel costs, which impacts the transport of US grains. With both wars still raging on, the global market is rapidly evolving. How trade relationships will be impacted going forward is something that the trade continues to watch closely. 

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