Oilseeds Highlights

• USDA WASDE REPORT out Tomorrow.
• United States Midterm Elections take place today.
  • Although not as much of a headline grabber as the US Presidential elections. The midterm elections hold just as important of a place in American politics and are watched globally.
  • The US midterm elections has the Republican partly looking to gain control of congress and take it away from the Democratic party.
  • Control of congress is highly important in the passing of bills and all of US government policy.
• China has announced it will continue with its “Zero Covid” policies for the foreseeable future. Sending concerns for oilseed and grain demand from the nation with nearly 18% of the global population.
• China’s October import numbers were released and Soybean imports were 19% lower than a year ago. The imports came in at just 4.14 mmt or the lowest in 8 years.
• Palm oil fell 1.5% overnight on concerns of weakening Chinese demand.
• Good general rains expected across most of South America this week. Brazil and Argentina both expected to get some rains which will be excellent for the Brazilian soybean planting region, where many regions have very good growing conditions.  Argentina will benifit from the rains in its soybean and corn regions as well.  The rains are to little to late in Argentinas wheat regions as harvest is underway for the crop
• Markets remain cautious that the escalating issues of Russian and Ukraine will continue to hamper sunflower oil production and exports.
• US barge traffic in the Missisippi river and its tributaries is causing major issues. Mississippi river accounts for the majority of US grain exports.  Rains this week will help river levels but not enough to be of significance.
  • Record low levels in the river is restricting barge traffic.
  • Barge traffic has caused inland basis values to increase in the US Midwest.
• Potential rail strike in the United States is becoming a potential threat. November 22nd.
  • Over half of US unionized rail workers still yet to ratify labour agreements, leaving risk potential for a strike.
• US federal reserve announced a bump of 0.75% in interest rates leading to the 4th consecutive rate hike.
  • The US federal reserve announced that it was not done with rate hikes and to expect another one in the December meeting.
• Many analysts are forecasting a global recession for late 2022 and into 2023 as rising interest rates and untamable inflation keep consumer spending at bay.
• Commodity markets lacking any major news outside of the Russian and Ukranian conflict to begin the week.  It is important to keep in mind the old adage, “Bulls need to be fed everyday”
• Weather in South America will begin to take a larger precedent in global agri trade.
  • Brazil moisture good for the time being, some reports of excessive moisture in pockets of production regions
• USDA WASDE highlights from October report:
  • Brazils 2022/23 soybean crop size estimates were bumped higher by 3 million tonnes to take the crop to a massive 152 mmt.  The crop is just being planted and is in the early stages at best.  Harvest will commence in February – March and markets will begin to focus on South American weather shortly
  • For reference, Brazils most recently harvested soybean crop from this spring came in at 127 mmt.
  • US soybean estimates fell to 49.8 bushels per acre.  This is the lower level of estimates heading into the report
• Brazil 2022/23 soy crop private analyst preliminary estimates mostly over 150 mmt. The crop is just in its very early stages, planting is still ongoing and analysts are using expected acres.  If realized, this would be a 21% increase in production. USDA placed the crop at 152 mmt in Octobers report. Soil Moisture conditions are posted below.
• Updated WASDE figures next week to reflect the November report

Global Vegetable Oil Pricing

USDA WASDE DATA – October 2022

Special Crops

• • European Union Durum exports higher than normal.  Import pace lowest in a decade.
  • Heavy rainfall in eastern Australia has downgraded the Barley crop.  Upwards of 60% of the Australian barley crop is grown there.
  • Flax exports from Russia hit a record 975,000 tonnes in 2021/22
    • Russia has been flooding several markets with Flax this year so far as well and it is hurting North American export prospects.
  • Moisture conditions in India coming in well for pea and chickpea production regions. Plantings of these crops are expected to be slightly lower for the year but the positive moisture conditions could help make up the difference.
  • Argentinian export pace of Canary seed has been quite aggressive recently, the heaviest movement in 10 years.
  • Durum bids in North America turning higher.
  • Container shipping rates falling significantly, although logistics still a problem.
    • Baltic Index tracked US to China container rates around half of July levels. Below $3,000 for the first time in nearly two years.
  • Brazilian Sugarcane crop expected to be the smallest since 2011, resulting in a lower supply available for the nations ethanol market.
  • Ukrainian Barley export availability expected to fall significantly,
  • Australia expected to harvest another large Barley crop, although it is mostly making its way into Saudi Arabia and Middle Eastern markets as the Chinese Market is still off limits.
  • European Durum crop is expected to fall to 6.9 mmt, 800,000 tonnes lower than last years production.
  • Canadian Durum crop expected to be of high quality, over half as a #1.
  • Canadian flax exports are slower, larger than expected ending stocks come in. Most since 2017/18
  • India has announced Lentils will remain exempt from levy of 10% until March 31^st

South American SOil Moisture

USDA AMS – GRAIN VESSEL RATES UNITED STATES P.N.W. to japan

Grains

• Questions remain over whether the Ukrainian / Russian Shipping corridor will be renegotiated before the November 19th deadline.
  • Russia has played back and forth and has toyed with markets over the idea that it will not participate in a new agreement
• US winter wheat issues persist.  Good to Excellent rating did improve marginally this week to 30% Good to Excellent.  Up 2% for the week but down from the 45% last year.
• Australian wheat suffering from heavy rains ahead of harvest, leading to grade issues
• Ukranian barley exports have been very slow, helping support Canadian and other exporters prices.
• Ukraine is expected to face a 30% to 40% drop in its winter wheat acres planted.
  • Input Financing, logistical issues and the fact the nation is at war sum up most of the cause for the drop in acres.
• US transportation hurting inland basis levels.
  • US barge system facing restrictive water levels in the Mississippi River.  Barge traffic has become massively restricted in recent weeks.
  • Restricted barge traffic is widening out basis levels for Corn and Soybeans for US growers in the basins draw region.
    • Nearly two thirds of US corn destined for export is shipped through the US Gulf coast. See figure below.
• USDA October highlights
  • US corn yields fall to 171.9 from 172.5 bpa last report.  Good yields in Illinois, Ohio, Indiana while South Dakota, Nebraska, Kansas, Texas and a handful of other smaller production states all fall from last months report.
  • Global corn stocks came in 3 mmt lower for this months report, come in at 301.2 mmt.  Soybean stocks 1.5 mmt higher at 100.5 mmt, Wheat 1 mmt lower at 267.5 mmt
•  Russian crop size is expected to be quite large, which some analysts are pushing towards the mega 100mmt mark. This would easily be 10mmt to 15mmt over a previous record crop size.
  • Winter wheat plantings in the black sea are already suffering for the next season.
• US winter wheat plantings are falling behind pace and producers are planting once again into very dry soils.
  • US winter wheat acreage is critical to the overall US wheat crop. Over 70% of US wheat production falls into the winter wheat category, 30% falls into spring wheat and durum (mostly spring wheat)
• Russia also expects to add 5mmt to its harvested area due to newly annexed regions of Ukraine.
• This also raises the markets question as to if the Ukraine grain corridor will be extended past its November 19 deadline.
• US federal reserve raised its interest rates 0.75% in November  Security backed Mortgage and Loan products in North America sit between 5.5% and 7.5% in many locations.  Cost of debt has risen significantly for many operations in the past year.
• More rate hikes expected to come. Canada did hike rates by half a percent on October 26th.
• Fertilizer prices do not bode well for high input corn crops globally going forwards, bearish soybeans.
• Europe’s corn crop is expected to be the smallest in 15 years.
• Ukrainian wheat production seen falling to 17.4 mmt by private analysts. This is down from roughly 33mmt in the year prior.

Charts

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Weather

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Chinese Soybean and Corn Highlight