Good morning!
Corrective buying overnight... Supportive outside markets helped fuel a corrective rebound in grain and soy futures overnight. As of 6:30 a.m. CT, corn futures are trading around 3 cents higher, soybeans are 5 to 8 cents higher and wheat is 9 to 12 cents higher. Front-month crude oil futures are nearly $2 higher and the U.S. dollar index is around 450 points lower this morning.
Ukraine grain export deal update... Several Russian officials continue to send less-than-positive signals on the prospects for continuing the grain deal that facilitated exports of Ukrainian grain and agricultural products via the Black Sea. Russian Foreign Ministry spokeswoman Maria Zakharova said the country was ready to boost food and fertilizer exports, but said the U.S. is still preventing such an action as they are “blackmailing” and “persecuting” those trying to trade with Russia. Russian First Deputy Permanent Representative to the United Nations Dmitry Polyanskiy told reporters there must be practical results for Russia for it to back the extension of the grain deal. “We will look at the practical results, not some kind of wishful thinking,” he said, adding, “practical results are very modest.” He also said Russia was not yet convinced the deal needed to be extended, labeling the export of Russian fertilizer and food products “the most important thing.” Polyanskiy also said his country would reassess its cooperation with UN Secretary General Antonio Guterres and his staff if they were to send experts to Ukraine to inspect downed drones the West said were made in Iran. Meanwhile, Ukraine’s central bank chief says he believes the grain export deal will be extended and that is built into its forecasts.
EU leaders to discuss energy crisis... European Union leaders will meet on Thursday to discuss the continent’s energy crisis and the war in Ukraine. On the agenda will be emergency measures proposed by the European Commission in Brussels that would compel the EU’s 27 governments to jointly purchase some natural gas. That would prevent European countries from bidding against each other, and thus driving up prices. With national governments pushing different remedies to the crisis, diplomats are playing down the chance of sweeping actions such as price caps on gas imports.
Weekly Export Sales Report out this morning... For the week ended Oct. 13, traders expect:
| 2022-23 expectations (in MT) | Last week |
Corn | 250,000-700,000 | 200,191 |
Wheat | 200,000-500,000 | 211,823 |
Soybeans | 1,700,000-2,500,000 | 724,405 |
Soymeal | 150,000-550,000 | 491,854 |
Soyoil | 0-20,000 | 3,298 |
Exchange cuts Argentine wheat crop forecast... Argentina is now expected to produce 15 MMT of wheat this year, according to the latest forecast from the Rosario Grain Exchange, down 1 MMT from its prior outlook, as late frost hit a crop already hurt by drought. This year’s production would be the lowest in seven years and the crop is “very critical and could still get worse,” the exchange said. USDA earlier this month forecast the 2022-23 Argentine wheat crop at 17.5 MMT.
Firm raises EU wheat crop forecast, cuts corn production... Consultancy Strategie Grains raised its 2022-23 EU wheat crop forecast by 1.4 MMT to 125.5 MMT, though that would still be down 4.3 MMT (3.3%) from last year. The firm cut its EU corn production figure to 50.4 MMT, down 2.5 MMT from its prior outlook and 19.9 MMT (28.3%) lower than last year due to this year’s drought.
China leaves interest rates unchanged... China kept its benchmark lending rates unchanged for a second straight month on Thursday, in line with expectations, as authorities held off unleashing more monetary stimulus to avoid stark policy divergence with other major central banks. The one-year loan prime rate (LPR) was kept at 3.65%, while the five-year LPR was unchanged at 4.30%. The steady LPR fixings came after the People’s Bank of China left the rate of its medium-term policy loans unchanged.
Yen hit a 32-year low against the U.S. dollar... The Japanese yen slid to 150 to the dollar on Thursday, its lowest value since 1990 and a psychological milestone. The Bank of Japan (BOJ) recommitted to its policy of bond-buying, laying out $667 million for purchasing new government debt to prevent bond prices from sinking too low. But BOJ refuses to raise interest rates, while other major central banks are tightening monetary policy. There is speculation BOJ will have sell U.S. dollars to support the yen again.
New rules could allow DOE to build gasoline, diesel supplies... Changes in the rules to purchase oil for the Strategic Petroleum Reserve (SPR) indicate the government could have set in place a process to build supplies of gasoline and diesel, according to Bloomberg. Under the plan, the Department of Energy (DOE) could buy fuels either on a fixed-price contract or a new index-priced contract. It also changes the framework of exchange agreements where companies are loaned fuel or oil to be repaid later. Some indicate the new process for building emergency reserves could end up limiting U.S. fuel exports.
‘Biden put’ for energy prices... The discussion of buying crude oil for the SPR near $70 per barrel was slightly bullish but only from a “price floor” (or “Biden put”) standpoint as the market was already trading comfortably above that area, says the Sevens Report. WTI crude oil futures firmed 2.5% Wednesday and extended those gains overnight.
China to sell more wheat reserves... China will sell 40,200 MT of wheat from its state reserves on Oct. 26. The country sold all 41,359 MT of wheat put up for auction on Oct. 12.
China encourages farmers to sell more hogs... China’s state planner has increased its coordination with large-scale hog farms to ensure stable supplies, as it tries to cool soaring prices in the world’s largest pork market. China’s largest hog producers have agreed to “undertake social responsibilities,” said the National Development and Reform Commission (NDRC) said. The companies will take the lead in ensuring supply and price stability in the market, release fattened hogs in a timely manner and speed up the slaughter pace when necessary, it added. Beijing has already issued several warnings to farmers urging them to stop holding back hogs from slaughter to wait for higher prices.
Higher cash cattle trade, but most feedlots waiting... Light cash cattle trade was reported at $147 in the Southern Plains and $150-plus in the northern market Wednesday – roughly $2 higher than last week’s prices in these areas. But most feedlots continue to hold out for higher prices since they are current on marketings and packers are showing a need for supplies. October live cattle futures finished yesterday $2.36 above last week’s average cash price of $146.99.
Discount narrowing in December hog futures... December lean hog futures finished Wednesday $5.825 below today’s cash index quote of $93.20 (as of Oct. 18). Amid the ongoing strong rally, traders’ attitudes have shifted from overly pessimistic to optimistic, as the discount in the lead contract is now less than the seasonal average from now until mid-December. Technically, December hogs are due for a pause or short-term pullback, but there’s growing optimism an early seasonal low may have already been posted in the cash index and there are hopes for stronger Chinese demand in the year ahead.
Overnight demand news... Japan purchased 97,482 MT of wheat in its weekly tender, including 34,912 MT U.S., 34,090 MT Canadian and 28480 MT Australian. Saudi Arabia tendered to buy 535,000 MT of hard 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
- 7:30 a.m. Weekly Export Sales — FAS
- 7:30 a.m. Extended Weather Outlook — NOAA
- 2:00 p.m. U.S. Bioenergy Statistics — ERS
- 2:00 p.m. Livestock Slaughter — NASS
- 2:00 p.m. Milk Production — NASS