Good morning!
Soybeans and wheat marginally reverse Wednesday’s price action overnight... Soybean futures pulled back overnight from their strong gains Wednesday, while wheat traded mildly higher after yesterday’s losses. Corn posted two-sided trade. As of 6:30 a.m. CT, corn futures are trading around a penny lower, soybeans are 2 to 3 cents lower, winter wheat futures are 2 to 4 cents higher and spring wheat is 4 to 6 cents higher. Front-month crude oil futures are modestly higher and the U.S. dollar index is more than 400 points lower this morning.
Export sales delayed until Friday... Due to Monday’s government holiday, USDA’s export sales data for the week ended Oct. 6, is pushed back until Friday morning.
Russia warns of war escalation as NATO beefs up its defenses... NATO allies meeting in Brussels unveiled plans to beef up Europe’s air defenses after committing more military aid to Kyiv. That prompted Russia to unleash missiles on more than 40 Ukrainian cities and towns and warn of an “escalation to a World War III” if Ukraine is admitted to military alliance. NATO is not likely to quickly allow Ukraine to join, as its membership would put the U.S. and it allies in direct conflict with Russia.
UN condemns Russia’s annexation of Ukrainian territories... The United Nations General Assembly on Wednesday overwhelmingly condemned Russia’s “attempted illegal annexation” of four partially occupied regions in Ukraine and called on all countries not to recognize the move, reinforcing a diplomatic international isolation of Moscow since it invaded its neighbor. Three-quarters of the 193-member General Assembly voted in favor of a resolution that also reaffirmed the sovereignty, independence, unity and territorial integrity of Ukraine within its internationally recognized borders. Only four countries joined Russia in voting against the resolution – Syria, Nicaragua, North Korea and Belarus. The other 35 countries abstained, including China. Russian Foreign Minister Sergei Lavrov called the UN condemnation “anti-Russian” and said the annexation had been achieved use “diplomatic terror,” Russian state-run TASS news agency reported.
Turkey wants to help Russia export grain, fertilizers... Turkish President Tayyip Erdogan said on Thursday that Ankara could work with Moscow on determining low-income countries to which Russian grains and fertilizers can be exported. “We are determined to strengthen and continue the grain exports under the Istanbul agreement and the transfer of Russian grain and fertilizer to less developed countries via Turkey,” Erdogan said. “It is important that we focus on the poor countries rather than developed countries.”
Argentina to meet with wheat sector over crop concerns... Argentina’s government is set to meet with wheat millers and exporters today amid concerns over the size of this year’s crop due to a severe and ongoing drought, a government official and an industry source told Reuters. A spokesperson for Argentina’s economy ministry, which sits above the agricultural secretariat, when asked about potential tighter caps on wheat exports said: “No. It’s not like that.” The Rosario Grain Exchange forecasts this year’s Argentine wheat crop at 16.5 MMT, which be down 6.5 MMT (28.3%) from the 2021-22 crop and the smallest in seven years.
India to allow some broken rice exports... India’s government will allow exports of 397,262 MT of broken rice backed by letters of credit issued prior to the Sept. 8 decision to bar exports. Reuters reported the decision to halt broken rice exports had stranded nearly 1 MMT of rice moved to ports for export or in transit before the announcement was made.
FOMC minutes: Inflation remains Fed’s top concern... Federal Reserve officials expressed concern at their meeting last month over the persistence of high inflation, underscoring their intention to continue raising interest rates in large steps. Policy makers revised higher their expectations for rate increases, though some signaled caution about overdoing them amid risks of economic and financial volatility, according to minutes of the Sept. 20-21 monetary policy meeting released Wednesday. The Fed has lifted its benchmark federal-funds rate five times this year to a range between 3% and 3.25% from near zero, the most rapid pace of rate increases since the early 1980s.
Soaring interest rates impacting housing... Mortgage rates have more than doubled since the start of the year, discouraging people from buying and refinancing. Mortgage applications to purchase a home last week fell to the lowest level since 2015, according to data from the Mortgage Bankers Association. Refinance applications were the lowest since 2000. “At this point, the trend in mortgage applications will take years to reverse as mortgage borrowers see few reasons to move and lose below-market rates and homebuyers slowly reset their expectations for affordability,” analysts at Contingent Macro Advisors said.
Labor hoarding by companies gives hope that Fed can achieve soft landing... Policymakers are hoping that after struggling through the worst labor shortages America has experienced in at least several decades, employers will be hesitant to lay off workers even when the economy cools, the New York Times reports. The recent changes to hiring and layoff practices “may help prevent the kind of painful recession the Federal Reserve is hoping to avoid as it tries to combat persistent inflation.” Officials are “still hoping to achieve a soft landing” and “a few have speculated that today’s staffing woes will help them to pull it off, as companies try harder than they have in the past to weather a slowdown without cutting staff.”
Max H-2B visas to be issues... The Department of Homeland Security for the first time intends to issue the maximum number of H-2B seasonal-worker visas allowed by law this year, a total of more than 130,000, the agency announced on Wednesday. The move comes amid labor shortages, particularly in low-wage sectors such as restaurants and hospitality.
USTR details China Section 301 tariffs review... The Office of the U.S. Trade Representative (USTR) finally revealed the next steps in the four-year review of tariffs Washington imposed in July and August 2018 via Section 301 on Chinese goods. USTR will open an online portal Nov. 15 for comments on the tariffs and whether they achieved objectives of the investigation prompting them, if other actions could be taken and the effects on the U.S. economy. Comments are due Jan. 17, 2023. USTR will post a copy of the questions they want answered by Nov. 1. USTR said that during the course of the review, it will determine if additional opportunities for comments would be appropriate via public hearings. The public comment timeline means nothing will happen on the Chinese tariffs until further into 2023 and an extension of the comment period is usually provided. Click here to view the pre-publication notice on the comment request.
Cattle slaughter remains strong... Estimated cattle slaughter through Wednesday stood at 384,000 head, up 1,000 head from last week and 28,000 head (7.9%) greater than the same period last year. While packer margins have slipped into the red, slowing their cash negotiations this week, the slaughter pace is showing no signs of letting up, suggesting firmer cash prices are likely.
Pork cutout strengthens... The pork cutout value firmed 79 cents Wednesday to $103.94, a three-week high. While the wholesale pork market is giving no indications of top, general seasonal weakness is typical into year-end as hog supplies build. The recent uptick in the pork cutout has pushed packer margins back into the black, which should help alleviate some of the normal seasonal cash weakness.
Overnight demand news... Japan purchased 94,140 MT of milling wheat in its weekly tender, including 25,390 MT U.S., 35,867 MT Canadian and 32,883 MT Australian. The Philippines tendered to buy 165,000 MT of feed wheat from unspecified origins.
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
- 11:00 a.m. Feed Grains Database — ERS
- 11:00 a.m. Meat Price Spreads — ERS
- 2:00 p.m. Dairy Monthly Tables — ERS
- 2:00 p.m. Season Average Price Forecasts — ERS
- 2:00 p.m. Wheat Data — ERS