Good morning!
Grains surge after Russia suspends grain export deal... Wheat futures led strong overnight price gains in reaction to Russia’s temporary suspension of the Ukraine grain export deal over the weekend. As of 6:30 a.m. CT, wheat futures are trading mostly 33 to 45 cents higher, corn is 12 to 14 cents higher and soybeans are 4 to 7 cents higher. Front-month crude oil futures are around $1.25 lower and the U.S. dollar index is more than 400 points higher this morning.
Russia suspends grain export deal, but shipments continuing... Russia will indefinitely suspend its participation in the United Nations-brokered grain export deal with Ukraine after drone attacks on the Crimean city of Sevastopol, the country’s defense ministry announced Saturday. Russia will sell its own grain to world markets as a replacement for Ukrainian grain. The UN, Ukraine and Turkey pushed forward with grain shipments, despite the Russian withdrawal, according to the Joint Coordination Center in Istanbul. Twelve vessels set off from Ukrainian ports on Monday carrying a record daily volume of 354,500 MT of grain. The UN head of a Black Sea grain-exports deal said on Monday civilian cargo ships can never be military targets or held hostage, and that “the food must flow” under the deal.
Lula wins Brazilian election... Leftist Luiz Inacio Lula da Silva won Brazil’s runoff election with current incumbent President Jair Bolsonaro. “Brazil is ready to resume its protagonism in the fight against the climate crisis, protecting all our ecosystems, especially the Amazon rainforest,” Lula tweeted Sunday night, vowing to “fight for zero deforestation.” He also will seek fair global trade rather than trade deals that “condemn our country to be an eternal exporter of raw materials.”
Another firm expects sharp drop in 2023 Russian wheat production... Russia’s 2023 wheat production is expected to fall to 87 MMT from this year’s record crop of 101 MMT, ag consultancy IKAR forecasts. IKAR raised its estimate of Russia’s exportable surplus of wheat in 2022-23 by 2 MMT to 50 MMT.
China again sells 100% of wheat put up for auction... China sold all 40,257 MT of state-owned wheat reserves put up for auction last week. Wheat from the 2014, 2015, 2016 and 2017 crops was sold at an average price of 2,843 yuan ($392.14) per metric ton.
The week ahead in Washington... This is the final stretch ahead of the midterm elections on Nov. 8. Democrats have brought back former President Barack Obama as a closer in several races, including Georgia. Obama returned to the campaign trail on Saturday in two of Democrats’ most vulnerable states — Michigan and Wisconsin. Obama will be in Nevada on Tuesday and appear with Biden in Pennsylvania on Saturday. Former President Donald Trump has an active agenda ahead, visiting several close Senate race states. The economic focus will be the Nov. 1-2 Federal Open Market Committee meeting after which the Fed is widely expected to raise interest rates another 75 basis points. Key economic reports include updates on construction spending, PMI and factory orders, and Friday’s October jobs report. The highlights for agriculture include the first winter wheat crop condition ratings this afternoon, along with updated ag trade data and FAO’s world food price index, both of which will be released on Friday.
China’s factory sector unexpectedly contracts in October... China’s official manufacturing purchasing managers index (PMI) unexpectedly fell to 49.2 in October from 50.1 the previous month – the lowest reading since July. Strict Covid restrictions in several major cities caused output, new orders and export sales to fall. The Caixin/Markit manufacturing PMI highlighting activity in smaller, privately owned factories in October will be released Monday evening.
Euro zone inflation soars to another record... Euro zone consumer inflation accelerated to 10.7% above year-ago in October from 9.9% a month earlier. Energy prices continued to drive inflation but food and imported industrial goods all pushed prices sharply higher even as services played only a marginal role this month. Excluding unprocessed food and energy prices, euro zone inflation jumped 6.4%, up from a 6.0% rise in September.
U.S. diesel supply ‘rapidly devolving’... Mansfield Energy issued an alert about diesel fuel shortages in several Southeastern states, including Alabama, Georgia, Tennessee, North Carolina, Virginia, and South Carolina. The company also noted “extremely high prices in the Northeast.” “Poor pipeline shipping economics and historically low diesel inventories are combining to cause shortages in various markets throughout the Southeast,” the company said. “These have been occurring sporadically, with areas like Tennessee seeing particularly acute challenges.” It noted that fuel prices are 30 to 80 cents higher than the posted market average due to “tight” supply, while saying that “fuel suppliers have to pull from higher cost options, at a time when low-high spreads are much wider than normal.” Fuel carriers are now having to go to “multiple terminals to find supply, which delays deliveries and strains local trucking capacity,” it said. While gasoline prices have dropped since they posted record highs in June, diesel hasn’t decreased nearly as much and currently stands at $5.31 per gallon, according to AAA. Oct. 21 data from the Energy Information show that the country had 25.9 days of diesel left.
China’s hog herd expands in September... China’s sow herd grew 2% in September versus the prior month to 43.62 million head, according to the country’s ag ministry. The hog herd increased 3.1% from the prior month to 443.94 million head and was up 1.4% from year-ago.
Will beef packers stay aggressive?... Cash cattle traded sharply higher again last week and packers bought a lot of cattle. Packers may attempt to be less aggressive after multiple weeks of actively chasing supplies, though strong competition and tightening market-ready supplies should keep the cash market well supported again this week.
Cash hog index slides again... The CME lean hog index is down 38 cents to $93.77 (as of Oct. 27), the third straight daily decline. December lean hog futures finished $7.67 below that level on Friday, which may help limit seller interest. If the cash index continue to fall, however, attitudes that it put in an early seasonal low could shift and drive fresh selling in futures.
Weekend demand news... Exporters reported no tenders or sales.
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. Fruit and Tree Nuts Yearbook — ERS
- 2:00 p.m. Agricultural Prices — NASS
- 3:00 p.m. Crop Progress — NASS