Good morning!
Grains mostly weaker overnight... Soybeans led overnight losses, while corn and the winter wheat markets faced lighter selling. As of 6:30 a.m. CT, corn futures are trading fractionally lower, soybeans are mostly 9 cents lower, winter wheat markets are 1 to 3 cents lower, while spring wheat futures are 2 to 4 cents higher. Front-month crude oil futures are around 50 cents lower and the U.S. dollar index is marginally weaker.
Rising threats of wider conflict in Middle East... Top U.S. officials are expressing growing concerns about the possibility of a broader conflict erupting in the Middle East, prompting the Pentagon to expedite the deployment of additional weapons systems and raise the alert status of U.S. forces for swift deployment. The apprehension arises from a combination of factors, including the Israeli/Hamas conflict, the Russia/China axis, North Korea, Iran’s provocative actions and the spread of weaponized fake videos in various conflict zones. Key developments include Israel and Iran engaging in heated rhetoric, with U.S. officials fearing rapid escalation and regional instability. The U.S. is employing a diplomatic strategy to slow Israel’s invasion of Gaza, allowing time to prepare for potential Iranian escalation and bolstering air defense systems in the region. Amid the complexity, officials are also monitoring China’s actions amid the chaos. The situation remains precarious, with concerns about the risk of armed conflict in the Middle East and potential global implications.
The week ahead in Washington... House Republicans are entering their third week without a speaker. Republicans will hold a candidate forum today at 6:30 p.m. ET. Then they will begin voting tomorrow. Nine candidates have filed their intentions. In a significant move, the Biden administration on Friday called upon Congress to approve a substantial $106 billion emergency aid package, aimed at providing crucial support to Israel, Ukraine, bolstering border security, and addressing humanitarian needs. The proposed allocation comprises $61.4 billion for Ukraine, with a focus on supplying Department of Defense equipment, replenishing weapon stocks, and sustaining military assistance. Additionally, $14.3 billion is earmarked for Israel, while $9.15 billion is designated for humanitarian aid in Ukraine, Israel and Gaza. On the economic front, the personal consumption expenditures price index for September. The Fed’s preferred inflation measure — core PCE, which excludes food and energy prices — is forecast to be up 3.7% from a year earlier, slower than August’s 3.9%. Key agricultural data this week will be this afternoon’s update on harvest progress, while USDA’s food price outlook will be released on Wednesday as will the Cold Storage Report.
U.S. 10-year Treasury yield tops 5%... The U.S. 10en-year Treasury yields rose above 5% for the first time since 2007, as investors begin to anticipate the Federal Reserve will keep interest rates higher for longer to keep inflation down. The U.S. economy has proven resilient to tighter monetary policy, suggesting a delayed path to interest-rate cuts.
Not a good development for U.S. economy... Americans are falling behind on their car loans at the highest rate on record. The percentage of subprime auto borrowers at least 60 days past due rose to 6.11% in September, according to Fitch.
IKAR raises Russian grain production, export forecasts... Russian agricultural consultancy IKAR estimates Russia’s grain production at 142.2 MMT, up 600,000 MT from its prior forecast. The firm raised its 2023-24 grain export forecast by 300,000 MT to 65 MMT.
China Sept. forex outflows highest since 2016... Capital outflows from China rose sharply to $75 billion in September, the largest such monthly amount since 2016, Goldman Sachs’ preferred gauge of foreign exchange flows showed, underscoring intensifying depreciation pressure on the yuan. September’s outflows, nearly 80% higher than the $42 billion seen in August, were driven by current account outflows as foreign investors’ net selling of equities and bonds slowed, Goldman Sachs said in a report. There was $35 billion in net outflows via onshore outright spot transactions last month, as well as $45 billion of net yuan payment from onshore to offshore, Goldman said.
Argentina headed for runoff vote in presidential election... Peronist party candidate Sergio Massa did better than expected in Argentina’s presidential election and will have a runoff with libertarian candidate Javier Milei on Nov. 19. Argentina’s sovereign dollar-denominated bonds fell after Economy Minister Sergio Massa emerged as the surprise frontrunner in the general election.
Bird flu case detected in Buena Vista County, Iowa... Officials have confirmed the presence of highly pathogenic avian influenza (HPAI) in around a 50,000 bird commercial turkey flock in Buena Vista County, Iowa, for the first time this migration season. Governor Kim Reynolds issued a disaster proclamation for the county, in effect until Nov. 19, enabling state resources to support tracking, monitoring, rapid detection, containment, disposal and disinfection efforts. The proclamation also includes provisions to waive certain regulations related to commercial vehicles responding to affected sites.
China’s hog herd growing, putting pressure on prices... China’s hog production is still growing, a farm ministry official said, with a higher-than-normal number of breeding sows set to maintain downward pressure on prices. China had 42.4 million sows at the end of September, unchanged from the previous month, but 3.4% higher than the normal level, Chen Guanghua, head of the animal husbandry and veterinary bureau at the ag ministry said. “The level of pig losses may even be greater than that of the same period this year,” he said, urging farmers to adjust their production.
Bearish Cattle on Feed Report... All three categories in Friday’s Cattle on Feed Report came in on the bearish side of pre-report expectations, with On Feed up 0.6%, placements up 6.1% and Marketings down 10.6% from year-ago levels. Cattle futures are expected to face pressure from the report data today.
Cash hog index continues to fall... The CME lean hog index is down another 66 cents to $79.79 (as of Oct. 19), extending its seasonal price decline. December lean hog futures finished last Friday at a $13.79 discount to today’s cash quote. Meanwhile, the pork cutout value firmed 84 cents on Friday to $87.97.
Weekend demand news... Taiwan tendered to buy 52,000 MT of U.S. milling wheat. Iran tendered to buy 180,000 MT of corn.
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
- 3:00 p.m. Crop Progress — NASS