Good morning!
Beans firmer, wheat lower and corn caught in the middle overnight... Soybean futures firmed overnight while the wheat market weakened. Corn was caught in the middle amid light, two-sided trade. As of 6:30 a.m. CT, corn futures are trading fractionally to a penny lower, soybeans are mostly 4 cents higher and wheat futures are 2 to 5 cents lower. Front-month crude oil futures and the U.S. dollar index are both modestly firmer this morning.
AgRural cuts Brazilian soybean crop forecast... Given erratic rainfall in Mato Grosso and forecasts calling for continued hot and dry conditions, AgRural cut its 2023-24 Brazilian soybean crop forecast by 1.1 MMT to 163.5 MMT. The Brazil-based consultancy warned it could make additional cuts to the forecast this month if weather doesn’t improve, as other areas of the country are also experiencing unfavorable conditions. Besides the erratic weather, there is a need for some replanting of soybeans.
More unfavorable weather in Brazil... Central and northeastern areas of Brazil were hot and dry during the weekend, while heavy rains continued in far southern locations. Those conditions will persist this week. World Weather Inc. says center-west, center-south and interior northeastern Brazil are all advertised to see some an increase in rainfall next week.
Biden, Xi to meet this week... President Joe Biden and Chinese leader Xi Jinping plan to meet Wednesday during the Asia-Pacific Economic Cooperation summit in San Francisco. Xi’s confab with Biden is helping spur purchases of U.S. soybeans. China bought around 3 MMT of soybeans from the U.S. last week, even though they are more expensive than Brazilian supplies, and processing margins are weak. The purchases are seen as a goodwill gesture ahead of Xi’s meeting with Biden. China is purchasing more than it needs for domestic use, signaling it’s seeking to build stockpiles, said Alex Sanfeliu, head of world trading at Cargill, the world’s largest agricultural commodities trader. “Xi’s visit is the only logical explanation why Sinograin would pay a big premium over Brazil beans,” Ken Morrison, an independent commodity trader in St. Louis, told Bloomberg. “Sinograin has a dual role; they crush beans, and they manage reserve stocks for the government. Crushing is very competitive in China as it is everywhere. Crushers don’t pay above-market prices.”
The week ahead in Washington... Work continues in Congress on trying to get a stopgap spending measure to keep the government funded beyond Nov. 17. House Republicans are proposing a two-tiered stopgap funding plan to extend current spending levels for some government agencies. It would extend funding for certain agencies until mid-January and others until early February. In the Senate, there are differing opinions on the stopgap plan, with some senators considering a more conventional stopgap measure that extends spending for all agencies until Jan. 19 and does not include aid to Israel or Ukraine. Meanwhile, the White House Office of Management and Budget has already begun its initial communications with agencies on how to prepare for a possible government shutdown. The four leaders of the House and Senate Agriculture Committees were able to come together to avoid a lapse in funding for critical agricultural programs. The stopgap measure extends the farm bill through September 2024. The extension includes funding for the 21 “orphan” programs and for the Foundation for Food and Agriculture Research. U.S. consumer inflation data for October will be released on Tuesday, with the producer price index slated for Wednesday. The key agricultural report will be Friday afternoon’s Cattle on Feed Report.
House ‘laddered’ spending bill would set January, February deadlines... The GOP-led House is moving forward with a stopgap bill to prevent a government shutdown past the impending Nov. 17 deadline, but it has introduced a complex “laddered” continuing resolution with deadlines in January and February, drawing criticism from GOP appropriators. The bill sets a Jan. 19 deadline for four bills and a Feb. 2 deadline for eight others. While this staggered approach complicates the schedule, it avoids including conservative policy riders or additional spending cuts, which is seen as a win for appropriators but a disappointment for hardline Republicans. The deadlines would be Jan. 19 for Agriculture-FDA, Energy and Water, Military Construction-VA and Transportation-HUD, and Feb. 2 for Commerce-Justice-Science, Defense, Financial Services, Homeland Security, Interior-Environment, Labor-HHS-Education, Legislative Branch State and Foreign Operations.
India imports record amounts of palm oil, sunoil... India’s imports of palm oil and sunflower oil in 2022-23 surged 24% and 54%, respectively, to record highs on a rebound in consumption and as both oils were available at a steep discount compared to rival soyoil. Palm oil imports totaled 9.79 MMT in the 2022-23 marketing year that ended Oct. 31, while sunflower oil imports rose to 3 MMT, Mumbai-based Solvent Extractors’ Association of India (SEA) said. Soyoil imports in the year fell 12% to 3.68 MMT.
DP World resumes partial operations after cyber-attack... DP World, a major global port operator, has partially restarted its operations following a cyber-attack that forced a shutdown of its facilities in Australia. As a result of the attack, the company is facing a significant challenge in dealing with a backlog of 30,000 shipping containers. DP World plays a crucial role in handling 40% of Australia’s maritime freight, making the disruption a matter of significant concern for trade and logistics in the region.
Morgan Stanley, Goldman Sachs differ on Fed rate cut predictions... Morgan Stanley anticipates the Fed will implement significant rate cuts over the next two years. In contrast, Goldman Sachs envisions rate reductions beginning later, in the fourth quarter of 2024, with quarterly cuts continuing through mid-2026. Goldman Sachs CEO David Solomon has expressed a belief that the likelihood of a recession in the U.S. has significantly decreased.
China’s new bank loans fall sharply in October... Chinese banks extended 738.4 billion yuan $101.30 billion) in new loans in October, the least in three months. Household loans, including mortgages, contracted by 34.6 billion yuan in October after rising 858.5 billion yuan in September. Corporate loans fell to 516.3 billion yuan from 1.68 trillion yuan in September. The amount of loans usually falls in October due to seasonal factors, but this year’s figures were above 615.2 billion yuan in 2022 and forecasts of 665 billion yuan. Meanwhile, outstanding yuan loans grew 10.9% year-on-year, the same as in September.
Japan’s wholesale inflation slows sharply in October... Japanese wholesale inflation slowed below 1% annually for the first time in just over 2 1/2 years in October, a sign that cost push pressures that had been driving up prices for a wide range of goods were starting to fade. The corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, increased 0.8% in October from a year earlier, roughly matching a median market forecast for a 0.9% gain but cooling significantly from a 2.2% rise in September. That marked the 10th straight month of slowing wholesale inflation with the year-on-year growth rate coming in below 1% for the first time since February 2021.
Cattle searching for a low... Cattle futures plunged last week, causing cash cattle prices to crater. With both futures and the cash market reeling, traders will be looking for signs of a bottom. Seasonally, the next couple of weeks tend to be a struggle for the cattle market, though an uptick is usually seen after Thanksgiving as retailers buy beef for year-end features.
Cash hog index resumes downtrend... After three days of gains, the CME lean hog index is down 59 cents to $76.28 as of Nov. 9, resuming its seasonal decline. December lean hog futures finished Friday at a $4.38 discount to today’s cash quote. Over the past five years, the index averaged a $5.47 decline from now until mid-December, when the contract is cash settled.
Weekend demand news... Iran tendered to buy up to 180,000 MT of corn to be sourced from Brazil, Europe or the Black Sea region and 120,000 MT of soymeal from Brazil, Argentina or India. Tunisia tendered to buy 50,000 MT of durum wheat from west European countries, the U.S., Canada or Argentina.
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
- 10:00 a.m. Export Inspections — AMS
- 11:00 a.m. Feed Grains Database — ERS
- 2:00 p.m. Season Average Price Forecasts — ERS
- 2:00 p.m. Wheat Data — ERS
- 3:00 p.m. Crop Progress — NASS