Good morning!
Price pressure overnight... Grain and soy complex futures were pressured overnight by outside markets and concerns about demand. As of 6:30 a.m. CT, corn futures are trading 2 to 3 cents lower, soybeans are mostly 6 to 8 cents lower, SRW wheat futures are 5 to 6 cents lower, HRW futures are 8 to 10 cents lower and HRS wheat is 2 to 3 cents lower. Front-month crude oil futures are around 65 cents lower and the U.S. dollar index is around 100 points higher.
Mexico to proceed with GMO corn ban... Mexico doesn’t plan to amend its ban on GMO corn imports that starts in 2024. Deputy Agriculture Minister Victor Suarez told Reuters Mexico is on track to halve its U.S. imports of yellow corn via increased domestic production and will look to make direct deals with farmers in the U.S., Argentina and Brazil who produce non-GMO corn to secure the remaining supplies. “There are many alternatives to importing non-GMO yellow corn from the United States,” Suarez said. This appeared to reverse assurances Ag Minister Victor Villalobos made to USDA Secretary Tom Vilsack last year, that Mexico would not limit imports of GMO corn from the United States. Suarez said he did not believe Mexico’s decree presented any violation of the U.S.-Mexico-Canada Agreement, saying the country was “under no obligation to buy and grow GM corn.”
Russia says small fraction of Ukraine grain exports going go to needy countries... Russia said only 3% of food shipped from Ukrainian ports since the grain export deal was signed has gone to the poorest countries, while Western countries account for half of all shipments. “The geography of the recipients of these cargoes has turned out to be completely inconsistent with the initially declared humanitarian objectives,” the country said in a statement. “Needy states such as Somalia, Ethiopia, Yemen, Sudan, (and) Afghanistan have received just 3% of food, mostly from the World Food Program.” Russian officials have said they need to be assured grain shipments will go to the poorest countries and sanctions against Moscow must be eased before they will agree to an extension.
Russia lowers wheat export tax... Russia’s wheat export tax for Nov. 2-8 will be 2,923.2 rubles ($47.40) per metric ton based on an indicative price of $312.70. That’s down from a rate of 3,028.0 rubles per metric ton the previous week.
Rains bring some relief to crops in Argentina... Much-needed rain improved conditions for 2022-23 wheat and corn in Argentina, where a prolonged drought has reduced both crops, the Buenos Aires Grain Exchange said in its weekly crop update. “Important rains on sectors of the province of Buenos Aires... improved the scenario for the sown wheat,” it said, adding the wheat area with fair to dry soil moisture conditions fell nine percentage points to 47%. For corn, the exchange said “58% of the lots have a water condition between optimal and adequate.”
High anxiety again over potential rail strike... Failure to agree on a revised deal could result in a walkout as early as December. Of the 12 labor unions involved in bargaining, six have ratified their agreements. Two of the largest unions, the Brotherhood of Locomotive Engineers and Trainmen and the Transportation Division of the International Association of Sheet Metal, Air, Rail, and Transportation Workers, are still in the process of ratification and are expected to announce results in mid-November, right after a standstill agreement to forestall strikes or a management lockout expires.
Fed on track for tens of billions in losses amid inflation fight... The Federal Reserve’s aggressive campaign to rein in inflation leaves it on track for tens of billions, if not more, in losses over the next few years, Reuters reported. The Fed started losing money last month, sooner than many had expected, including the Congressional Budget Office, who had no Fed losses in a forecast released in September. The Fed accounts for negative income with an accounting measure it calls a deferred asset. The size of that shortfall now stands at $5.3 billion. “The deferred asset account is likely to peak in the zone of $100 billion to $200 billion, and will likely take 3-4 years to recover,” said Derek Tang, an economist at research firm LH Meyer Monetary Policy Analytics. The expected path of losses is “bad, but not too bad,” said William English, a former top Fed staffer who is now at Yale University.
BOJ leaves rates unchanged despite higher inflation outlook... The Bank of Japan (BOJ) on Friday maintained its ultralow interest rates as widely expected, going against a global trend of aggressive monetary tightening, as it attempts to navigate what it sees as a temporary inflation amid higher commodity prices and a weak yen. Reflecting the impact of rising import costs of energy, raw materials and other goods, BOJ revised upward its core consumer inflation outlook for the current fiscal year to next March to 2.9% from its earlier projection of 2.3%. Meanwhile, Japan’s government on Friday unveiled a new stimulus package to ease the pain of inflation, with spending worth 39.0 trillion yen ($265 billion) that it said would boost gross domestic product (GDP) by around 4.6%.
IMF cuts Asian economic forecasts... The International Monetary Fund (IMF) cut Asia’s economic forecasts as global monetary tightening, rising inflation and China’s sharp slowdown dampened the region’s recovery prospects. IMF now forecasts Asia’s growth at 4.0% this year and 4.3% next year, down 0.9 point and 0.8 point from its previous outlook. The region’s economies grew a collective 6.5% in 2021. “Asia’s strong economic rebound early this year is losing momentum, with a weaker-than expected second quarter,” the report said. “Further tightening of monetary policy will be required to ensure that inflation returns to target and inflation expectations remain well anchored. As the effects of the pandemic wane, the region faces new headwinds from global financial tightening and an expected slowdown of external demand.” IMF expects China’s growth to slow to 3.2% this year, a 1.2-point downgrade from its April projection, after an 8.1% rise in 2021. China’s economy is expected to grow 4.4% next year and 4.5% in 2024, IMF said.
Signs of some improvement for fertilizer market... Lower natural gas prices are encouraging producers to restart production at European plants. About 47% of the region’s ammonia capacity is now offline, down from 70% in September, the International Fertilizer Association said. That should make it a bit easier for farmers to get hold of crucial nutrients. U.S. farmers may pull back on ammonia use this quarter due to the crop nutrient’s premium price tag, dry soil conditions across the Midwest and expectations of lower prices into the second quarter, Bloomberg Intelligence says.
RFS set timeline nears... The Nov. 16 court-negotiated deadline for EPA to issue the Renewable Fuel Standard (RFS) proposed levels for 2023 is fast approaching, and the so-called “set” rule has not yet been forwarded to the Office of Management and Budget (OMB) for review. OMB can take up to 90 days to review a regulation sent forward from an agency. OMB also typically holds meetings with stakeholders on rules.
China continues its soybean auctions... China will sell another 500,000 MT of state-owned soybeans on Nov. 11. Beijing has regularly been auctioning imported soybeans from the 2019, 2020 and 2021 crop years to alleviate tight domestic supplies.
Indonesia to raise palm reference price, export tax... Indonesia plans to set its crude palm oil reference price at $770.88 per metric for Nov. 1-15, the country’s deputy minister for economic affairs said on Friday, up from $713.89 currently. The planned reference price would increase the export tax for the period to $18 per metric ton from the current $3.
Strong gains in cash cattle... Cash cattle traded around $150 in the Southern Plains on Thursday, about $2 higher than last week’s weighted average in the region, though some feedlots held out for even higher prices. Trade in the northern market was quieter, with asking prices reportedly in the $155 to $156 range in Nebraska. This week’s average cash price will mark a new high for the year and will likely end up at the highest level since May or June 2015.
December hogs sharply extend discount to cash index... After sharp losses on Thursday, December hogs finished more than $9 below today’s cash quote of $94.15 (as of Oct. 26). While the cash index has declined for two straight days and could face more pressure, yesterday’s sharp extension of the discount in December hogs was technically driven.
Overnight demand news... South Korea purchased 134,000 MT of corn expected to be sourced from South America or South Africa.
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
- 2:00 p.m. Egg Products — NASS
- 2:00 p.m. Peanut Prices — NASS
- 2:30 p.m. Commitments of Traders — CFTC