Good morning!
Wheat leads overnight price gains... Wheat futures were supported overnight by Black Sea supply concerns as Russia was set to annex four regions of Ukraine. Corn and soybeans followed wheat higher ahead of USDA’s reports later this morning. As of 6:30 a.m. CT, corn futures are trading mostly 4 cents higher, soybeans are 5 to 6 cents higher and wheat futures are 9 to 14 cents higher. Front-month crude oil futures are around 40 cents higher, while the U.S. dollar index is up about 170 points.
Ian regains strength, will make landfall today in South Carolina... Ian, now a hurricane again, is expected to make landfall again near Charleston, South Carolina around 1 p.m. CT. Ian is expected to weaken quickly once over land, but it will not completely dissipate until Saturday afternoon. Some crop damage is possible. The hurricane swept through about 40% of Florida’s beef cattle country, leaving ranches “kind of wrecked,” Jim Handley, executive vice president of the Florida Cattlemen’s Association told Bloomberg. The heaviest agricultural damage was to Florida’s orange crop. Fertilizer maker Mosaic Co. found no releases of toxic fertilizer byproduct in the wake of Ian.
Grain Stocks Report, Small Grains Summary out later this morning... Sept. 1 stocks in the Grain Stocks Report will set final 2021-22 carryover for corn and soybeans and signal implied first quarter 2022-23 wheat use. Traders expect Sept. 1 stock of 1.512 billion bu. for corn, 242 million bu. for soybeans and 1.776 billion bu. for wheat. USDA will also issue its final production estimates for this year’s U.S. wheat crop. All wheat production is expected to come in at 1.778 billion bu., up 5 million bu. from August, with just minor adjustments to the wheat classes.
Low river levels, soaring barge freight rates curbing U.S. grain exports... Numerous barges have run aground on the lower Mississippi River and grain barge shipping rates are soaring to historic highs this week, Reuters reports, hampering already sluggish grain exports from the Gulf. Tow boats on the lower Mississippi have been forced to reduce the number of barges per tow by nearly 40% to squeeze through the reduced shipping lanes. Barge freight at the Port of St. Louis hit a record-high $49.88 per ton this week, up 58% from a year ago, according to USDA data, while grain barge unloads at Louisiana Gulf Coast export terminals were 39% below the five-year average since Sept. 1. “The projections for the water levels are going down, which means this situation is going to get worse,” Mike Steenhoek, executive director for the Soy Transportation Coalition, told Reuters. “Unless we get a significant amount of rainfall soon, this season is going to be a challenge.”
Senate passes CR, House will clear it today... The Senate easily passed a continuing resolution (CR) to fund federal government funded through Dec. 16. It includes more than $12 billion in aid for Ukraine, $1 billion in heating and utility assistance, emergency aid for natural disasters and a five-year reauthorization of FDA user fees. The emergency aid is not an ERP extension but ordinary Stafford disaster assistance. ERP extension efforts are likely to be made in the omnibus in December. The House will clear the CR today, but by a far closer vote. It may not be so easy when lawmakers deal with an omnibus spending bill for fiscal year 2023 in a post-election, lame duck session of Congress.
Diesel price falls to lowest since March... For the week ended Sept. 26, the U.S. average price of diesel fell 7.5 cents to $4.889 per gallon. According to the U.S. Energy Information Administration, the price was $1.483 above the same time last year but fell below $4.90 for the first time since March. The price of diesel fell in all 10 regions. In the Midwest, the diesel price showed the largest decrease, falling by 1.14 cents to $4.881 per gallon.
Euro zone inflation hits record 10%... Euro zone inflation jumped to a record 10.0% in September from 9.1% the previous month. Inflation was still driven mainly by volatile energy and food prices but continued to broaden. Excluding food and fuel prices, inflation jumped to 6.1% from 5.5% while an even narrower measure, which also excludes alcohol and tobacco, rose to 4.8% from 4.3%.
EU ministers adopt windfall levy, no deal on gas price cap... European Union energy ministers on Friday adopted a package of measures to soothe the energy crisis, including a windfall levy on profits by fossil fuel companies, but a deal on capping gas prices remained off the table, the Associated Press reports. The measures include a levy on surplus profits made by companies producing or refining oil, gas and coal. The two other main elements of the plan are a temporary cap on the revenues of low-cost electricity generators such as wind, solar and nuclear companies, as well as an obligation for the 27 EU countries to reduce electricity consumption by at least 5% during peak price hours. The text should be adopted next week and enter into force soon after.
Another sharp drop in Russia wheat export tax... Russia’s wheat export tax for Oct. 5-11 will be 2,119.0 rubles ($37.16) per metric ton based on an indicative price of $308.10. That’s down from a rate of 2,476.6 rubles per metric ton the previous week and the eighth straight weekly decline. After a slow start to 2022-23 wheat exports despite a record crop this year, Russia has been actively lowering the export tax in an effort to encourage more sales.
China’s factory sector unexpectedly expands... China’s official manufacturing purchasing managers index increased to 50.1 in September 2022 from 49.4 the previous month. This was the first expansion in factory activity in three months. Both output and buying activity grew for the first time in three months while new orders shrank the least since June.
China lowers port fees by 20%... China will lower port fees for cargoes by 20% in the fourth quarter to promote stability and the smooth flow of goods, the transport ministry said on Friday. Local governments are also encouraged to offer preferential fees to encourage more transport.
China’s raises state purchase price for wheat... China set the 2023 minimum purchase price for wheat at 2,340 yuan ($329.69) per metric ton, an increase of 40 yuan (1.7%) compared with this year. China buys wheat from farmers at the minimum price when the market price drops below that level in order to support stable grain production. Cash wheat prices in the major growing province Shandong currently stand at 3,100 yuan a metric ton.
China to relax floor on mortgage rates to revive housing sector... Chinese local governments can relax the floor on mortgage rates for first-time home buyers in some cities in phases, the central bank said on Thursday, in a bid to prop up property prices and revive the real estate sector. Localities would be allowed to decide whether to maintain, lower or scrap the floor for such buyers by the end of 2022, the People’s Bank of China (PBOC) said. Banks and customers may negotiate to determine the specific interest rate of new housing loans to help reduce borrowers’ debt burden and better support housing demand, PBOC added.
Bullish H&P Report... Every category in USDA’s Hogs & Pigs Reports was under the average pre-report trade estimates, which should trigger corrective buying in lean hog futures. USDA estimated the U.S. hog herd at 73.8 million head as of Sept. 1, down 1.1 million head (1.4%) from year-ago. The breeding herd at 6.152 million head declined 38,000 head (0.6%) from year-ago, while the marketing herd at 67.648 million head fell 1.029 million head (1.5%). All three categories were the smallest inventories since 2017.
Cash cattle trade fares better than feared... Cash cattle trade appears mostly wrapped up for the week. Cattle traded at mostly steady prices in the Southern Plains and steady/weaker in the northern market, though that was better than feared early in the week as futures faced heavy pressure. The volume traded appears sufficient that showlists were virtually cleaned up, paving the way for potentially steady/firmer cash prices next week.
Overnight demand news... South Korea purchased 60,000 MT of corn that’s likely to be sourced from South America or South Africa. The Philippines purchased 50,000 MT of Australian feed barley but passed on a tender to purchase up to 60,000 MT of feed wheat. Mauritius tendered to buy 25,800 MT of optional origin wheat flour. Algeria purchased between 150,000 and 200,000 MT of milling wheat that’s likely to be sourced from Russia and is continuing negotiations on more purchases, which are believed to be more focused on EU origin.
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. Grain Stocks — NASS
- 11:00 a.m. Small Grains Summary — NASS
- 2:00 p.m. Dairy products: Per capita consumption (Annual) — ERS
- 2:00 p.m. Milk: Supply and utilization of all dairy products (Annual) — ERS
- 2:00 p.m. Per capita consumption of selected cheese varieties (Annual) — ERS
- 2:00 p.m. Agricultural Prices — NASS
- 2:00 p.m. Peanut Prices — NASS
- 2:30 p.m. Commitments of Traders — CFTC