Good morning!
Quiet overnight trade in grains... Soybean and wheat futures posted mild gains amid corrective buying in light overnight trade, while corn pivoted narrowly around unchanged. As of 6:30 a.m. CT, corn futures are trading narrowly mixed, soybeans are 5 to 6 cents higher, SRW wheat futures are a penny higher, HRW wheat is 2 to 4 cents higher and HRS wheat is 2 to 3 cents higher. Front-month crude oil futures are nearly $1.00 higher and the U.S. dollar index is around 250 points higher.
Lawmakers exit Washington as gov’t shutdown appears more likely... In a surprising turn of events, renegade House Republicans once again rejected Speaker Kevin McCarthy’s (R-Calif.) efforts to pass a Pentagon funding bill, raising concerns of a potential government shutdown in just nine days. This marks the second time this week the rebel GOP members have disrupted federal spending plans, highlighting deep divisions within the party. It now looks like the Senate will take the lead approach in trying to get a continuing resolution going, even though the House would likely balk at its contents. Negotiations on both short-term funding solutions and long-term appropriations have deteriorated to the point where lawmakers from both chambers are returning home, with no scheduled votes for the remainder of the week. McCarthy and his leadership team now intend to focus on passing the remaining 11 individual funding bills. The House Rules Committee has scheduled a markup this afternoon on four spending bills — Homeland Security, State-Foreign Operations, Defense and Agriculture. When lawmakers returns on Tuesday, they will have just five days left to avoid a shutdown.
Mexico researchers show progress on replacing U.S. GM corn imports... Researchers at the Autonomous University of Chapingo highlighted progress they had made in producing more non-GM yellow corn seeds to help replace imports from the United States. Fields planted last spring were generating new strands of hybrid seed varieties to be tested in 2024 with release for planting in 2025, they said. The project aims in two years to develop enough non-GM seed varieties cultivable in Mexico to replace about 6 MMT of the 18 MMT of corn the country imports from the U.S. annually.
Second ship leaves Ukrainian Black Sea port... Aroyat left Ukraine’s Chornomorsk port on the Black Sea loaded with 17,600 MT of wheat for Egypt. It was the second bulk carrier to leave the port this week using Ukraine’s new temporary humanitarian corridor.
India sells state-owned wheat... India sold 1.809 MTMT of state-owned wheat into the domestic market the ease prices. The Indian government says there are sufficient wheat reserves for continuation of these sales during 2023-24, without providing how much wheat it intends to auction.
China to sell sugar reserves for first time in seven years... China will hold its first auction of state-owned sugar reserves since 2016 next week amid tightening supplies and rocketing prices. The auction will include 26,700 MT of old-crop white sugar with a floor price of 6,500 yuan ($890.40) per MT and 100,000 MT of white sugar produced in 2023 with a floor price of 7,300 yuan ($999.95) per MT, Huashang Reserve Commodity Management Center said.
Biden expands use of controversial social cost of carbon metric... The White House has granted federal agencies the authority to incorporate the contentious social cost of carbon metric into a wide range of decisions. This move paves the way for imposing higher fines on violators, conducting more rigorous assessments of federal programs, applying stricter analyses to permit applications and promoting the adoption of electric vehicles and other low-carbon equipment. The social cost of carbon represents the estimated societal cost of emitting one ton of greenhouse gases into the atmosphere, considering factors such as reduced agricultural productivity, property damage from severe weather events and decreased access to freshwater resources. Sen. Shelley Moore Capito (R-W.Va.) criticized the decision, branding the metric as “flawed” and accusing the Biden administration of relying on unproven figures to support its environmental policies. Capito serves as the ranking member of the Environment and Public Works Committee.
BOJ maintains interest rates, hints at possible end to negative rates... The Bank of Japan (BOJ) kept its key short-term interest rate at -0.1% and maintained the 10-year bond yields around 0% through a unanimous vote. It also left unchanged an allowance band of 50 basis points on either side of the yield target, as well as a new hard cap of 1.0% adopted in July. BOJ Governor Kazuo Ueda has hinted at a potential departure from negative interest rates, suggesting that such a move could occur sooner than previously anticipated, provided there is sufficient data supporting wage hikes.
Euro zone PMI improves but still contracting... HCOB’s flash euro zone composite purchasing managers’ index (PMI) compiled by S&P Global rose to 47.1 in September from August’s 33-month low of 46.7 but remained well below the 50 point mark, signaling contraction. The manufacturing PMI reading slipped to 43.4 from 43.5 in August, while services PMI rose to 48.4 from 47.9 last month.
Cattle on Feed Report out this afternoon... Traders expect USDA’s Cattle on Feed Report at 2:00 p.m. CT to show the feedlot inventory as of Sept. 1 down 2.3% from year-ago at 11.023 million head, which would be the 12th consecutive month of year-over-year declines. Placements are expected to have declined 6.4%, while marketings are seen down 5.3% from year-ago levels.
Fundamentals vs. macroeconomics for cattle... Cattle futures faced heavy selling pressure on Thursday amid broad risk aversion in markets as traders ignored cash fundamentals. Cash cattle trade has been limited thus far, but the cattle that traded were at steady/firmer prices in the northern market. That could limit followthrough selling interest in futures ahead of this afternoon’s report.
October hogs discount widens... The CME lean hog index is up 50 cents to $87.17 (as of Sept. 20). After sharp losses on Thursday, October hogs held a $4.22 discount to today’s cash quote. The five-year average is roughly a $2.75 rise in the cash index from now until mid-October when that contract expires, which should help limit followthrough selling pressure.
Overnight demand news... Taiwan purchased 93,125 MT of U.S. milling wheat. South Korea purchased 65,000 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
- 11:00 a.m. Cotton Ginnings — NASS
- 2:00 p.m. Cattle on Feed — NASS
- 2:00 p.m. Chickens and Eggs — NASS
- 2:00 p.m. Peanut Prices — NASS
- 2:30 p.m. Commitments of Traders — CFTC