By Kirk Maltais
--Corn for December delivery fell 1.2% to $6.79 1/4 a bushel, on the Chicago Board of Trade Thursday, with grains pressured by speculation that the Federal Reserve will raise interest rates higher than initially expected in order to quell inflation.
--Soybeans for January delivery fell 1.2% to $14.37 a bushel.
--Wheat for December delivery fell 0.7% to $8.40 1/2 a bushel.
HIGHLIGHTS
Bigger Picture: With Russia resuming its commitments under the Black Sea grain export deal reached in July, the focus of grain traders has gone back to following macro indicators. Markets overall are dropping in response to the Federal Reserve signaling that it may have to raise interest rates higher than previously expected to curb inflation. A sharply higher U.S. dollar is also providing pressure on grains. "Grain and oilseed prices have largely erased early week risk premium tied to the pause in export shipments from Ukraine," said Arlan Suderman of StoneX in a note.
Lingering Uncertainty: Even with Russia rejoining the Ukraine grain export deal, President Vladimir Putin says Russia is reserving the right to again pull out of the agreement, but that it wouldn't interfere in any future grain shipments from Ukraine directly to Turkey. "One can only imagine that shorts will remain a bit timid with the erratic Putin," Dan Hueber of the Hueber Report told the WSJ. "Wheat had pushed down to what appeared to be a level of value coming into the week, so there is even less reason for people to press the short side for now."
Holiday Lull: Although the Thanksgiving holiday is still three weeks away, grain traders who have endured an especially volatile year are increasingly opting to step away from the market for the remainder of 2022. "We've been relatively slow," said Jason Britt of Central States Commodities. "We're moving into that time of year when, if you've made money, you take your profits--and if you've lost money, you wait until the first of next year." Mr. Britt told the WSJ that with Federal Reserve Chairman Jerome Powell's latest comments on interest rates, he expects the U.S. dollar to remain strong through the rest of the year--keeping that source of pressure for grain futures in place.
INSIGHTS
Growing Scarce: Longer-term fundamental issues are expected to keep commodity prices climbing, said Goldman Sachs in a research note. In particular, the firm notes that the third-quarter earnings season is showing that businesses that are reliant on advertising are being battered by constrained consumer spending, while businesses selling necessary commodities like oil and food are prospering. "This past week has shown us how the Old Economy is starting to take its revenge on the New Economy," said the firm, which adds that years of systemic under-investment in the commodity space has allowed for scarcity in goods like grains and metals to grow.
Weak Margins: Ethanol producer Green Plains Inc. reported a net loss of $73.5 million, due in part to a negative margin for producing ethanol in the quarter. The company says that its consolidated crush margin showed a loss of 9 cents per gallon, with high prices for corn making ethanol unprofitable and driving the company to do seasonal maintenance on its plants earlier than usual. In the three months ending Sept. 30, CBOT corn futures ran up after posting a year-low of $5.64 per bushel in late July. It has since stayed range-bound, but Green Plains forecasts the price to fall back. "We have seen corn basis break from recent highs as harvest is nearing completion and based on our current outlook, we anticipate an improved and positive fourth quarter margin environment," said Green Plains CEO Todd Becker in a release.
AHEAD:
--The CFTC will release its weekly commitment of traders report at 3:30 p.m. ET Friday.
--The USDA will release its weekly grains export inspections report at 11 a.m. ET Monday.
--The USDA will release its initial tables of its outlook of U.S. agriculture until 2032 at 3 p.m. Monday.
--The USDA will release its weekly crop progress report at 4 p.m. ET Monday.
--Mosaic Co. will release its third-quarter earnings report after the stock market closes on Monday.
Write to Kirk Maltais at kirk.maltais@wsj.com
(END) Dow Jones Newswires
11-03-22 1533ET
