Grain Comments: 03-13-2023

Good morning

The grains are lower across the board this morning as the market deals with global economic concerns.

California regulators shut down Silicon Valley Bank on Friday after the bank failed to raise capital. SVB is now under the control of the US Federal De-posit Insurance Corporation. This is the second largest bank failure in history and the largest since 2008. SVB’s failure can be attributed to its links to the tech industry. Customers with less than $250,000 in the bank are protected by FDIC insurance. Regulators are looking for a quick buyer for the bank. The ripple effect of the failure is being felt around the world. On Sunday, Treasury Secretary Janet Yellen said the government would not bail out SVB.

U.S. banks lost over $100 billion in value late last week while European banks lost $50 billion according to Reuters calculations.

Silicon Valley Bank was ranked as the 16th largest lender in the US as of the end of 2022 with $209 billion in assets. While the bank tried to raise capital amid fleeing deposits, they lost $1.8 billion on Treasury bonds whose value dropped due to Fed rate hikes. Silicon Valley Bank will reopen today, and all insured depositors (less than $250,000) will have access to their insured de-posits. According to the FDIC, 89% of the banks’ $175 billion in deposits were uninsured at the end of 2022. S&P Global Ratings, a credit rating agency, said on Friday, it expects SVB to file bankruptcy due to its liabilities.

Weekend rain favored Center-South and Center-West Brazil according to Commodity Weather Group. Half of Argentina will miss current rains.

A key factor in this week’s trade will be developments in the Black Sea corridor extension. Formal talks are scheduled to begin this week in regard to keeping the corridor open and the current agreement ends on March 18th, and Russia has stated they will participate. Several countries and groups have stepped forward to say the corridor must remain open to maintain an adequate world food supply. The major obstacle to end extension of the corridor agreement is Russia. Russia states they are willing to extend the current agreement but want concessions made to benefit them, mainly the removal of sanctions several countries placed on them at the start of the war with Ukraine. It is highly unlikely any of these will be lifted as Russia continues to attack Ukraine targets almost daily. Ukraine is finding alternative routes for exports, mainly rail movement into Poland where grain can be loaded for export. While this does help, it is more costly and time consuming than using Ukraine’s own ports. The deciding factor in whether Russia agrees to an extension may come from China who has been a large importer of grain from the region. If China is still in need of imports Russia is more likely to agree to keeping shipping routes open.

Have a great day!