Good morning!
Corn and wheat firmer, beans weaker this morning... Corn, soybeans and wheat held in relatively tight trading ranges during two-sided trade overnight. As of 6:30 a.m. CT, corn futures are trading fractionally higher, soybeans are mostly 2 cents lower and wheat futures are mostly 4 to 7 cents higher. Front-month crude oil futures are more than $1.00 higher and the U.S. dollar index is around 250 points higher.
Fed widely expected to continue monetary policy pause... The Federal Reserve is expected to hold monetary policy steady for a second straight meeting, waiting for the effects of prior rate hikes to further slow inflation. Markets will focus on the post-meeting statement and Chair Jerome Powell’s press conference for future guidance on the Fed’s plans, which could potentially signal whether the policy-tightening cycle has concluded.
Soy crush expected to rise, corn ethanol use anticipated to drop in September... Traders expect USDA to report soybean crush totaled 173.2 million bu. during September, according to a Bloomberg survey, which would be up 2.5% from August and 3.4% above last year. NOPA data implied soybean crush would come in around 175 million bushels. Corn-for-ethanol use is expected to come in at 411.8 million bu., which would be down 7.0% from August but 7.4% above last year.
U.S. airlines back ethanol industry position on aviation fuel credit... Major U.S. airlines and aviation companies joined ethanol companies to send a letter to the Biden administration on Wednesday backing a regulatory change that would make it easier for sustainable aviation fuel (SAF) made from corn-based ethanol to qualify for federal subsidies. Airlines including Delta, JetBlue and Southwest, and companies like GE Aerospace and Boeing, said in the letter to Treasury Secretary Janet Yellen the administration should allow the use of the Department of Energy’s Greenhouse Gases, Regulated Emissions and Energy Use in Technologies (GREET) model in addition to the one developed by the International Civil Aviation Organization (ICAO), echoing a request from the ethanol industry. The ethanol industry believes the GREET model is more likely than the ICAO model to bear out the required climate benefits to secure Inflation Reduction Act subsidies.
One year farm bill extension linked with CR under discussion... Senate Ag Committee leaders are considering using a continuing resolution (CR) as a legislative vehicle to pass a one-year extension of the 2018 Farm Bill before January. Ranking member John Boozman (R-Ark.) and Chair Debbie Stabenow (D-Mich.) agree on the need for the extension while working on a new bill to replace the expired 2018 Farm Bill. They hope to attach the extension to a stopgap funding bill required when the current CR expires on Nov. 17. Stabenow had initially preferred a three-month farm bill extension, but USDA explained that shorter extensions would be challenging to administer. The Senate and House Ag committees are working on draft texts for their respective farm bills, with the possibility of finalizing a version by spring. A farm bill extension would provide security for farmers and ensure the availability of risk management tools and financial support. The committees have not yet decided which, if any, of the 21 so-called “orphan programs” would be part of the extension, potentially requiring offsets or additional funding sources.
ERP timeline for 2022 losses... On or around Nov. 8, FSA expects to begin mailing Emergency Relief Program (ERP) Track 1 application forms for 2022 losses to producers who received federal crop insurance indemnities and to producers who received NAP payments. For Track 2, FSA began accepting applications on Oct. 31.
Ukraine unveils plan to regulate food exports, address tax evasion... According to a recent government resolution reported by Reuters, only Ukrainian companies registered with the State Agrarian Register, classified as value-added taxpayers, and free from tax debts or delays in foreign currency return will be permitted to export Ukrainian goods. The government aims to safeguard the rights of agricultural entities conducting legal economic activities through these measures. The initiative seeks to address the challenge of generating funds for agricultural exports conducted in cash, where taxes often go uncollected. These efforts are critical for generating additional revenues to meet the needs of Ukraine’s ongoing conflict with Russia.
Another sign of factory sector contraction in China... China’s Caixin/S&P Global manufacturing purchasing managers index (PMI) fell to 49.5 in October from 50.6 in September, marking the first contraction since July. This data comes on the heels of Tuesday’s contraction in China’s official PMI, renewing concerns over the state of the country’s vast manufacturing sector and its fragile economic recovery. A slowdown in Chinese manufacturing will soften China’s imports.
BOJ intervenes in bond market to curb rising yields after recent policy tweak... The Bank of Japan (BOJ) took an unexpected step by entering the bond market to slow down the increase in sovereign yields. This move comes just a day after it announced a loosening of its control over debt prices. The central bank’s unscheduled purchase operation was prompted by the 10-year bond yield reaching 0.97%, marking a fresh decade-high. However, this yield is still below the 1% cap BOJ had previously removed in favor of a more flexible policy approach. This move indicates BOJ is committed to remaining active in the market even after adjusting its bond-yield cap. BOJ Governor Kazuo Ueda, after announcing the policy tweak, expressed the belief that yields would not rise significantly beyond 1%. However, many analysts see this as part of the BOJ’s broader strategy to normalize its monetary policy in response to inflation in Japan, which is nearing a four-decade high. Aligning its policy with more hawkish stances held by other central banks is also seen to address the issue of a weak yen.
Trudeau rules out further carbon tax exemptions... Canadian Prime Minister Justin Trudeau ruled out any further carve-outs from the federal carbon tax scheme amid mounting pressure from provinces seeking measures like an exemption on home heating oil announced last week.
Steady/firmer cash cattle prices expected... Last week’s average cash cattle price dropped $2.13, but late-week trade was notably higher than initial price action. That has most cash sources expecting steady/firmer cash prices this week, despite packers having fresh contract supplies available with the flip of the calendar. Packers have been slow to establish early cash bids, so active trade is not likely until Thursday or Friday.
Cash hog/futures spread continues to narrow... The recent rise in lean hog futures continued Tuesday, with the December contract up 55 cents to $71.725. The seasonal decline in the CME lean hog index extended another 38 cents to $77.13 (as of Oct. 30). That narrows the discount the lead contract holds to the cash index to $5.405, suggesting traders anticipate a less-than-average decline in the cash market from now until mid-December.
Overnight demand news... South Korea purchased 125,000 MT of corn – 57,000 MT of optional origin and 68,000 MT expected to be sourced from South America or South Africa – and tendered to buy 177,000 MT of rice, mostly from the United States. Jordan tendered to buy up to 120,000 MT of optional origin milling wheat.
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
- 9:30 a.m. Weekly Ethanol Production — EIA
- 2:00 p.m. Broiler Hatchery — NASS
- 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