Good morning!
Grains mostly weaker overnight... Corn, soybeans and the winter wheat markets faced price pressure overnight, while spring wheat traded mildly higher. As of 6:30 a.m. CT, corn futures are trading 2 cents lower, soybeans are 7 to 8 cents lower, winter wheat markets are 1 to 2 cents lower and spring wheat is 1 to 3 cents higher. The U.S. dollar index is more than 100 points lower and front-month crude oil futures are around 25 cents higher.
Gold hits record high in flight to quality... Spot gold prices set an all-time high on Thursday amid a flight to quality given heightened geopolitical tensions and a potential sign investors don’t believe the war against inflation is over. Gold has soared 30% this year and is on the cusp of reaching $2,700 an ounce.
U.S. offers conditional loans for two SAF projects... Gevo, Inc. secured a conditional commitment for a $1.46 billion loan from the U.S. Department of Energy (DOE) Loan Programs Office for its Net-Zero 1 project. This represents the first-ever large-scale alcohol-to-jet project to receive such a commitment from DOE and aligns with the growing demand for sustainable aviation fuel (SAF) and the aviation industry’s efforts to reduce its carbon footprint. While the conditional commitment is a significant milestone, Gevo must still satisfy certain technical, legal, environmental, commercial and financial conditions before DOE can finalize the financing documents and fund the loan guarantee. DOE also approved conditional funding of up to $1.44 billion to Calumet to support the expansion of its Montana facility to utilize vegetable oils, fats and greases to produce biofuels. If finalized, the loan guarantee would fund facility expansion to produce about 315 million gallons per year of biofuels, most of which will be SAF, DOE said. The U.S. government has set a goal to produce three billion gallons of SAF by 2030 and meet 100% of U.S. aviation fuel demand with SAF by 2050.
Russia allows transit of Kazakh grain for export, bans imports... Russia has granted Kazakhstan permission to transit grain through its territory for export to other countries starting today, but imposed a temporary ban on Kazakh grain imports to Russia, its agricultural watchdog said. Transit of grain will be possible if Kazakhstan provides phytosanitary certificates for the final destination country and ensures trans-shipment of grain from railway cars directly into export vessels. Russian watchdog Rosselkhoznadzor had previously said that from Sept. 23 its systems would automatically block the issuance of phytosanitary certificates for grain, grain products, sunflower seeds, tomatoes and peppers from Kazakhstan.
Export sales pushed back... Due to Monday’s government holiday, export sales data for the week ended Oct. 10 will be released Friday morning.
Economists grow more optimistic on inflation, recession and growth in 2024... Economists surveyed by the Wall Street Journal (link) are increasingly upbeat about the U.S. economy, projecting steady GDP growth, moderating inflation and a manageable labor market slowdown. The probability of a recession within the next 12 months has dropped, aligning with expectations of cooling inflation and further interest rate cuts. While forecasts anticipate the unemployment rate to hover around 4.2% by year-end, economists see jobs creation remaining steady at approximately 130,400 new jobs per month. Moreover, the economists predict that both inflation and the federal funds rate will decline faster than previously expected, reflecting the easing effect of the Federal Reserve’s September rate cut. The survey also explores which presidential candidates — Trump or Harris — would exert greater influence on inflation, interest rates, and the federal deficit.
Report: Presidential candidates focus on food inflation, overlooking pandemic’s impact... Both major political parties have made food price inflation a campaign priority, though they downplay Covid-19’s lingering effects on supply chains and global inflation, according to a report from the American Enterprise Institute. The report is written by Dr. Joe Glauber, a former chief economist at USDA, and Vincent Smith, an AEI senior fellow. While food prices have stabilized, with home food costs rising just 1% annually since 2022, dining out prices are growing at 3% per year. The pandemic led to a modest increase in household food spending, with low-income households seeing only a 1.3 percentage point rise in food budget share. The authors criticize both major candidates for their approach to the issue: “The campaigns have also focused disproportionately on the inflationary impacts of expansionary fiscal actions taken by both the Trump and Biden administrations to prevent the potentially catastrophic costs of a severe pandemic-driven recession.” This focus overlooks the global nature of the issue and the similar policies adopted by other developed countries to mitigate the economic impact of the pandemic.
Yellen to warn tariffs war would ignite inflation... U.S. Treasury Secretary Janet Yellen is expected to warn in remarks to the Council on Foreign Relations, “Sweeping, untargeted tariffs would raise prices for American families and make our businesses less competitive.” Although she is not expected to mention Donald Trump by name, Yellen will argue the broad tariffs the former president and some Republicans in Congress support would damage the U.S. economy, the New York Times reported, citing her speech obtained by the newspaper. Meanwhile, the Wall Street Journal says Trump’s proposed trade policies for a potential second term could dramatically reshape global trade, potentially leading to the highest tariff levels since the 1930s. The long-term consequences of such policies are uncertain and depend largely on how other countries respond.
China boosts funds for housing projects to support embattled sector... China will expand a “white list” of housing projects eligible for financing and increase bank lending for such developments to 4 trillion yuan ($562 billion) by year-end, Minister of Housing and Urban-Rural Development Ni Hong said. Redevelopment of cities will also gather pace, with a million “urban villages” to be included in such plans, Ni said, adding that people being resettled will help absorb existing housing inventories. Approved loans for the “white list” projects had risen to 2.23 trillion yuan as of Oct. 16, Xiao Yuanqi, deputy director of the State Financial Regulatory Administration, said.
Euro zone inflation slows more than initially expected in September... Euro zone consumer inflation slowed to 1.7% above year-ago in September, lower than the “flash” estimate of 1.8%, dropping it below the European Central Bank’s 2% target for the first time since mid-2021. Core inflation, minus food, energy, alcohol and tobacco costs, increased 2.7%.
Supreme Court allows EPA’s new climate rule to proceed... The U.S. Supreme Court declined to halt EPA’ new climate regulation for power plants, allowing the rule to remain in effect while legal challenges continue. This decision comes despite opposition from Republican-led states and energy industry groups who sought to block the regulation.
Sen. Baldwin urges USDA aid for Wisconsin farmers after poultry plant closure... Sen. Tammy Baldwin (D-Wis.) has taken action to address the crisis facing poultry farmers in her state following the abrupt closure of Pure Prairie Poultry. Pure Prairie Poultry, an Iowa-based poultry processor, suddenly closed its processing plant in Charles City, Iowa on Oct. 2, leaving farmers with thousands of chickens but no means to feed or process them. Sen. Baldwin on Oct. 16 sent a letter to USDA Secretary Tom Vilsack, urging the department to provide immediate assistance to affected Wisconsin farmers. Baldwin called on USDA to intervene and assist farmers facing extreme financial hardship. The senator pointed out that USDA had previously invested over $47 million in Pure Prairie Poultry less than two years ago. She expressed concerns about animal welfare and the potential for this situation to exacerbate the avian flu outbreak.
H5N1 cases rise in dairy and poultry... H5N1 continues to spread, with 97 dairy herd cases reported in California and Idaho over the past 30 days. On the poultry side, 2.76 million birds across three western states have been affected, including major outbreaks in Utah and Washington. Since the outbreak began in February 2022, H5N1 has hit 1,180 flocks across 48 states, affecting 103.47 million birds.
Choice beef continues to surge... Choice boxed beef prices firmed another $2.30 to $319.13 on Wednesday. Choice beef has surged $22.76 since late September and is now more than $15.00 above last year at this time. Daily Livestock Report notes, “The value of the chuck primal, which is heavily featured by retailers in October, has surged due to reduced spot availability as packers cut back on slaughter.” Once that seasonal demand ceases, the beef cutout could decline.
Cash hog index posts new seasonal low, pork cutout remains choppy... The CME lean hog index is down 23 cents to $83.85 as of Oct. 15, marking a new seasonal low. The pork cutout firmed 45 cents to $94.85, holding well within the five-week choppy range from the September low at $92.91 to this month’s high at $96.31.
Overnight demand news... South Korea purchased a total of 130,000 MT of corn in two separate tenders – all of which is expected to be sourced from the U.S. or South America. Taiwan purchased 65,000 MT of corn expected to be sourced from Argentina, Brazil or South Africa and 78,200 MT of U.S. milling wheat. Algeria tendered to buy up to 240,000 MT of corn from Brazil or Argentina and 35,000 MT of optional origin feed barley. Jordan tendered to buy up to 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. Weekly Ethanol Production — EIA
· 11:00 a.m. Feed Grains: Yearbook Tables — ERS