Good morning!
Price pressure overnight... Corn, soybean and wheat futures retreated from Thursday’s gains overnight amid renewed hopes for a Ukrainian grain export extension and pressure from financial and currency markets. As of 6:30 a.m. CT, corn futures are trading 3 to 4 cents lower, soybeans are 8 to 9 cents lower, winter wheat futures are 9 to 10 cents lower and spring wheat is around a nickel lower. Front-month crude oil futures are modestly firmer, while the U.S. dollar index is around 550 points higher.
Turkey’s president sees no obstacles to extending grain export deal... Turkish President Tayyip Erdogan said he sees no obstacles to extending the deal allowing Ukrainian Black Sea grain exports, after discussions with his Russian and Ukrainian counterparts this week. “There is no obstacle to extending the export deal. I saw this in the talks I held with (Ukrainian President Volodymyr) Zelenskyy last night and also in the talks I held with (Russian President Vladimir) Putin,” NTV reported. This is a more upbeat message than that from Russian officials this week. We expect the situation to continue to ebb and flow right up until (and maybe beyond) the Nov. 19 deadline on the current grain export deal.
U.S. 10-year Treasury yield at highest level since 2007... Yields on 10-year U.S. government bonds rose to their highest level since late 2007 on Friday, as Federal Reserve officials kept up their strong rhetoric on inflation. The 10-year Treasury yield hit 4.291%, a level last seen in December 2007. The Fed’s top priority is taming inflation and is willing to let the U.S. economy stall out to get the job done more quickly. This scenario is bearish for stocks, bonds and commodity markets, but bullish for the U.S. dollar.
China’s yuan near Great Recession lows... China’s yuan continued to weaken against the U.S. dollar, approaching lows hit during the global financial crisis of 2008. The yuan hit an intraday low of 7.2479, not much above the 14-year low of 7.2521 hit in late September. Chinese authorities continued to set firmer-than-expected yuan guidance in a bid to keep the currency stable amid the ongoing Communist Party Congress. The stronger daily guidance, which allows the onshore yuan to trade in a narrow range of 2% on either side of the midpoint, has effectively capped the downside limit for the yuan.
China eases A-share financing rules for some real estate firms... Chinese authorities will ease share financing rules for certain real estate-related firms, fueling hopes of more measures to aid the beleaguered real estate sector. The China Securities Regulatory Commission (CSRC) will allow certain companies with small property interests to raise money by selling A-shares, but the proceeds cannot be invested in the real estate business, China Securities Journal reported. For eligible companies, real estate must not be their core business, and should not contribute more than 10% of their profit, according to the report. China has barred its property firms or property-related firms from financing via the domestic A-share market since end-2018, including both IPOs and additional or follow-up share sales.
UK bonds set for best week on record... UK government bonds at the heart of recent market turmoil are set for their biggest weekly surge on record. The rate on 30-year bonds has plummeted 78 basis points this week, its biggest retreat ever. The equivalent yield on 10- and 30-year inflation-linked gilts are also on course for record declines. The move reflects relief at the departure of Prime Minister Liz Truss’ and her economic agenda. The market is also being supported by the exclusion of long-dated debt from the Bank of England’s bond sales program and signs the pensions industry is on a more stable footing.
Fertilizer prices falling... Farmers balking at the high costs of nutrients are holding off on purchases, driving down demand and causing gluts that are upending the market for crop inputs, Bloomberg reports. Prices soared to a record earlier this year after sanctions against Belarus, a major producer, and Russia’s invasion of Ukraine. That prompted global fertilizer firms to boost purchases and transport massive amounts of product to avoid supply chain issues and trade restrictions in export markets such as Russia.
India won’t increase duties on palm oil imports... India will refrain from increasing duties on palm oil imports as it wants to avoid a surge in domestic prices at a time when inflation is running hot, Bloomberg reported, according to a person familiar with the matter. Reuters reported this week that India was examining whether to raise import taxes on palm to support millions of local oilseed farmers. India’s basic import duty on crude palm oil is currently zero, while the tax on refined varieties of palm oil and palm olein is 12.5%.
France’s wheat planting rolls along... French farmers had sown 46% of the expected soft wheat area for next year’s harvest by Oct. 17, compared with 36% last year at this time. Mild weather has allowed planting to rapidly advance. While rains this week may slow planting, the moisture should benefit the emergence of crops and somewhat ease water deficits following summer drought.
Ship backlog progress... The queue of ships waiting to unload at the ports of Los Angeles and Long Beach fell from a peak of 109 vessels in January to four this week, according to the Marine Exchange of Southern California. Bottlenecks continue to delay cargo at other major U.S. seaports and at inland freight hubs, but the end of the backup at the big ports in California signals broader supply-chain tangles that have been troubling retailers and manufacturers are unwinding.
Feedlot supplies expected to be slightly under year-ago... USDA’s Cattle on Feed Report this afternoon is expected to show the Oct. 1 feedlot inventory down 104,000 head (0.9%) from year-ago, which would be the first year-over-year decline since December 2021. Placements are expected to have declined 3.6% in September, while marketings are anticipated to have increased 4.0% from year-ago.
Sharply higher cash cattle trade... Feedlots secured $148 for cash cattle in the Southern Plains and $152 in the northern market on Wednesday. Trading volume was active, as expected amid the sharply higher prices, as packers didn’t wait to secure cattle amid tightening supplies. This week’s average cash price will be the highest in seven years.
Deferred hog futures continue to climb... Spring- and summer-month lean hog futures shook off corrective selling pressure to end slightly higher Thursday, despite being short-term overbought. While seasonal weakness is likely for winter-month contracts, the longer-term outlook leans bullish as supplies will tighten and Chinese demand for pork is expected to improve. Far-deferred hog futures are still well below their 2022 highs, suggesting there’s more upside potential longer-term.
Overnight demand news... Turkey provisionally purchased around 125,000 MT of milling wheat in a tender for 495,000 MT, with additional purchases expected.
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
- 11:00 a.m. Cotton Ginnings — NASS
- 11:00 a.m. Rice Stocks — NASS
- 2:00 p.m. Cattle on Feed — NASS
- 2:00 p.m. Chickens and Eggs — NASS
- 2:00 p.m. Peanut Prices — NASS
- 2:30 p.m. Commitments of Traders — CFTC