A look at winter market factors

By Doug Tenney, Leist Mercantile

Harvest for many producers went well into the second week of November, longer than normal. Numerous rain delays were not the cause. Instead, it was the late planting window of corn and soybeans this spring which went into mid-June or even later across Ohio. It was a common occurrence for corn planting to halt mid-May and not resume again until June due to frequent rains. A rare occurrence when soybeans, replanted soybeans, and double-crop soybeans were planted the same week in June was very commonplace across the state. 

The moving parts in the grain markets continue to be ever increasing. Volatility remains high and looks to linger. Huge price swings coming out of nowhere are tiresome. Grain settlement prices on any day are moving multiple dimes up or down for soybeans and wheat, with corn not far behind. Single words, both nouns and verbs which seem so innocent, simple, and short can streak into the forefront at a moment’s notice, haunting the psyche of the staunchest of traders and producers alike. Three words in particular came into play the first half of November.  

First, “relaxing.” Hints that China was potentially relaxing its COVID policy helped soybeans rally 62 cents the first week of November. Concerns about demand slowing for many raw commodities including food and soybeans were put on the back burner, but only briefly. China for months has been quick to lock down entire cities when positive COVID tests were revealed. At one point this fall, China locked down new cities when positive COVID tests were revealed as those cities had a total population in excess of 200 million citizens. When those lockdowns occur, only one person can exit in the pursuit of buying and bringing food back home.  

Second, “zero.” Grains the second week of November were lower for several days. China announced it was maintaining its zero policy on COVID until its population was 70% vaccinated. The idea of relaxation quickly vanished as the 70% level will likely not occur until the first quarter of 2023. The zero announcement was a reminder that China, as the world’s most populous country, had a strict solution to the COVID issue: No waver in addressing outbreaks. 

Third, “extended.” Export corridor, specifically the Ukraine export corridor. The original 90-day export corridor was scheduled to end Nov. 19. Early November it was potentially not extended, with grains moving sharply higher. Then just two days later, the corridor might be extended, with grains moving sharply lower as ongoing corn and wheat exports from Ukraine reduce the potential of U.S. exports.  

Soybean imports into China continued to be a hot thread of discussion mid-November. Some traders had anticipated that USDA would be lowering soybean imports into China largely due to imports totaled just 4.5 million tons in October, the lowest import for October in the last eight years. Traders were also indicating it could be difficult to reach last year’s China soybean import total of just 91.6 million tons. A decline in that category last month was not in the cards.  

Why? Remember that USDA had just raised the import total one million tons to 98 million tons with the Oct. 12 WASDE Report. Simply stated, a decrease one month for the import total would cause confusion when the preceding month the import total had been increased. USDA might give us a surprise but they would never be a source of confusion. Right? “Wink, wink, nod, nod, Bob’s your uncle.” Correct?  

At this writing, regarding the Dec. 14 U.S. Fed meeting, the vast majority of traders were expecting a half percent interest rate increase as the previous four rate hikes were three-quarters percent increase.