Good morning!
Grains under pressure to open the week... Corn, soybean and wheat futures faced pressure overnight from Chinese Covid concerns and outside markets. As of 6:30 a.m. CT, corn futures are trading 2 to 3 cents lower, soybeans are 3 to 5 cents lower, SRW wheat is 9 to 11 cents lower, HRW wheat is 3 to 5 cents lower and HRS wheat is 2 to 3 cents lower. Front-month crude oil futures are around 50 cents lower and the U.S. dollar index is more than 900 points higher this morning.
China’s Covid cases flare up, Beijing tightens rules... China’s new Covid cases are nearing the April peak as there are flare ups around the country, including the capital of Beijing. The latest wave is testing China’s resolve to stick to recent adjustments it has made to its zero-Covid policy, which call for cities to be more targeted in their clampdown measures and steer away from widespread lockdowns and testing that have strangled the economy and frustrated residents. Meanwhile, Hong Kong’s chief executive, John Lee, tested positive for Covid-19 just days after interacting with his boss, President Xi Jinping of China, at the Asia Pacific Economic Cooperation forum in Bangkok.
China keeps interest rates unchanged... China kept its benchmark lending rates unchanged for the third straight month on Monday, as a weaker yuan and persistent capital outflows continued to limit Beijing’s ability to ease monetary conditions to support the economy. The one-year loan prime rate (LPR) was kept at 3.65%, while the five-year LPR was unchanged at 4.30%. The steady LPR fixings came after the People’s Bank of China (PBOC) partially rolled over maturing medium-term policy loans last week and kept the interest rate unchanged for a third straight month. Widening policy divergence with other major economies, particularly the U.S., could worsen fund flows. The yield gap between China and the United States hovered at the widest level in 15 years, and the yuan has lost more than 10% against the dollar so far this year and looks set for the biggest annual drop since 1994.
China tells banks to step up credit support for economy... China’s banks should step up credit support for the economy, including expanding medium to long-term loans to support infrastructure investment, the central bank and the banking and insurance regulator said on Monday. “We will make every effort to provide financial services to stabilize investment, promote consumption and ensure people’s livelihood,” the People’s Bank of China and the China Banking and Insurance Regulatory Commission said in a statement after a meeting on bank credit. “We will boost credit support to key areas, weak links, and sectors affected by the Covid-19, and make every effort to promote further economic recovery,” the statement said.
Bostic: End of rate hikes near... The end of the monetary tightening cycle is in sight, according to Atlanta Fed chief Raphael Bostic. He said the bank should end its tightening cycle after 75 to 100 basis points of further rate hikes if the economy develops as he expects. His view of about 4.75% to 5% as a peak for the Fed funds rate is on the less aggressive wing of Fed officials.
ECB president says recession alone won’t tame inflation... European Central Bank President Christine Lagarde said Europe will need to face higher interest rates. In her view, a potential recession won’t be enough to tame inflation on its own. Policymakers currently are weighing whether to slow down the pace of rate hikes at the December meeting.
Turkey to ship flour produced from Russian wheat... Turkish President Tayyip Erdogan said he had agreed with Russian President Vladimir Putin to produce flour in Turkey from Russian wheat and ship it for free to the least developed countries in order to ease a global food crisis, broadcaster Haberturk reported. This comes on the back of an extension of the deal last week allowing Ukrainian grain exports to continue from the Black Sea.
IKAR raises Russian wheat export forecast... IKAR consulting firm raised its 2022-23 Russian wheat export forecast by 2 MMT to 44 MMT. Its overall grain export forecast was raised 1 MMT to 53.5 MMT, meaning shipments of grains aside from wheat are expected to be 1 MMT less than previously projected.
China again sells all wheat put up for auction... China sold all 40,152 MT of state-owned wheat reserves put up for action last week. The average sales price was 2,934 yuan ($409.52) per metric ton.
EPA nears final rule on canola oil pathways under the RFS... The Office of Management and Budget (OMB) completed it review of EPA’s final rule on canola oil pathways for renewable diesel, jet fuel, naptha, liquefied petroleum gas and heating oil under the Renewable Fuel Standard (RFS). The final rule covers analysis of the lifecycle greenhouse gas (GHG) emissions produced from canola/rapeseed oil. With another RFS announcement pending by Nov. 30 for RFS levels for 2023 and beyond, it is possible the agency may hold off on the canola pathways announcement until then.
The week ahead in Washington... Washington will be quiet this week with Congress on recess for Thanksgiving. Markets and government offices are closed on Thursday for Thanksgiving. On the economic front, the Fed will release minutes from its November monetary policy meeting on Wednesday. Key agricultural data includes Tuesday’s Cold Storage Report, which will highlight frozen meat stocks at the end of October.
Supportive Cattle on Feed Report... Last Friday’s Cattle on Feed Report data should be supportive for cattle futures to open the week as the Nov. 1 feedlot inventory declined 2.0% and placements fell 6.1%, both greater than expected. October marketings rose 0.6% from year-ago, which was slightly less than expected but definitely not bearish.
Cash hog index continues to drop... The CME lean hog index is down another 37 cents to $87.77 (as of Nov. 17), the lowest level since Feb. 9, as the seasonal slide continues. December lean hog futures finished Friday $3.545 below today’s cash index quote, reflecting attitudes that the cash market will continue to weaken over the next month.
Weekend demand news... Jordan tendered to buy 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
- 10:00 a.m. Export Inspections — AMS
- 10:00 a.m. Fruit and Tree Nuts Data — ERS
- 10:00 a.m. Vegetables and Pulses Data — ERS
- 11:00 a.m. Cotton and Wool Yearbook — ERS
- 2:00 p.m. Chickens and Eggs — NASS
- 2:00 p.m. Milk Production — NASS
- 3:00 p.m. Crop Progress — NASS