Good morning!
Grains firmer to open the week... Corn, soybeans and wheat firmed overnight on support from crude oil as it responded to a major geopolitical shock over the weekend when Hamas raided Israel. As of 6:30 a.m. CT, corn futures are trading 3 to 4 cents higher, soybeans are 7 to 8 cents higher and wheat futures are 8 to 12 cents higher. Front-month crude oil futures are nearly $3.00 higher and the U.S. dollar index is more than 400 points higher.
Gov’t holiday but most markets open... Government offices are closed today for Columbus Day and Indigenous Peoples’ Day. Most markets will trade normal hours, but the bond market will be closed.
Israel declares war on Hamas after invasion... Fighting between Israelis and Hamas forces within Israel continued on Monday, following a surprise attack by Gaza militants that killed many Israelis, including civilians, and resulted in hostage situations. Retaliatory Israeli airstrikes have led to casualties among Palestinians, displacing thousands from their homes. The UN Security Council convened an emergency session on Sunday but did not propose a course of action in response to the Hamas assault. There are reports suggesting Iranian security officials assisted Hamas in planning the attack on Saturday. However, American officials have not confirmed this evidence. Additionally, the conflict appears to be widening as Hezbollah, an Iran-backed militant group in Lebanon, shelled Israeli military positions, further raising concerns about the escalating situation.
The week ahead in Washington... The attack on Israel by Hamas adds urgency to GOP efforts to elect a new House speaker. They head into a conference vote as soon as Wednesday with two strong candidates and no clear favorite between House Majority Leader Steve Scalise (R-La.) and Rep. Jim Jordan (R-Ohio). The need to focus on Israel may help get a House GOP leadership decision this week. Lawmakers have emphasized that a delay in filling the role could slow any efforts to help Israel. The Pentagon announced an initial emergency military assistance package for Israel on Sunday, as well as the movement of U.S. Navy ships and aircraft closer to Israel as a show of support. The key economic data this week will be U.S. producer price data on Wednesday and consumer inflation figures on Thursday. The Fed will release minutes from its last monetary policy meeting on Wednesday. USDA’s October crop reports will be the focal point for agriculture.
IKAR raises Russian grain crop, export forecasts... IKAR agriculture consultancy raised its forecast for Russia’s grain crop this year to 141.2 MMT, up 1.2 MMT from its prior projection. The firm raised its 2023-24 grain export forecast by 500,000 MT to 64.5 MMT.
Indonesia to import more rice to combat high prices... Indonesia will import an additional 1.5 MMT of rice in 2023, its ag minister said, as drought in the country is raising domestic prices. The additional quota comes on top of a 2 MMT rice import quota for 2023 and an additional 300,000 MT carryover from last year’s import plan. But he said realistically Indonesia may only be able to procure 600,000 MT of the new import plan up to year-end.
OPEC raises forecasts for global oil demand... Global oil consumption will climb 16% over the next two decades to reach 116 million barrels a day (bpd) in 2045, about 6 million bpd more than previously predicted, the Organization of Petroleum Exporting Countries said in its World Oil Outlook. Road transportation, petrochemicals and aviation will drive the growth, it said. India represents the biggest expansion, more than doubling its consumption to almost 12 million bpd, followed by China, with a gain of 4 million bpd, or 26%. “There has been pushback against the opinion that the world should see the back of fossil fuels, as policies and targets for other energies falter due to costs and a more nuanced understanding of the scale of the energy challenges,” OPEC Secretary-General Haitham Al Ghais said. OPEC also boosted projections for how much oil it will supply in coming years, even though most of its members — hobbled by underinvestment, operational disruptions and political instability — aren’t currently able to pump at their full production quotas. It sees OPEC liquids supply rising roughly 14% to 38.9 million bpd by the end of the decade, ultimately reaching 46.1 million bpd in 2045.
Sneak peek at IMF forecasts... European Central Bank President Christine Lagarde said the IMF cut its global growth forecasts, except for the U.S., ahead of that organization’s latest outlook that will be released tomorrow. It currently sees global GDP expanding 3% in both 2023 and 2024, with the U.S. growing 1.8% and 1%. In the runup to this week’s World Economic Outlook — published as part of IMF’s annual meetings in Marrakesh — Managing Director Kristalina Georgieva highlighted the new numbers will show “the current pace of global growth remains quite weak — well below the 3.8% average in the two decades before the pandemic. Over the medium-term, growth prospects have weakened further,” with “stark differences in growth dynamics,” she said in a speech in Abidjan, Ivory Coast. “Stronger momentum comes from the United States,” Georgieva said. “But most advanced economies are slowing down and in China economic activity is below expectations.”
U.S. senators arrive in China, seek diplomacy over conflict... A bipartisan delegation of U.S. senators, led by Majority Leader Chuck Schumer (D-N.Y.), landed in China on Saturday, expressing a commitment to fostering competition rather than conflict with the Asian superpower. Schumer emphasized the importance of maintaining a cooperative relationship between the world’s two largest economies and stated the U.S. aims for economic competition with China but does not seek confrontation. The U.S. hopes to pave the way for a potential meeting between President Joe Biden and Chinese President Xi Jinping at the Asia-Pacific Economic Cooperation summit in San Francisco in November, although China has yet to confirm the Chinese leader’s attendance. But Xi’s first meeting with U.S. congressional leaders in eight years was colored with tension after Schumer criticized China’s response to the Hamas attacks in Israel, Bloomberg reports.
Chinese property developers remain a focal point... China’s Country Garden may announce a restructuring of its offshore debt soon, local media reported, while bondholders of embattled peer China Evergrande Group raised concerns about a possible liquidation as its debt plans floundered. Country Garden, which missed two dollar interest payments last month, has two coupons totalling $66.8 million coming due today. Media outlet Cailianshe said the company may announce a restructuring soon. Country Garden has $10.96 billion offshore bonds and 42.4 billion yuan ($5.81 billion) worth of loans not denominated in yuan. If it defaults, these debts will need to be restructured, and the company or its assets also risk liquidation by creditors.
Choice beef back above $300... Choice boxed beef prices jumped $4.25 on Friday, climbing back above the $300.00 level after slipping below that mark earlier last week. Select beef firmed $1.01 to $275.78. One day of price action isn’t nearly enough to say the market has put in a short-term low, but it’s at least a clue the market may be finding some traction.
Cash hog fundamentals continue to weaken... The CME lean hog index is down another 67 cents to $83.03, the lowest level since June 5. The pork cutout value fell $1.76 to $93.22 on Friday amid sharp declines in primal bellies, hams and loins. That’s the lowest level for the pork cutout since Aug. 31.
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
- Gov’t offices closed. No reports scheduled.