Good morning!
Wheat firmer, beans weaker and corn mixed... Wheat futures traded higher to open the week amid global supply concerns, while soybeans softened and corn was caught in the middle. As of 6:30 a.m. CT, corn futures are trading fractionally on either side of unchanged, soybeans are fractionally to 3 cents lower and wheat futures are 10 to 14 cents higher. Front-month crude oil futures are trading near unchanged and the U.S. dollar index is around 400 points lower.
Xi comes out swinging... Chinese leader Xi Jinping in a Sunday speech to open the Communist Party National Congress claimed significant successes in fighting Covid-19, enforcing order in Hong Kong and curtailing what he called separatist activism in the island democracy of Taiwan, which Beijing claims as its territory. He reiterated Beijing won’t renounce the use of force in unifying Taiwan. “The complete unification of the motherland must be realized, and it will be realized,” he said. Meanwhile, the new leadership lineup of China’s ruling Communist Party will be unveiled next Sunday, Oct. 23, a day after its twice-a-decade national congress wraps up. While Xi Jinping is set to receive a third term as the paramount party leader, there will be major changes in other senior positions. The reshuffle will be completed next March at the annual parliamentary sessions after changes in key government posts are confirmed — such as who will take over from Li Keqiang as the new premier.
Yuan losses capped by state bank actions, PBOC keeps rates unchanged... State banks in China have been swapping yuan for dollars in the forwards market and selling those dollars in the spot market, six banking sources told Reuters on Monday. Beijing is trying to stabilize financial markets during the once-in-five-year Communist Party Congress that got underway Sunday. A former People’s Bank of China (PBOC) official said the country’s central bank still has many policy tools to guide yuan expectations and the currency is unlikely to have persistent sharp depreciation. PBOC fully rolled over maturing medium-term policy loans while keeping the interest rate unchanged for a second month, reinforcing expectations that conditions will continue to stay loose to help the pandemic-hit economy.
Biden brushes off risks of strong dollar on global economy... President Joe Biden dismissed the risks of a strong U.S. dollar and instead blamed anemic growth and policy missteps in other parts of the world for dragging down the global economy. “I’m not concerned about the strength of the dollar, I’m concerned about the rest of the world,” Biden told reporters on Saturday during a campaign stop in Portland, Oregon. “Our economy is strong as hell.”
U.S. forecast to enter recession in the coming 12 months... The U.S. economy will enter a recession within the next year as the Federal Reserve battles to bring down persistently high inflation, the economy contracts and employers cut jobs in response, according to the Wall Street Journal’s latest survey of economists. On average, economists put the probability of a recession in the next 12 months at 63%, up from 49% in July’s survey. It is the first time the survey pegged the probability above 50% since July 2020, in the wake of the last short but sharp recession. Economists’ forecasts for 2023 are increasingly gloomy. They now expect GDP to contract in the first two quarters of next year, a downgrade from the last quarterly survey, when they penciled in mild growth. On average, economists now predict GDP will contract at a 0.2% annual rate in the first quarter of 2023 and shrink 0.1% in the second quarter. In July’s survey, they expected a 0.8% growth rate in the first quarter and 1% growth in the second.
Record September NOPA crush expected... Traders expect members of the National Oilseed Processors Association (NOPA) to report soybean crush totaled 161.6 million bu. during September, which would be down 2.4% from August but up 5.1% from year-ago and a record for the month. Soyoil stocks are expected to decline to 1.522 billion bu., which would be a 23-month low.
‘Significantly less’ Ukraine winter grains sown during optimal window... Less than 30% of the Ukrainian winter grain crop area for the 2023 harvest was sown at optimal times because of poor weather, the state weather forecaster said, adding that this was “significantly less” than in previous years. “For crops that will be sown in October, there is a high probability that the plants... will enter the winter in the initial stages of development, will be weakened and vulnerable to adverse winter conditions if they occur,” forecaster said.
Ukraine October grain exports nearly back to pre-war level... Ukraine exported 2.12 MMT of grain, mostly corn and wheat, during the first 17 days of this month, according to ag ministry data. That was down 50,000 MT (2.3%) from the same period last year. Since July 1, Ukraine has exported 10.8 MMT of grain, including 5.88 MMT of corn, 3.99 MMT of wheat and 896,000 MT of barley – down 5.7 MMT (34.5%) from the same period last year.
The week ahead in Washington... President Joe Biden suggested last week his administration could announce new actions to help tackle rising gas prices in the U.S., which have reversed their downward trend in recent weeks and are expected to rise higher following news of the OPEC+ production cuts. It is murky what Biden might do to help temper prices, though the White House has not ruled out the possibility that he could order the release of additional oil from the nation’s Strategic Petroleum Reserve (SPR) beyond the drawdown of 180 million barrels announced in March. The administration has also explored the possibility of limiting exports of petroleum products to reduce prices in the United States. The final stretch for Nov. 8 elections is at hand, with prognosticators continuing to predict close races in the House and Senate.
China halts LNG sales to foreign buyers to ensure domestic supplies... China has asked its state-owned gas importers to stop reselling liquefied natural gas (LNG) to buyers in Europe and Asia as it seeks to ensure its own supply for the winter season, Bloomberg News reported. China’s National Development and Reform Commission asked PetroChina, Sinopec and Cnooc to keep winter cargoes for domestic use, the report said, citing people familiar with the matter. Meanwhile, China will greatly increase domestic energy supply capacity and its reserve capacity for key commodities, government officials said on Monday, reiterating a policy of ensuring supplies and stabilizing prices of raw materials. Beijing will enhance a “diversified domestic supply base” centered on coal while speeding development of domestic oil and gas resources. Xi said China would steadily implement its carbon peak and neutrality targets and in accordance with its energy resources.
China delays key economic data... China will delay the release of economic indicators originally scheduled for publication this week, including the country’s third-quarter gross domestic product due on Tuesday, according to an updated calendar on the statistics bureau’s website. The delays announced Monday followed an unexplained move by the General Administration of Customs on Friday to skip its previously scheduled release of September’s trade data.
China sells 100% of wheat reserves up for auction... China sold all 41,359 MT of state-owned wheat reserves put up for auction last week. China will hold another wheat auction on Oct. 19, with plans to sell around 50,000 MT of state-owned reserves.
Powell opens probe over Fed trading violations... Federal Reserve Bank of Atlanta President Raphael Bostic said his asset managers made trades that broke central bank rules, leading Chair Jerome Powell to open a probe in the latest chapter of a broader Fed ethics scandal. Bostic said in a statement Friday he was not aware of the specific trades or timing of the transactions, which were made by a third-party manager in accounts where he did not have ability to direct trades. He detailed the transactions in corrected disclosure forms posted to the Atlanta Fed’s website.
Cattle traders cautiously optimistic... Cattle traders expect cash cattle to firm again this week after higher prices the past two weeks. But nearby live cattle futures are trading just slightly above the cash market. Macroeconomic concerns continue to keep traders cautious toward the long side of the market despite firming cash prices and a bullish longer-term outlook as supplies tighten through 2023.
Cash hog index strengthening... The CME lean hog index is up 42 cents to $93.09 (as of Oct. 13), the third gain in the past five days. December hogs, which is the new lead-month contract, finished $10.84 below the cash index, suggesting traders expect the strengthening of the index to be short-lived.
Weekend demand news... The Philippines purchased 165,000 MT of Australian feed wheat. South Korea tendered to buy 45,000 MT of U.S. 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
- 11:00 a.m. Soybean Crush — NOPA
- 11:00 a.m. Feed Grains: Yearbook Tables — ERS
- 3:00 p.m. Crop Progress — NASS