Good morning!
Grains weaker overnight... Corn and soybeans extended Monday’s losses during overnight trade, while wheat more than wiped out yesterday’s gains. As of 6:30 a.m. CT, corn futures are trading 3 to 4 cents lower, soybeans are 7 to 9 cents lower and wheat futures are 8 to 10 cents lower. Front-month crude oil futures and the U.S. dollar index are both modestly weaker.
Tensions escalate in Gaza conflict... Israeli Defense Forces (IDF) reported the discovery of the bodies of 1,500 Hamas militants within Israeli territory, marking a significant development in the conflict in the Gaza region. Israel stated it has regained control of the border with Gaza and reported no recent incursions over the past day. Earlier, Hamas issued a threat, stating its intention to execute Israeli captives if Israel continued to carry out airstrikes on civilian houses in Gaza without prior warning. These statements heightened tensions in the already volatile region. Reports from Gaza officials indicate that the airstrikes have resulted in the deaths of at least 700 Palestinians, while in Israel, at least 900 people have been killed by militants from Gaza. Market responses to the conflict have been relatively muted.
IMF: Global economy ‘limping along’... The International Monetary Fund (IMF) left its forecast for global GDP growth in 2023 unchanged at 3.0%, though that would be down from 3.5% growth last year. IMF cut its 2024 forecast by 0.1 percentage point to 2.9%. Cuts to the economic outlooks for China and euro zone were offset by “remarkable strength” in the U.S. economy. IMF raised its 2023 GDP forecast for the U.S. to 2.1%, up 0.3 point from its prior outlook. The outlook for China’s economy was cut 0.2 point to 5.0%, while the euro zone is now expected to grow 0.7%, down 0.2 point from the prior projection. “The global economy is showing resilience. It’s not knocked out by the big shocks it’s experienced in the last two or three years, but it’s not doing too great either,” IMF chief economist Pierre-Olivier Gourinchas told Reuters. “We see a global economy that is limping along and it’s not quite sprinting yet.” Inflation continued to decline around the globe due to a fall in energy prices and to a lesser extent food prices. IMF forecasts inflation to fall to 6.9% in 2023, down from 8.7% in 2022, and to 5.8% in 2024. Core inflation, excluding food and energy prices, is coming down more gradually, and should drop to 6.3% in 2023, from 6.4% in 2022, and to 5.3% in 2024, IMF said.
China’s Commerce minister expresses concerns over trade, tech restrictions... Chinese Commerce Minister Wang Wentao voiced specific concerns regarding American restrictions on trade and technology during a meeting with U.S. Senate Majority Leader Chuck Schumer (D-N.Y.) in BeijingThe discussions, described as “rational and pragmatic,” centered on the need for the U.S. to precisely define security boundaries, avoid overgeneralizing and politicizing security issues and refrain from weaponizing commerce and trade activities with China. Wang emphasized the importance of fair treatment for Chinese companies investing in the U.S., stating that competition should be based on international economic and trade rules and should be fair and constructive. He expressed China’s willingness to collaborate with the U.S. to create a favorable business environment that could boost bilateral trade. Schumer expressed Washington’s desire to strengthen communication and exchanges with Beijing. He highlighted bipartisan support for maintaining and enhancing the bilateral economic and trade relationship, emphasizing there is no intention of “decoupling” from China.
UN held talks in Russia regarding grain, fertilizer exports... Top United Nations trade official Rebeca Grynspan met with Russian officials in Moscow on Monday for talks aimed at enabling the “unimpeded access” to global markets for grain and fertilizer from Russia and Ukraine. UN aid chief Martin Griffiths also attended the meetings virtually, UN spokesperson Stephane Dujarric said. UN Secretary-General Antonio Guterres “continues in his determination to facilitate the unimpeded access to global markets for food products and fertilizers from both Ukraine and the Russian Federation,” Dujarric said.
Ukraine’s winter wheat seedings pass halfway point... Ukraine’s ag ministry said farmers had sown around 3.7 million hectares of winter crops as of Oct. 9, including 2.35 million hectares of winter wheat, 1.1 million hectares of winter rapeseed and 171,300 hectares of winter barley. The wheat plantings represented 54% of the expected area for 2023-24. Ukrainian weather forecasters have said the prolonged absence of rain in most Ukrainian regions had created unfavorable conditions for sowing and development of winter crops and Agriculture Minister Mykola Solsky said last week Ukraine was likely to sow less winter wheat than it initially expected.
China considers new stimulus to meet growth target... China is looking to increase its budget deficit for 2023 as the government prepares to bring a new round of stimulus to help the economy meet the government’s annual growth target, Bloomberg News reported, citing people familiar with the matter. Chinese policymakers are reportedly weighing the issuance of at least 1 trillion yuan ($137.1 billion) of additional sovereign debt for spending on infrastructure such as water conservancy projects.
China’s Country Garden expects debt default... Chinese property developer Country Garden announced it anticipates being unable to meet its offshore payment obligations, marking its first-ever default. The company has taken the step of appointing financial and legal advisers to assess its capital structure and liquidity. Country Garden’s financial struggles have garnered significant attention, serving as a symbol of the broader property debt crisis in China. This crisis has raised concerns about its potential impact on social stability within the country.
Smithfield to close North Carolina plant but transfer production to another site... Smithfield Foods will close its Charlotte, North Carolina, pork-processing plant and transfer production to its Tar Heel, North Carolina, facility to increase efficiency and better utilize existing capacity. Tyson and Perdue Farms are also shuttering some plants due to declining demand and persistent cost challenges.
Packers buying and processing more cattle... Packers purchased 95,000 head of cattle in negotiated trade last week, which was the largest volume since June. That would suggest packer demand for cattle will be limited this week. While beef margins remain in the red, beef plants processed a strong 628,000 head of cattle last week.
Cash hog index extends losses, pork cutout firms... The CME lean hog index is down another 57 cents to $82.46 (as of Oct. 6), extending its seasonal slide. The pork cutout value firmed $1.84 to $95.06, led by a $13.39 jump in primal bellies, though movement totaled only 234.06 loads on the day.
Overnight demand news... South Korea purchased 138,000 MT of corn – one cargo optional origin and the other from South America or South Africa. Japan is seeking 90,640 MT of milling wheat in its weekly tender. Algeria tendered to buy up to 120,000 MT of corn from Brazil 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
- 2:00 p.m. U.S. Agricultural Trade Data Update — ERS
- 3:00 p.m. Crop Progress — NASS