Good morning!
Followthrough buying in soybeans, corn and wheat retreat... Soybeans built on Monday’s gains during overnight trade, while the corn and wheat markets pulled back amid corrective selling. As of 6:30 a.m. CT, corn futures are trading 1 to 3 cents lower, soybeans are 11 to 15 cents higher and wheat futures are 7 to 11 cents lower. Front-month crude oil futures are around $1 higher and the U.S. dollar index is more than 650 points lower this morning.
Putin: Russia not ending grain export deal... Russia is not ending its participation in a deal to export Ukrainian grain through Black Sea ports but rather is suspending it, President Vladimir Putin said on Monday. “We are not saying that we are ceasing our participation in this operation. No, we are saying that we are suspending it,” Putin told a televised news conference. “Ukraine must guarantee that there will be no threats to civilian vessels or to Russian supply vessels,” said Putin, noting that under the terms of the deal, Russia is responsible for ensuring security.
Black Sea grain shipments continue... Three outbound vessels left Ukrainian ports by midday Tuesday after 12 departures and two arrivals yesterday, the UN-led coordination center said. The UN coordinator for the grain export initiative continued discussions with Ukraine, Russia and Turkey in an effort to resume full participation at the inspections center that oversees safe passage of vessels. Maritime law experts said any attempt by Russia to stop ships in international waters would violate international law, which guarantees freedom of navigation. Enforcing order is another matter. Russia has considerable naval assets, including submarines and two frigates armed with rockets, torpedoes and cruise missiles.
Brazilian protests intensify... Protests by backers of Jair Bolsonaro intensified as the Brazilian president remained silent over his loss in Sunday’s election, refusing to concede defeat to Luiz Inacio Lula da Silva. Over 300 federal highways were partially or fully blocked, according to the police, leading a judge to order the roads cleared. As we reported in “Evening Report” on Monday, the blockades included BR-163 in Mato Grosso, the so-called “soybean highway.” The Brazilian Supreme Court ordered truckers to dismantle roadblocks and disperse or face fines of over $19,000 per hour.
Record-low fall HRW CCI rating... When USDA’s weekly crop condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the HRW crop starts the growing season at 265.8, the lowest initial rating ever and the lowest on record for any week ahead of dormancy. The HRW CCI rating was 76.3 points below the five-year average. The SRW crop starts the growing season with a CCI reading of 347.9, which was 17.9 points below the five-year average for the end of October. Click here for details.
Crop Progress Report highlights… Following are highlights from USDA’s crop progress and condition update for the week ended Oct. 30.
- Corn: 76% harvested (64% average).
- Soybeans: 88% harvested (78% average).
- Cotton: 96% bolls opening (94% average), 55% harvested (47% average).
- Winter wheat:87% planted (85% average), emerged 62% (66% average), 28% good/excellent (45% last year).
Smaller soy crush, corn-for-ethanol use expected in September... Traders expect USDA to report soybean crush totaled 167.9 million bu. in September, according to a Bloomberg survey. That would be down 7.1 million bu. (4.1%) from August but up 3.7 million bu. (2.3%) from last year. Corn-for-ethanol use is expected to total 394.4 million bu., which would be down 37.9 million bu. (8.8%) from August and 12.7 million bu. (3.1%) less than September 2021.
More data signals Chinese factory contraction... China’s smaller and privately owned factories contracted in October as Covid-19 restrictions slowed production and reduced demand. The Caixin/S&P Global manufacturing purchasing managers index (PMI) rose to 49.2 in October, up from 48.1 in September, though that was still below the 50.0 level separating contraction from expansion. “There is still tremendous downward pressure on the economy, and the foundation for recovery is not yet solid,” said Dr. Wang Zhe, an economist at Caixin Insight.
Fed upside down on interest payments... The Federal Reserve is now paying out more in interest expenses than it earns in interest income. The central bank’s operating losses have increased in recent weeks because what it is paying banks and money-market funds to keep money at the Fed now exceeds the income it earns on some $8.3 trillion in Treasury and mortgage-backed securities it accumulated during bond-buying stimulus programs over the past 14 years. The losses don’t interfere with the Fed’s ability to conduct monetary policy, but do create potential political headaches.
ERP payments slightly higher... Payments under the Emergency Relief Program (ERP) edged up to $7.11 billion as of Oct. 30, up from $7.09 billion the prior week, according to data from USDA’s Farm Service Agency (FSA). The rise in total payments came as specialty crop payments are now at $6.10 billion ($6.08 billion prior) and non-specialty crop payments rose to $1.10 billion ($1.03 billion prior). Payments under the Coronavirus Food Assistance Program 1 (CFAP 1) effort were basically steady, while CFAP 2 payments are now at $19.15 billion ($19.14 billion prior) with traditional CFAP 2 payments at $14.32 billion ($14.31 billion prior). Top-up payments were basically steady at $4.83 billion.
China to release more pork reserves... China’s state planner said on Tuesday it will release its seventh batch of frozen pork from reserves, without providing details. China sold 200,000 MT of pork from state reserves last month to help ease surging domestic pork prices.
Fresh contract cattle supplies available... With the flip of the calendar, packers will have fresh contract supplies for November to pull from. That could reduce their pursuit of cattle in the negotiated market. But cash sources still expect firmer cash cattle prices to eventually develop as competition for tightening supplies remains strong.
Cash hog fundamentals weaken... The national direct cash hog price dropped $2.20 on Monday with pressure noted across all regions. The pork cutout value also declined $1.40 on Monday, though most of that was due to a $23.62 plunge in primal belly prices. All other pork cuts posted strong gains aside from picnics. Given weakening cash fundamentals, December lean hog futures may face followthrough selling after dropping $1.175 on Monday.
Overnight demand news... South Korea purchased 65,000 MT of corn expected to be sourced from South America or South Africa and 63,000 MT of feed wheat expected to be sourced from the United States. South Korea passed on a tender to buy up to 58,000 MT of corn and 8,000 MT of soymeal.
See ‘Policy Updates’ for late-breaking morning news updates... For updates to items in “First Thing Today” or any late-breaking morning news stories, check “Policy Updates” on www.profarmer.com.
Today’s reports
- 2:00 p.m. Cotton System Consumption and Stocks — NASS
- 2:00 p.m. Fats & Oils: Oilseed Crushings, Production, Consumption and Stocks — NASS
- 2:00 p.m. Flour Milling — NASS
- 2:00 p.m. Grain Crushings and Co-Products Production — NASS