Good morning!
Mostly lower price tone this morning... Corn and wheat traded lower overnight on followthrough selling, while soybeans faced two-sided trade. As of 6:30 a.m. CT, corn futures are trading 2 to 3 cents lower, soybeans are fractionally on either side of unchanged and wheat futures are 6 to 9 cents lower. Front-month crude oil futures are around $1.35 lower and the U.S. dollar index is modestly firmer.
China’s economy saddled by Covid restrictions... China’s economic growth is hitting an early speed bump in the fourth quarter as Covid-19 curbs and anxieties further tapped the brakes on travel and shipping, constraining consumption and commerce. Mobility statistics – from metro passenger traffic in cities and flight cancellations to domestic container handling at major ports – have worsened in October despite falling local coronavirus cases, suggesting Covid-19 preventive measures, or fear of those measures, are still stifling economic activity.
China surveys banks of FX positioning... China’s foreign exchange regulator sent a survey to some banks late on Monday asking them about their positioning in the currency market, three sources with direct knowledge of the matter told Reuters. The survey comes at a time when the yuan is at its weakest levels since 2007, and the offshore yuan is at record lows. The U.S. dollar’s strong rise amid aggressive monetary tightening and a slowing Chinese economy have pressured the yuan, which has lost more than 13% against the dollar so far this year and looks set for its biggest annual drop since 1994, when China unified market and official rates. Beijing already rolled out measures to stem the fast yuan declines, including raising a parameter on cross-border corporate financing to make it easier for domestic firms to raise funds from overseas markets. Some believe tightening overseas lending could be the next move.
Ukraine grain exports could rise nearly 9% this month... Ukraine’s exports of agricultural products could reach 7.5 MMT in October, a rise of 8.7% from the 6.9 MMT it exported last month, the deputy chair of the Ukrainian Agrarian Council said on Tuesday. The official didn’t give a commodity-by-commodity breakdown of his export forecast.
Ukraine keeps winter wheat area unchanged despite planting delays... Ukraine maintained its forecast for winter wheat seedings at 3.8 million hectares despite planting delays due to unfavorable weather. The ag ministry said farmers had planted 3.1 million hectares to winter wheat as of Oct. 25. Another 500,000 hectares of other winter grains had been sown. Planted area will be down significantly from last year when Ukraine seeded 6.5 million hectares to winter wheat.
Crop Progress Report highlights… Following are highlights from USDA’s crop progress and condition update for the week ended Oct. 23.
- Corn: 97% mature (97% on average), 61% harvested (52% average).
- Soybeans: harvested 80% (67% average).
- Cotton: 92% bolls opening (91% average), 45% harvested (39% average), 30% good/excellent (31% last week).
- Winter wheat:79% planted (78% average), emerged 49% (56% average).
Key index shows contracting economic activity... S&P Global said its composite output index for the U.S., which includes services and manufacturing activity, fell to 47.3 in October from 49.5 in September, its second-fastest pace of decline since 2009 excluding early 2020 at the start of the Covid-19 pandemic. An reading below 50 signals contracting economic activity while above 50 signals growth.
LA port chief: Labor deal likely months away but probability of work disruption ‘extremely low’... A labor deal between 22,000 dockworkers at U.S. West Coast ports and their employers may take several months to reach, but service disruptions while negotiations continue are unlikely, Port of Los Angeles Executive Director Gene Seroka, whose port is the nation’s busiest, said in an interview with Bloomberg on Monday. Seroka said he isn’t worried about the chance the parties will fail to reach a deal. “I think the probability of work disruption is extremely low,” he said.
Yellen downplays hopes on EV tax credit changes... Treasury Secretary Janet Yellen is dousing expectations that the agency will provide relief to foreign automakers lobbying against stringent limits on a popular electric-vehicle (EV) tax credit. “I’ve heard a lot about the concerns of the Koreans and Europeans about those rules, and we’ll certainly take them into account,” but “the legislation is what it is,” Yellen said Monday, referring to the $7,500 consumer tax credit restricted only to vehicles built in North America. “We have to implement the law that was written. We’re early on in the process for writing rules,” Yellen said. “I gave my assurance that we would listen to their concerns and see what was in the range of the feasible as we implement the rules.” The Inflation Reduction Act has other requirements that will prove challenging for automakers. The bill denies a subsidy after 2023 to automakers that use battery components manufactured in China and other “foreign entities of concern.” Beginning in 2025, that prohibition extends to the use of any critical mineral in a battery that is extracted or processed by those countries.
ERP payouts nearly $7.1 billion, specialty crop payouts top $1 billion... Payments under the Emergency Relief Program (ERP) totaled $7.09 billion as of Oct. 23, up from $7.03 billion the prior week, according to USDA data. The total includes $6.08 billion in non-specialty crop payments ($6.04 billion prior) and now over $1 billion in payments for specialty crops — $1.03 billion ($991.3 million prior). There have been 280,580 approved applications paid. There are still payments to be issued under a second effort via the Phase 1 ERP payouts and Phase 2 of ERP that are still to come.
Cash cattle hit new high for the year... Cash cattle averaged $150.07 last week, up $3.08 from the previous week’s yearly high and the highest price since the second week of July 2015. Cash sources report showlist numbers are down sharply this week and market-ready fed cattle supplies will continue to tighten. That paints a bullish outlook for the cash market and cattle futures. While live cattle futures are short-term overbought, their premiums to the cash market are small, suggesting downside risk should be limited.
Cash hog fundamentals firming... The national direct cash hog price firmed 29 cents on Monday, despite weakness in Iowa/Minnesota and the western Corn Belt, suggesting supplies are tighter in other areas of the country. The CME lean hog index is up 62 cents today (as of Oct. 21), marking the seventh increase in the past eight days. After sharp losses on Monday, December lean hog futures stood $6.745 below today’s cash index quote.
Overnight demand news... South Korea purchased 68,000 MT of optional origin corn, excluding the Black Sea region. Taiwan tendered to buy 38,515 MT of U.S. 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
- 8:00 a.m. Food Price Outlook — ERS