Good morning!
Price pressure to start the week... Grain and soy futures faced pressure from weak outside markets overnight. As of 6:30 a.m. CT, corn futures are trading 3 to 4 cents lower, soybeans are mostly 12 to 13 cents lower and wheat futures are 4 to 6 cents lower. Front-month crude oil futures are around $1 lower and the U.S. dollar index is around 400 points higher.
Ukraine again accuses Russia of delaying grain shipments... Ukraine accused Russia of blocking the full implementation of Black Sea grain deal. “Russia is deliberately blocking the full realization of the Grain Initiative. As a result, these (Ukrainian) ports in the last few days are working only at 25% to 30% of their capacity,” Ukraine’s infrastructure ministry said in a statement via the Telegram messaging app. The United Nations is calling for “urgent measures to be taken” to prevent shipping delays. Meanwhile, Russian Foreign Minister Sergei Lavrov said Moscow has asked the United Nations for data on the destination and end-users for Ukrainian grain shipments, saying that “corrections” to a deal would depend on this information. Since July 1, Ukraine has exported nearly 12 MMT of grain, according to the country’s ag ministry, down 33.4% from the same period last year. The exports included 6.29 MMT of corn, 4.49 MMT of wheat and 1 MMT of barley.
China’s Q3 GDP grew more than expected... China’s economy grew 3.9% from a year earlier in the third quarter, quickening from the 0.4% growth recorded in the second quarter. That topped the 3.5% economic growth expected by economists. For the first nine months of the year, China’s GDP expanded 3.0% from a year earlier, well below the 5.5% annual growth target set earlier by the government.
China’s trade surplus rose in September... China’s exports increased a stronger-than-expected 5.7% from year-ago in September while imports inched up 0.3%, the slowest growth since April. China’s trade surplus climbed to $84.74 billion last month, up from $79.39 billion in August. The trade surplus with the U.S. narrowed to $36.1 billion in September from $36.7 billion in August.
China’s September soybean imports increase... China imported 7.72 MMT of soybeans in September, up 840,000 MT (12.2%) from August and 550,000 MT (7.7%) more than last year. Imports were slightly higher than expected amid increasing urgency to rebuild stockpiles. Through the first nine months of the year, China imported 69.04 MMT of soybeans, down 6.6% from the same period last year.
Xi tightens grip on China leadership... China’s Xi Jinping secured a precedent-breaking third leadership term and introduced a new top governing body stacked with loyalists, cementing his place as the country’s most powerful ruler since Mao Zedong. Xi emerged from China’s confab with an even tighter grip on power, ensuring continued “zero Covid” policies and heightened tensions with the West. Li Qiang, who oversaw Shanghai’s two-month Covid-19 lockdown this year as party boss of China’s commercial hub, is on track to become China’s next premier in March. Other members of the seven-man Politburo Standing Committee include Zhao Leji and Wang Huning, who return from the previous committee, and newcomers Cai Qi, Ding Xuexiang and Li Xi.
Euro zone economic contraction deepens in October... The S&P Global Composite PMI dropped to 47.1 in October, the lowest since November 2020, and below market consensus of 47.5, pointing to a fourth consecutive decline in business activity. Excluding pandemic lockdown months, manufacturing and energy-intensive sectors shrank the most since July 2012 due to a surge in energy costs, while services contracted the most since May 2013 amid the ongoing cost of living crisis and economic uncertainty.
The week ahead in Washington... Congress remains on recess as we are into the last stretch before the Nov. 8 midterm elections, with Republicans picking up momentum in both the House and Senate races, based on polls. Voters believe the biggest election issues are the inflation/economy, followed by crime, topics which Republicans score better on. Higher fuel prices including surging diesel, and continued food price inflation, are an everyday occurrence for American shoppers. On the economic front, the preliminary estimate for third quarter U.S. GDP, durable goods orders and flash PMI readings will be the focus. USDA will release its updated food price outlook on Tuesday, which will highlight inflated costs for American consumers at grocery stores and restaurants.
China again sells all wheat put up for auction... China sold all 40,026 MT of wheat from state-owned reserves that was put up for auction Oct. 19. Both of China’s wheat auctions have resulted in 100% of the volume put up for sale being sold.
China’s pork imports increased in September... China imported 150,000 MT of pork in September, up 10,000 MT (7.1%) from August but down 54,000 MT (26.5%) from last year. Through the first nine months of this year, China imported 1.22 MMT of pork, down 61.2% from the same period last year.
China’s Q3 pork production inches up... China’s third-quarter pork output totaled 12.11 MMT, up by less than 1% from the same period last year. China’s pork output totaled 41.5 MMT in the first nine months of the year, up 5.9% from last year. But the growth rate of China’s pork production has slowed recently since increasing every quarter year-on-year for the last two years, as some farmers reduced their breeding herds after months of low hog prices and high feed costs eroded profits. China’s pig herd totaled 443.94 million head at the end of September, up 1.4% from last year.
Neutral Cattle on Feed Report... USDA’s Cattle on Feed Report showed the Oct. 1 feedlot inventory down 0.9%, with September placements down 3.8% and marketings up 4.0%. With all three categories virtually in line with the pre-report estimates, the data is fully neutral and will have no impact on prices. However, declining feedlot inventories paint a bullish picture for both cattle futures and the cash cattle market into 2023.
Cold Storage Report out this afternoon... USDA will detail frozen meat stocks at the end of September. The five-year average is a 12.6-million-lb. increase in beef stocks and a 11.9-million-lb. rise in pork stocks during the month.
Bullish cash cattle hopes... Cash cattle rose for a third straight week, with the average price expected to be up around $3 when USDA releases the official data later this morning. Despite recent strong gains, December live cattle futures hold just a small premium to the cash market, which opens the door to more near-term buyer interest.
Cash hog index continues to firm... The CME lean hog index is 29 cents higher to $94.05 (as of Oct. 20) and has risen six of the past seven days. December lean hog futures have been rising with the cash index and finished Friday $4.965 below today’s index quote.
Weekend demand news... Saudi Arabia purchased 566,000 MT of optional origin milling wheat. Iraq pushed back the closing date on it tender to buy a nominal 50,000 MT of optional origin wheat to Oct. 30. Algeria tendered to buy a nominal 50,000 MT of soft 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
- 2:00 p.m. Cold Storage — NASS
- 2:00 p.m. Poultry Slaughter — NASS
- 3:00 p.m. Crop Progress — NASS