Good morning!
Strong price gains to open the week... Wheat futures led a price surge in the grain and soy markets overnight as escalating war concerns sparked supply concerns from the Black Sea region. As of 6:30 a.m. CT, corn futures are trading 10 to 11 cents higher, soybeans are 22 to 28 cents higher, winter wheat futures are 35 to 40 cents higher and spring wheat is 22 to 28 cents higher. Front-month crude oil futures are around 80 cents lower and the U.S. dollar index is nearly 300 points higher.
Ukraine war tensions escalate... Russia struck cities across Ukraine during rush hour on Monday morning, killing civilians and destroying infrastructure in apparent revenge after Russian President Vladimir Putin declared an explosion and fire on the only bridge linking mainland Russia to Crimea to be a terrorist attack. Meanwhile, Belarusian President Alexander Lukashenko said on Monday he had ordered troops to deploy with Russian forces near Ukraine in response to what he said was a clear threat to Belarus from Kyiv and its Western allies.
UN aid chief ‘reasonably confident’ on extension of Ukraine deal... United Nations aid chief Martin Griffiths voiced confidence on Monday that a deal allowing Ukrainian Black Sea grains exports could be extended and even expanded despite an escalation of tensions between Russia and Ukraine. “Our view at the UN is we of course should seek its renewal, and I’m reasonably confident that we will see it (renewed) but also that it needs to go beyond a four-month cycle. We need to see it renewed for a year,” Griffiths said.
The week ahead in Washington... Government offices are closed today for Columbus Day and will reopen on Tuesday. A second big ag sector Supreme Court case comes Tuesday involving California’s Proposition 12 rule on animal housing, in particular sows. The Biden administration is showing greater concern over rising gasoline prices with less than a month until the midterm elections. “Nothing is off the table” when it comes to responding to OPEC+’s decision to cut oil production by 2 million barrels per day, the White House said. On the economic front, two key U.S. inflation indicators will be released, with the producer price index out Tuesday and the consumer price index scheduled for Thursday. The IMF and World Bank host their annual meetings in Washington this week. The highlight for agriculture will be Wednesday’s October crop reports, featuring updated corn and soybean production estimates and revised balance sheets, which will likely see major changes to the 2022-23 domestic tables.
Concerning economic data out of China... Official data released in recent days showed consumer spending in China falling sharply during the week-long National Day holiday when compared with a year earlier, while a private survey of services activity fell into contraction in September. Travelers in China made fewer trips than a year earlier, tourism spending was less than half of the level in 2019, and China’s box office, another closely watched measure of consumption, marked its worst result for a National Day holiday since 2014.
Another test ahead to see if price controls work... The highest inflation in decades and the steep drop in Russian natural gas exports to Europe have pushed several governments to experiment with ways to control energy prices. The Wall Street Journal (WSJ) said the plans will test the economic wisdom that price controls distort markets and create supply shortages. The European Union has approved both a plan to claw back some energy companies’ profits and redistribute them to consumers, and it is also exploring the creation of a cap on the price of natural gas across the bloc. The U.S. is leading an effort with its allies to cap the global sales price of Russian oil, while a United Nations agency last week called for policy makers to opt for price caps and windfall taxes to fight inflation. Bottom line, according to WSJ: “Economic textbooks predict that imposing a lower price on a product will reduce its supply. Unless demand is also sufficiently reduced, possibly through rationing, the mismatch between supply and demand can create shortages. Enforcing price controls can also be difficult and require a large bureaucracy. And since controls are usually lifted at some point, higher costs to consumers are only delayed, not prevented.”
Commerce Dept. imposes new limits on the export of advanced computer chips to China... Firms will need to acquire a license to export the chips, which America said China was using to advance its army’s technological prowess and “commit human rights abuses.” The new rules not only require U.S. companies to get special permission to send the chips to China, they also ban countries worldwide from selling to China if they’re made with U.S. equipment. China called the move “sci-tech hegemony.”
China’s hog futures surge on supply concerns... China’s hog futures jumped on Monday after a surge in demand during the week-long National Day holiday pushed prices higher. Dalian January hog futures posted the biggest daily gain since hog futures were launched last year. China’s state planner said on Sunday it will release its fifth batch of pork reserves, without specifying the amount. In September, China sold 200,000 MT of pork from state reserves in an attempt to ease rising prices.
Cattle traders being cautious... Live cattle futures firmed last week amid strength in the cash market. But October live cattle finished Friday just modestly higher than the previous week’s average cash price, signaling traders are remaining cautious. Given tightening supplies and current feedlot conditions, the cash market should continue a general firming tone.
October hogs move premium to cash index... The CME lean hog index is down 12 cents to $92.65 (as of Oct. 6). October lean hog futures finished Friday 30 cents above today’s cash index quote, suggesting traders sense a short-term rebound in the cash market is coming. But December futures ended last week $15.50 below the cash index, signaling attitudes are pessimistic through year-end.
Weekend demand news... Algeria tendered to buy a nominal 50,000 MT of optional origin soft 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
- Gov’t offices closed for Columbus Day.