Disappointing export numbers continue

By Doug Tenney, Leist Mercantile

Our home is happily wearing a new roof. I chose to work from home on day one of the predicted two-day job. A scheduled zoom meeting was “perfectly” timed during the peak of the demolition phase. My ear buds spared me and allowed me to wander and watch a “well-oiled machine” of nine who amazingly completed the job and cleanup in one day! Professional, pleasant, and persistent, just like the combines, grain carts, trucks, and personnel we will be seeing soon in the fields!

Grains’ volume at the CBOT continues to be light compared to past years. Trade volume by grain end users as well as producers is still much below that of other traders in the market. One trend which has been observed numerous times throughout the summer took place with corn, soybean, and wheat price activity. Often within a week, prices were higher in the overnight trading when it takes a brief pause at 8:45 a.m. ET. Yet, when that occurred, prices were lower for the day when trading ended at 2:20 p.m. ET.

It’s no secret that U.S. corn exports have been disappointing for the past several months. USDA projections for U.S. corn exports have been declining for several months. In February USDA estimated corn exports for 2022-2023 would reach 1.925 billion bushels. Just six months later that number had dropped to 1.625 billion bushels, a 16% drop.

Funds like their long soybean positions, and have been using their months old short positions in wheat to reduce risk. Wheat has been under pressure with excellent yields for soft red wheat, Ohio’s wheat type. Russian wheat exports are expected to reach a record 50 million tons this coming year. Russia’s wheat production was higher than earlier projected. That higher production coupled with higher exports have been a huge factor in the price declines for wheat the past several months. During August, wheat prices declined 90 cents compared to July. It’s no wonder the funds have been in love with their month’s old short wheat positions.

Brazil has been exporting a boatload of corn (pun intended) into the world marketplace, with the vast majority going to China. Mid-July U.S. Gulf corn export values were 40 cents more expensive than those from Brazil. Mid-August US. .Gulf corn was cheaper than Brazil corn by 10 to 20 cents. August 2022 U.S. Gulf corn was 80 to 90 cents above Brazil’s origins. Mid-August private analysts estimated Brazil’s corn export commitments at a record 25 million tons (984 million bushels). In one week alone their corn export commitments increased 3 million tons (118 million bushels). Brazil’s export corn sales for 2023-2024 of 25 million tons are already a staggering 44% for a marketing year which has not even started as of Oct. 1, 2023. Brazil is scheduled in the 2023-2024 marketing year to be the newly crowned world’s corn export leader, relegating the U.S. to second place.

Brazil has been aggressively exporting both corn and soybeans just ahead of the U.S. fall harvest season. Boats waiting to load grain at Brazil’s ports are seeing a wait time of 48 days in early September, which increases shipping costs with demurrage charges skyrocketing. The wait time for boats to pass through the Panama Canal was three weeks early last month. One boat owner offered to pay over $2 million to skip ahead of the current waiting line.

The India monsoon to date has been most disappointing while the drought in numerous areas is causing severe crop production problems. Monsoon season runs from June 1 to Sept. 30. Rainfall amounts as of mid-July were 315 mm (12.5 inches) with rains into late August still below par. The poor monsoon has forced India to take several drastic steps. First, rice exports have been eliminated for the near term. In past years, India was the world’s largest exporter of rice. Second, India will be importing wheat, not exporting it. Late August it was rumored that India had bought 5 ot 8 million tons (184 – 294 million bushels) in secret negotiations with Russia.

Just a reminder that the U.S. government could shut down without a short-term funding measure when the current budget year ends Sept. 30. Early September reports from the Office of Management and Budget (OMB) indicated the Congress would very likely need to approve a temporary spending measure in September to prevent a potential partial government shutdown.

Thought for the day. “Success is best when it is shared.” – Howard Schultz.