Morning Coffee Comments

Corn

Good morning. Futures are showing a reddish tint again this morning, as the trade continues its struggle to find some fresh and supportive news. Nothing supportive is coming from the demand side and the yield reports are too few and far between to reignite any production concerns. The few we have from northwest Indiana and Illinois have tended to be better-than-expected, but that means little at this juncture. Until we get a better handle on what transpired in the far western Corn Belt, there won't be much production news for traders to wrap their brains around. The outside markets certainly aren't helping much, with the surging Dollar and talk of recession taking its toll on the financial sector. The brief gains from the September 12 USDA reports are completely gone, with the December contract now a full 20 cents under the pre-report close. Technically, I'm not seeing any support above the $6.60 mark and I'm concerned about that level holding up before Friday's USDA stocks report. The trade isn't expecting any fireworks from that one and I would concur, although there have been some notable post-report moves in recent years. In early trading I'm seeing the December down 3 cents to $6.64 1/2, with the December '23 down 2 1/4 to $6.08.

Soybeans

Soybean futures have also given up all of the post-USDA report gains, plus another 15 cents. The current November tick of $13.97 (down 11 cents), is $1.11 below the high mark from September 13. Failing demand is the main culprit in the slide, along with the surging Dollar and talk of recession. Whatever problems we're dealing with here pale in comparison to what is being seen in Europe and China and that's not good for the demand side of the ledger. Unlike the past two years, we're not seeing any planting season concerns for the Brazilian crop and that will likely lead to another large increase in acreage. Without any significant growing season problems, it's possible the Brazilian crop could jump by 20 million tonnes or 735 million bushels. Given that they're still in the export market in October, after a short crop, I really don't care to think about what might happen price-wise if they drift back to their usual yield-conducive growing season weather. And, if high N prices shove more acreage toward soybeans this coming spring, the situation will only be compounded. We are certainly overdue here in the States for a major breakout in yield.

Wheat

Wheat futures have turned a blind eye to corn and soybeans this morning, which is a very good thing. We're currently seeing the December contract up 3 1/2 cents to $8.75, with the July up 3 to $8.79. Concerns flowing from the Ukrainian war continue to be the main supportive factor and for good cause. A major leak in the Nord Stream pipeline has added to the panic level and it's possible the leak was the result of sabotage. Europe has been stockpiling liquified natural gas and fears of a winter disaster have been subsiding but if the winter is brutal, all bets are off on where natural gas prices could go. I must admit that they're currently well under where I thought they could be at this time, but I wouldn't get overly comfortable if I was a large consumer of the product.

Financials

The equity markets extended their losses yesterday, with the Dow falling 126 points to settle at 29,135. Investors and traders haven't been able to catch their breath since the break began on August 17. The closing Dow settlement the previous day was almost exactly 5,000 points higher. Ouch. The culprits in the equity demise remain the same, with the surging Dollar perhaps taking the lead over the past two weeks. The Index is sharply higher again this morning at 114.59, which is adding to the pressure in commodities. The technical target for the Index now is the 2001 high of 120.33, which I would give a reasonable chance of being tested. The all-time high of 151.47 occurred in 1984 and I strongly suspect (and certainly hope), will never be tested again.

Energy

The energy sector has not handled the surging Dollar well and that will likely be the case moving forward. It's amazing to think that with the war still raging in Ukraine, that the nearby crude price could be $14 under the February 23 close (the day prior to the war's start). But as we were taught in Econ 101, the best cure for high prices is high prices. Gasoline demand in particular has fallen sharply across the globe, with this morning's tick of $2.49 being $1.83 under the June 13 high. At that point in time, there was plenty of chatter about the national average surging above the $6 mark before the end of summer driving season.

Weather

The national radar map is almost a totally clear slate again this morning, with the notable exception being the hurricane currently lashing the state of Florida. Ian is now being listed as a cat 4 storm, which will undoubtedly cause some major damage in its path. Our prayers go out to the people of that state, along with those to the north that will also be impacted. The seven-day and extended maps continue to paint a picture of clear sailing for the majority of the Corn Belt.