Dominant Xi Follows China Party Congress as Loyalists Prevail in Key Positions

CFTC launches new Commitments of Traders reports | U.S. slams Russia over ‘dirty bomb’ claims

Xi Jinping’s re-election saw Chinese stocks listed in the U.S. fall as Xi clinched a third term and promoted his allies to key roles. The six men on China’s top decision-making body, the Politburo Standing Committee, are seen as Xi Jinping loyalists. Some economists fear a further erosion of checks on the power of Xi, who has overseen expansion of state control over the economy. The Hang Seng fell 6% as Premier Xi emerged from China’s confab with an even tighter grip on power, ensuring continued “zero Covid” policies and heightened tensions with the West. Delayed GDP figures released Sunday showed weak quarterly growth. Meanwhile, China won’t have a woman sitting on its Politburo for the first time in 25 years.

Rishi Sunak is the favorite to become the next U.K. prime minister. Boris Johnson’s decision to sit out the race cleared the former finance minister’s path to Downing Street — see The Week Ahead for more. Sunak was Johnson’s former finance minister and had finished second to Liz Truss in their race during the summer after pushing back on her economic plans, which called for steep tax cuts. Markets rebelled once her government proposed such an economic package as Britain contended with a cost-of-living crisis and high levels of wealth inequality, and Truss resigned. Now investors are looking to Sunak for stability. At age 42, Sunak would be the youngest prime minister in more than 200 years and the country’s first South Asian leader.

U.S. slams Russia over ‘dirty bomb’ claims. Russian authorities have been spreading claims that Ukraine is preparing to use a so-called dirty bomb, a device that can poison a region with radioactivity without a nuclear explosion. U.S. Secretary of State Antony Blinken and other critics denounced Russia’s “transparently false” message as a pretext for potential escalation as Vladimir Putin’s ground forces lose ground to Ukraine’s military.

Election Day 2022 is 15 days away. Election Day 2024 is 744 days away.

Equities today: Global stock markets were mixed overnight, with European shares mostly up and Asian shares mostly down. U.S. stock indexes are pointed to firmer openings. Chevron Corp. and ExxonMobil Corp. are set to hold their third-quarter earnings calls back-to-back on Friday. In Asia, Japan +0.3%. Hong Kong -6.4%. China -2%. India closed. In Europe, at midday, London -0.4%. Paris +0.5%. Frankfurt +0.5%.

U.S. equities Friday: The Dow added 748.97 points, 2.5%, to 31,082.56. The S&P 500 added 86.97 points, 2.4%, to 3,752.75. The Nasdaq added 244.87 points, 2.3%, to 10,859.72. Major indexes turned higher, and Treasury yields paused their climb as the Wall Street Journal reported that Federal Reserve officials are set to raise interest rates by 0.75 percentage point at their Nov. 1-2 meeting but are poised to debate shifting to a smaller increase in December. The yield on the 10-year Treasury note ended the week at 4.212%, near its highest levels of the past decade. The yield on the two-year Treasury note, which is typically more sensitive to interest-rate expectations, also slipped Friday, ending the week at 4.489%.

For the week, the S&P 500 and Dow gained 4.7% and 4.9%, respectively, while the Nasdaq rose 5.2%.

Agriculture markets Friday:

• Corn: December corn futures rose 1/4 cent to $6.84 1/4, a decline of 13 1/2 cents for the week.
• Soy complex: November soybeans rose 4 cents to $13.95 1/2, the highest close since Oct. 13 and up 11 3/4 cents for the week. December soymeal rose $4.60 to $417.90. December soyoil rose 108 points to 71.50 cents, a four-month closing high.
• Wheat: December SRW wheat rose 1 1/2 cents to $8.50 3/4, down 9 cents for the week. December HRW futures fell 1 1/2 cents to $9.48 1/4, down 4 cents for the week. December spring wheat slipped 1 cent to $9.61 1/2.
• Cotton: December cotton rose 173 points to 79.13 cents after earlier dropping to the lowest level since late 2020. The contract fell 402 points for the week.
• Cattle: October live cattle gained 70 cents to $150.475, the highest close for a nearby contract since August 2015. December live cattle rose 75 cents to $152.425, a lifetime-high close for the contract. November feeder cattle rose 80 cents to $178.35, up $3.575 for the week.
• Hogs: December lean hogs rose $2.10 to $89.125, the contract’s highest close since Aug. 15 and a weekly gain of $6.875. Friday’s CME lean hog index was $93.76 and the benchmark is expected to rise another 29 cents Monday.
  

Ag markets today: Grain and soy futures faced pressure from weak outside markets overnight. As of 7:30 a.m. ET, corn futures were trading 3 to 4 cents lower, soybeans were mostly 12 to 13 cents lower and wheat futures were 4 to 6 cents lower. Front-month crude oil futures was around $1 lower, and the U.S. dollar index was around 400 points higher.

On tap today:

• Chicago Fed National Activity Index comes out at 8:30 a.m. ET.
• S&P Global purchasing managers index for manufacturing and services is out at 9:45 a.m. ET.
• USDA Grain Export Inspections, 11 a.m. ET.
• USDA Cold Storage report, 3 p.m. ET.
• USDA Crop Progress report, 4 p.m. ET.

CFTC launches new Commitments of Traders reports. The Commodity Futures Trading Commission launched new features for the widely popular Commitments of Traders (COT) reports. These new features offer easy to locate historical data as part of a modernization initiative intended to improve data access, CFTC said. The traditional weekly report will still be available on the CFTC’s website. The new environment gives users the flexibility to access the COT reports in the traditional format they are familiar with or utilize new enhanced capabilities.

Link: COT Public Reporting Environment (PRE)

Link: PRE User Guide

Link: PRE Frequently Asked Questions (FAQs)

Link: Additional information on the Commitments of Traders reports

Link: View the press release in full.

Eurozone economic contraction deepens in October. The S&P Global Composite PMI dropped to 47.1 in October, the lowest since November 2020, and below the market consensus of 47.5, pointing to a 4th consecutive decline in business activity. Excluding pandemic lockdown months, manufacturing and energy-intensive sectors shrank the most since July 2012 due to a surge in energy costs, while services contracted the most since May 2013, amid the ongoing cost of living crisis and economic uncertainty.

Market perspectives:

• Outside markets: The U.S. dollar index was higher despite most currencies being firmer against the greenback ahead of U.S. market action. The yield on the 10-year U.S. Treasury note was weaker, around 4.17%, with a mostly lower tone in global government bond yields. Crude is under pressure, with U.S. crude around $84 per barrel and Brent around $92.80 per barrel. Gold and silver futures were narrowly mixed, with gold weaker around $1,654 per troy ounce and silver firmer around $19.18 per troy ounce.

• EU natural gas price falls. Natural gas futures linked to TTF, Europe’s wholesale gas price, touched €100 per megawatt-hour on Monday, a new low since early June and about 70% down from the highs of August as fears over shortages in winter eased again. The weather in Europe is expected to remain milder than usual for this time of the year until the end of the month. Meanwhile, ample supplies of LNG allowed Europe’s gas storage sites to get filled with Germany’s stockpile rate reaching 96%. Finally, the European Union governments last week came together to back urgent measures to tackle the high cost of energy, including a price cap, on top of a plan to set up joint natural gas purchases.

• Demand concerns equal oil price declines. WTI crude futures bottomed below the $84 per barrel level on Monday as fears about a potential global recession-driven demand downturn continued to hang over the market. Investors have been growing worried about a deteriorating outlook for growth amid intensifying macro headwinds, including high inflation and tighter financial conditions. Meanwhile, Chinese customs data showed that demand from the world’s largest crude importer remained subdued in September as persistent coronavirus-induced restrictions and fuel export curbs suppressed consumption. A looming European Union ban on Russian crude also exacerbated concerns about tight supplies.

• The Mississippi River, a vital commercial transportation highway, is drying up. And industries don’t have many alternatives. In a video report (link), the WSJ explains how this happened and what it means for U.S. agriculture, oil and tourism.

• Ag trade: Saudi Arabia purchased 566,000 MT of optional origin milling wheat. Iraq pushed back the closing date on it tender to buy a nominal 50,000 MT of optional origin wheat to Oct. 30. Algeria tendered to buy a nominal 50,000 MT of soft milling wheat.

• NWS weather: There is a Slight Risk of excessive rainfall over parts of the Southern Plains and Middle/Lower Mississippi Valley through Tuesday morning... ...There is a Slight Risk of severe thunderstorms over parts of the Southern Plains on Monday moving to the Lower Mississippi Valley/Tennessee Valley on Tuesday into Wednesday... ...Temperatures will be 10 to 20 degrees above average over parts of the Great Lakes/Ohio Valley... ...Snow for parts of the Cascades and the Northern Rockies.

Items in Pro Farmer’s First Thing Today include:

• Price pressure to start the week
• Ukraine again accuses Russia of delaying grain shipments (details below)
• China’s September soybean imports increase (details in China section)
• Neutral Cattle on Feed report
• Cold Storage report out this afternoon
• Bullish cash cattle hopes
• Cash hog index continues to firm

— Heading off Russia.: The U.S., U.K. and France rejected Russia’s allegation that Ukraine is preparing to use a “dirty bomb” on its own territory, which involves conventional explosives spreading radioactive material. They urged Moscow not to use the claim as a pretext to escalate a war that’s entering its ninth month, saying the world would “see through” any attempt to do so.

• Ukraine again accuses Russia of delaying grain shipments. Ukraine accused Russia of blocking the full implementation of the Black Sea grain deal. “Russia is deliberately blocking the full realization of the Grain Initiative. As a result, these (Ukrainian) ports in the last few days are working only at 25% to 30% of their capacity,” Ukraine’s infrastructure ministry said in a statement via the Telegram messaging app. The United Nations is calling for “urgent measures to be taken” to prevent shipping delays.

  Meanwhile, Russian Foreign Minister Sergei Lavrov said Moscow has asked the United Nations for data on the destination and end-users for Ukrainian grain shipments, saying that “corrections” to a deal would depend on this information.

  Since July 1, Ukraine has exported nearly 12 MMT of grain, according to the country’s ag ministry, down 33.4% from the same period last year. The exports included 6.29 MMT of corn, 4.49 MMT of wheat and 1 MMT of barley.

— Pelosi: No regrets on Covid aid that GOP links to inflation. House Speaker Nancy Pelosi (D-Calif.) said she doesn’t regret pandemic aid passed by Democrats to boost the U.S. economy and advised her party’s midterm candidates to focus on the Biden administration’s efforts to curb inflation. “No, absolutely not, because that was necessary for people to survive,” Pelosi said on CBS’s Face the Nation. “The point is that when you reduce unemployment, it’s inflationary. That is a fact.” In a letter to fellow Democratic lawmakers on Saturday, she urged her party to focus campaigning on “kitchen table” issues and steps to reduce inflation, which is cutting into Americans’ purchasing power ahead of the midterm elections. Pelosi said House Democrats should tell voters what they have already done to ease the burden of inflation and what they’ll do if they return to power in the next Congress. “The fight is not about inflation, it’s about the cost of living,” she said on Sunday.

— Pro Farmer’s new farm bill primer is included in a link at the bottom of this dispatch.

— Biden designates Logan FCA chair. President Biden on Friday designated Vincent Logan, the newest member of the Farm Credit Administration board, as chairman and CEO of the FCA. A member of the Osage Nation, Logan is the first Native American to serve on the FCA board. Logan was sworn in as a member of the FCA board and as a member of the board of directors of the Farm Credit System Insurance Corporation (FCSIC) on Oct. 13 after being confirmed by the Senate. As chairman and CEO, Logan succeeds Glen R. Smith, who has served as FCA board chairman and CEO since July 17, 2019. Smith, whose board term expired on May 21 of this year, will remain a member of the FCA board until a successor has been named to his board position. The other member of the FCA board is Jeffery Hall, who is serving a term that expired on Oct. 13, 2018. He will continue to serve until his successor has been named.

— IRS Commissioner Charles Rettig has less than three weeks left in his term, and President Biden hasn’t nominated a successor to spearhead the agency’s $80 billion expansion.

— China’s economy grew 3.9% in the third quarter, as the country bounced back modestly from Covid lockdowns in the spring. The third quarter data was delayed from a scheduled Oct. 18 release. Economists believe officials wanted to avoid overshadowing the Communist Party gathering.

— Taiwan is stocking up on natural gas and coal in anticipation of more military action from Beijing, Reuters has reported (link), citing a Taipei government official. In case of a Chinese attack on the island or a blockade, Reuters wrote, the Taiwan government wanted to boost its resilience since it is almost completely dependent on imports for its energy demand. “When it does happen, we need to be able to undertake pressure to a certain degree,” Tseng Wen-Sheng, a deputy economy minister, told Reuters. Taiwan depends on imports for some 98% of its energy consumption, with coal and natural gas accounting for 81.5% of electricity generation on the island. Nuclear provides another 9.6% and wind and solar contribute another 6%.

This month, the chief of the U.S. Navy warned (link) that China could attack Taiwan by the end of the year and the U.S. must be ready to respond to this attack. “When we talk about the 2027 window, in my mind that has to be a 2022 window or potentially a 2023 window,” Admiral Mike Gilday told the Atlantic Council last week, as quoted by the Financial Times. “I don’t mean at all to be alarmist… it’s just that we can’t wish that away.”

Beijing has blamed the U.S. for the escalation between China and Taiwan. President Xi Jinping said this weekend that if China is compelled to attack Taiwan, it would be because of “external forces.”

— China’s exports to many of its largest trade markets contracted in September, more evidence of a slowdown in global demand despite a better-than-expected headline figure. Exports to the US plunged 11.6% last month from a year ago, falling faster than the 3.8% drop in August, data from the General Administration of Customs showed.

— China’s September soybean imports increase. China imported 7.72 MMT of soybeans in September, up 840,000 MT (12.2%) from August and 550,000 MT (7.7%) more than last year. Imports were slightly higher than expected amid increasing urgency to rebuild stockpiles. Through the first nine months of the year, China imported 69.04 MMT of soybeans, down 6.6% from the same period last year.

— China’s pork imports increased in September. China imported 150,000 MT of pork in September, up 10,000 MT (7.1%) from August but down 54,000 MT (26.5%) from last year. Through the first nine months of this year, China imported 1.22 MMT of pork, down 61.2% from the same period last year.

— China’s Q3 pork production inches up. China’s third-quarter pork output totaled 12.11 MMT, up by less than 1% from the same period last year. China’s pork output totaled 41.5 MMT in the first nine months of the year, up 5.9% from last year. But the growth rate of China’s pork production has slowed recently since increasing every quarter year-on-year for the last two years, as some farmers reduced their breeding herds after months of low hog prices and high feed costs eroded profits. China’s pig herd totaled 443.94 million head at the end of September, up 1.4% from last year.

— USTR rejects Florida lawmakers’ request to investigate Mexican produce imports. The Office of the U.S. Trade Representative (USTR) on Sunday said it would not open an investigation into Mexican fruit and vegetable imports into the United States. USTR said some members of Florida’s congressional delegation filed the Section 301 petition on Sept. 8 alleging that the government of Mexico has adopted an “export targeting” scheme aimed at Florida produce.

USTR said, “The 301 statute requires that USTR make a decision on whether to move forward with an investigation within 45 days. The statute also includes a private-sector advisory panel as a specific response to export targeting… Although USTR could not conclude in the 45-day statutory period that a formal 301 investigation would be effective and is not opening an investigation at this time, USTR is moving forward with an advisory panel, and USTR and USDA will work with the petitioners and producers to examine the issues raised in the petition and to consider any further actions that may be appropriate.”

USTR added, “The Biden administration recognizes that Southeast producers have faced challenges, which have only intensified since Hurricane Ian made landfall earlier this month. USTR will establish a private-sector industry advisory panel to recommend measures to promote the competitiveness of producers of seasonal and perishable produce in the southeastern United States.”

USTR said it will publish a formal notice in the Federal Register summarizing its response to the petition.

Jim Bair, president and CEO of the U.S. Apple Association, said in a news release, “The U.S. apple industry is relieved by the U.S. Trade Representative’s decision to reject the 301 Investigation on imported fruits and vegetables from Mexico… A Section 301 investigation could have been followed by tariffs on imported produce and, in turn, retaliatory tariffs from Mexico. That has happened in the past where U.S. apples were the targets of retaliation. We acknowledge that other sectors of the fresh produce industry are facing their own difficult challenges, but the U.S. Trade Representative came to the correct conclusion, and we are thankful.”

— House Dems join list of those pushing for farmer exemption from SEC climate-reporting rules. A group of House Democrats wrote Securities and Exchange Commission (SEC) Commissioner Gary Gensler (link) and called on the agency to exempt small farmers from proposed climate disclosures under consideration.

The lawmakers want SEC to continue using estimated greenhouse gas (GHG) emissions relative to small- and medium-sized farmers. “Rather than placing additional burdens on small and mid-sized farmers, we should continue to allow the usage of emissions estimates,” the lawmakers said. They also called on the SEC to shield small businesses from the reporting requirements out of concern over potential liability issues. They argued those worries “may also be leading these large companies to go beyond what is required, and press their suppliers for detailed information that small businesses and independent farmers may not be able to provide. That could lead to a preference for larger suppliers, and make it even harder to operate as a small business, which is the last thing any of us should want. Accordingly, we would ask that you clarify the safe harbors from liability to further protect our farms and small businesses.”

The SEC keeps saying their proposed rule would not require farmers to calculate and report emissions unless they are public companies. The SEC continues to work on the controversial rules.

— Summary:

• Global Covid-19 cases at 627,631,619 with 6,578,440 deaths.
• U.S. case count is at 97,198,630 with 1,067,686 deaths.
• Johns Hopkins University Coronavirus Resource Center says there have been 632,905,664 doses administered, 265,591,330 have received at least one vaccine, or 80.61% of the U.S. population.

— CDC Director Rochelle Walensky tests positive for Covid-19. Rochelle Walensky, director of the Centers for Disease Control and Prevention (CDC), has tested positive for Covid-19, the agency said. Dr. Walensky is up to date with her Covid-19 vaccinations and is experiencing mild symptoms, the CDC said on Saturday. She is isolating at home per CDC guidelines and plans to participate in coming meetings virtually, the agency said. The CDC said senior staff and close contacts have been notified since she tested positive on Friday.

— Pfizer set a hefty price tag for its Covid-19 vaccine in the U.S. Once it becomes commercially available, a dose will cost $110 to $130 — a hundred times more than its estimated manufacturing costs. Moderna has also said it expected to charge $100 per dose for its vaccine, which was initially priced at $16.50.

WASDE | Crop Production | USDA weekly reports | Crop Progress | Food prices | Farm income | Export Sales weekly | ERP dashboard | California phase-out of gas-powered vehicles | RFS | IRA: Biofuels | IRA: Ag | Student loan forgiveness | Russia/Ukraine war, lessons learned | Election predictions: Split-ticket | Congress to-do list | SCOTUS on WOTUS | SCOTUS on Prop 12 | New farm bill primer |