Mortgage Rates Above 7% Significantly Impacting U.S. Housing Market

Husband of House Speaker Nancy Pelosi ‘violently assaulted’ by assailant at home

USDA daily export sales: 126,000 metric tons of soybeans to China during the 2022-2023 marketing year; 198,000 metric tons of soybeans for delivery to Spain during the 2022-2023 marketing year.

Russia continued its assault on Ukraine’s electric grid and threatened to target U.S. satellites.

Kyiv residents face prolonged blackouts after Russian airstrikes hit Ukraine’s electric system again overnight, and Russia said it could target U.S. commercial satellites if they are used to help Ukraine. That expands its threats of reprisals to a new theater that could hit closer to home for American interests.

U.S. mortgage rates surpass 7%. Rates for the average 30-year fixed mortgage have now reached their highest level since 2002, according to a survey by Freddie Mac. That’s likely to put further pressure on the housing market, which is already in the midst of a slowdown.

The Bank of Japan keeps rates ultralow. Japan’s central bank left rates unchanged, making it an outlier in not moving them higher to curb inflation. The yen continued to weaken against the dollar; analysts think it could reach a three-decade low despite interventions by the Japanese government.

The IMF cut its forecast for economic growth in Asia this year, from 4.3% to 4%. The fund said that a myriad of factors were weighing on the region, including rising interest rates and inflation, an unrelated slowdown in China and the war in Ukraine. The region grew by 6.5% in 2021.

High anxiety about a rail strike is growing. Details in Market section.

Husband of House Speaker Nancy Pelosi ‘violently assaulted’ by assailant at home, her office says. Details below.

Twitter takeover complete, Elon Musk started firing. After the deal closed, Musk fired Twitter’s CEO, CFO, general counsel and top legal and policy executive. Hours later he tweeted “the bird is freed,” a seeming reference to Twitter’s bird logo. As he takes Twitter private again, Musk has pledged to limit content moderation in favor of free speech. But that risks conflict with some users, politicians — and advertisers. He sent advertisers a message assuring them Twitter won’t be a “free-for-all hellscape.”

Election Day 2022 is 11 days away. Election Day 2024 is 740 days away.

Equities today: Global stock markets were mixed while the U.S. Dow opened up around 160 points higher and is currently slightly over 400 points higher. In Asia, Japan -0.9%. Hong Kong -3.7%. China -2.3%. India +0.3%. In Europe, at midday, London -0.4%. Paris -0.4%. Frankfurt -0.7%.

Exxon Mobil smashed expectations as soaring energy prices fueled a record-breaking quarterly profit, nearly matching that of tech giant Apple.

Amazon shares plunged 18% to less than $90 in after-hours trading, pushing the stock to its lowest level since early 2020, and rendering the company the latest casualty of an earnings season that has tanked the value of some of technology’s biggest players. Meanwhile, the National Labor Relations Board filed a complaint against Amazon CEO Andy Jassy, alleging that he broke federal labor laws by making comments in recent television interviews that workers could be negatively impacted by unions.

Phillies recession indicator. If the Philadelphia Phillies win the World Series, watch out. The WSJ reports (link) that over the past century economic crises tend to follow a successful season by Philadelphia’s baseball team. The city’s championship in 1929 preceded the Great Depression. Then in 1980, they won again, a victory marred by recession. They last won the World Series in 2008. Now they’re back to take on the Houston Astros, who are favored to win.

U.S. equities yesterday: The Dow rose 194.17 points, 0.61%, at 32,033.28, after the better-than-expected GDP update, but finished near its session lows. The Nasdaq and S&P 500 were battered by tech earnings, with the Nasdaq ending down 178.32 points, 1.63%, at 10,792.67. The S&P 500 lost 23.30 points, 0.61%, at 3,807.30.

Agriculture markets yesterday:

• Corn: December corn fell 2 3/4 cents to $6.82 1/4.
• Soy complex: November soybeans rose 1/2 cent to $13.82 1/4. December soymeal gained $6.70 to $415.40, while December soyoil fell 112 points to 72.30 cents.
• Wheat: December SRW wheat fell 2 cents to $8.38 1/2 and December HRW wheat fell 8 1/2 cents to $9.32 1/4. December spring wheat fell 1 1/2 cents to $9.50 1/2.
• Cotton: December cotton fell 271 points to 75.11 cents, the lowest settlement for a nearby contract since December 2020.
• Cattle: December live cattle fell 15 cents to $153.425. January feeders fell 80 cents to $180.45. Live steers in five major feedlot areas averaged $150.49 through Thursday morning, up 42 cents from last week’s average. Choice beef cutout values edged up 48 cents to $261.34, near an eight-week high of $261.43 posted Tuesday.
• Hogs: December lean hogs fell $3.375 to $85.125, the contract’s lowest close since Oct. 17. The CME lean hog index fell 34 cents to $94.47 but continues to track near a four-week high.
  

Ag markets today: Grain and soy complex futures were pressured overnight by outside markets and concerns about demand. As of 7:30 a.m. ET, corn futures were trading 2 to 3 cents lower, soybeans were mostly 6 to 8 cents lower, SRW wheat futures were 5 to 6 cents lower, HRW futures were 8 to 10 cents lower and HRS wheat was 2 to 3 cents lower. Front-month crude oil futures were around 65 cents lower, and the U.S. dollar index was around 100 points higher.

Technical viewpoints from Jim Wyckoff:

Mortgage rates topped 7% for the first time in 20 years. The average rate on a 30-year fixed mortgage rose to 7.08% this week, up from below 6% seven weeks ago. By one measure, the percentage rise over the past several weeks has been the fastest on record, going back half a century — a destabilizing pace, mortgage lenders and real-estate agents say.

BOJ leaves rates unchanged despite higher inflation outlook. The Bank of Japan (BOJ) on Friday maintained its ultralow interest rates as widely expected, going against a global trend of aggressive monetary tightening, as it attempts to navigate what it sees as a temporary inflation amid higher commodity prices and a weak yen. Reflecting the impact of rising import costs of energy, raw materials and other goods, BOJ revised upward its core consumer inflation outlook for the current fiscal year to next March to 2.9% from its earlier projection of 2.3%.

Meanwhile, Japan’s government on Friday unveiled a new stimulus package to ease the pain of inflation, with spending worth 39.0 trillion yen ($265 billion) that it said would boost gross domestic product (GDP) by around 4.6%.

Britain weighs $57 billion in tax increases and spending cuts. The country’s new (and wealthy) prime minister, Rishi Sunak, is exploring ways to raise 50 billion pounds to help fill a hole in public finances. That figure could come down if the Bank of England persuades markets that it can fight inflation while raising interest rates by less than expected, The Financial Times reports (link).

Germany’s consumer price inflation rose further to 10.4% year-on-year in October 2022, a new all-time high and above market expectations of 10.1%, lifted by euro weakness, a deepening energy crisis and the continuing supply chain interruptions. The goods inflation increased to 17.8% from 17.2% in September, led by high energy prices (43.0% vs 43.9%) and a sharp acceleration in food inflation (20.3% vs 18.7%). In addition, prices of services advanced at a faster 4.0%, compared with 3.6% in September, with the rents inflation picking up to 1.8% from 1.7%. On a monthly basis, consumer prices were up 0.9% in October, also above market consensus of 0.6%.

IMF cuts Asian economic forecasts. The International Monetary Fund (IMF) cut Asia’s economic forecasts as global monetary tightening, rising inflation and China’s sharp slowdown dampened the region’s recovery prospects. IMF now forecasts Asia’s growth at 4.0% this year and 4.3% next year, down 0.9 point and 0.8 point from its previous outlook. The region’s economies grew a collective 6.5% in 2021.

“Asia’s strong economic rebound early this year is losing momentum, with a weaker-than expected second quarter,” the report said. “Further tightening of monetary policy will be required to ensure that inflation returns to target and inflation expectations remain well anchored. As the effects of the pandemic wane, the region faces new headwinds from global financial tightening and an expected slowdown of external demand.”

IMF expects China’s growth to slow to 3.2% this year, a 1.2-point downgrade from its April projection, after an 8.1% rise in 2021. China’s economy is expected to grow 4.4% next year and 4.5% in 2024, IMF said.

Market perspectives:

• Outside markets: The U.S. dollar index was firmer. The yield on the 10-year U.S. Treasury note was firmer ahead of economic data, trading around 4.0% amid a mixed tone in global government bond yields. Crude remains lower, with U.S. crude around $88.20 per barrel and Brent around $94.30 per barrel. Gold and silver futures were lower, with gold under $1,653 per troy ounce and silver under $19.26 per troy ounce.

• High anxiety, again, over potential rail strike. Two rail labor unions have rejected a proposed agreement reached between union and railroad negotiating parties in September. Both the Brotherhood of Maintenance of Way Employees (BMWED) and the Brotherhood of Railroad Signalmen (BRS) have voted against the deal. They have agreed to not strike until five days after Congress reconvenes. If Congress reconvenes on Nov. 14, as currently scheduled, then a strike could occur after Nov. 19. Others say failure to agree on a revised deal could result in a walkout as early as December. “Railroaders are discouraged and upset with working conditions and compensation and hold their employer in low regard,” said BMWED President Tony Cardwell in an Oct. 10 statement. “The result of this vote indicates that there is a lot of work to do to establish goodwill and improve the morale that has been broken by the railroads’ executives and Wall Street hedge fund managers.”

Of the 12 labor unions involved in bargaining, six have ratified their agreements. Two of the largest unions, the Brotherhood of Locomotive Engineers and Trainmen and the Transportation Division of the International Association of Sheet Metal, Air, Rail, and Transportation Workers, are still in the process of ratification and are expected to announce results in mid-November, right after a standstill agreement to forestall strikes or a management lockout expires.

Meanwhile, the National Railway Labor Conference, which represents rail carriers, issued a press release indicating they are not interested in moving beyond the recommendations of the Presidential Emergency Board (PEB). “The PEB’s recommendations were crafted by a panel of experts…They remain the framework for agreements with BRS and all other labor organizations in national bargaining.”

• Railroad profits surge. Canadian National Railway raised its annual profit outlook after third-quarter revenue jumped 26%. Canadian Pacific Railway’s third-quarter revenue rose 19% on strong gains in potash and intermodal transports.

• The Port of Houston will impose a fee for long-dwelling containers at port docks.

• U.S. diesel supplies are becoming critically low with shortages and price spikes likely to occur in the next six months unless and until the economy and fuel consumption slow.

• Signs of some improvement in the world of fertilizers, as lower prices of gas — a key feedstock — encourage producers to restart production at European plants. About 47% of the region’s ammonia capacity is now offline, down from 70% in September, the International Fertilizer Association said. That should make it a bit easier for farmers to get hold of crucial nutrients. But in the U.S., growers have to contend with drought across the key crop. U.S. farmers may pull back on ammonia use this quarter due to the crop nutrient’s premium price tag, dry soil conditions across the Midwest and expectations of lower prices into the second quarter, Bloomberg Intelligence says.

• Farmers in Brazil are gambling on La Nina to boost profits, Bloomberg reports (link). Advanced sales for the next soy crop are halted as farmers await higher prices, according to an analyst at consulting firm Safras & Mercado. Growers are betting that a third consecutive year of La Nina may cause drought losses in Brazil’s far south and in Argentina, boosting futures prices.

• Ag trade: South Korea purchased 134,000 MT of corn expected to be sourced from South America or South Africa.

• NWS weather: A low pressure system will bring a quick round heavy rain and possibly severe thunderstorms across the southern Plains into the lower to mid-Mississippi Valley during the next couple of days... ...Approaching frontal system will spread rain and high elevation snow into the Pacific Northwest.

Items in Pro Farmer’s First Thing Today include:

• Price pressure overnight
• Russia lowers wheat export tax
• Rains bring some relief to crops in Argentina
• Fed on track for tens of billions in losses amid inflation fight
• China continues its soybean auctions
• Indonesia to raise palm reference price, export tax
• Strong gains in cash cattle
• December hogs sharply extend discount to cash index’

— Summary: Russian President Vladimir Putin said Thursday he doesn’t think it would be necessary to use nuclear weapons. “We see no need for that,” Putin said. “There is no point in that, neither political, nor military.” President Joe Biden, however, declined to take Putin at his word. “If he has no intention, why does he keep talking about it? Why is he talking about the ability to use a tactical nuclear weapon?” Biden said during an interview with NewsNation. The exchange comes as Russia alleges that Ukraine would use a so-called dirty bomb, a traditional explosive device equipped with radioactive material, in its fight against the Kremlin’s invaders. Ukrainian and Western officials have dismissed the claim as a potential pretext for escalation. Bottom line: Putin showed no regrets for the war against Ukraine, insisting it was going to plan and playing down any nuclear standoff with the West, while both sides prepared for what could be a key battle in Kherson in Ukraine’s south. Putin had a familiar litany of grievances against “Western opponents” as he addressed a conference in Moscow, accusing the West of inciting the war and of playing a “dangerous, bloody and dirty” game that was sowing chaos. Meanwhile, a Russian official’s threat this week to “strike” Western satellites aiding Ukraine highlights an untested area of international law, raising concerns among space lawyers and industry executives about the safety of objects in orbit.

• Russia says small fraction of Ukraine grain exports going go to needy countries, detailing that only 3% of food shipped from Ukrainian ports since the grain export deal was signed has gone to the poorest countries, while Western countries account for half of all shipments. “The geography of the recipients of these cargoes has turned out to be completely inconsistent with the initially declared humanitarian objectives,” the country said in a statement. “Needy states such as Somalia, Ethiopia, Yemen, Sudan, (and) Afghanistan have received just 3% of food, mostly from the World Food Program.” Russian officials have said they need to be assured grain shipments will go to the poorest countries and sanctions against Moscow must be eased before they will agree to an extension.
• Ukraine’s president, Volodymyr Zelenskyy, said that Russia has launched more than 30 drone strikes in the past two days. Western officials believe that the deployed “kamikaze” drones are being supplied by Iran, although the country denies it. Zelenskyy said that Ukraine has endured 4,500 missile strikes and more than 8,000 air raids, but pledged to “clip the wings” of the Kremlin’s air forces.
  

— Senate panel said to plan Nov. 15 hearing for FERC chair’s renomination. The Senate Energy and Natural Resources Committee could take up Federal Energy Regulatory Commission Chair Richard Glick’s renomination as soon as Nov. 15, two people familiar with the matter told E&E News, as the chair’s five-year term is set to expire at the end of this year. Glick’s renomination hearing, which would likely need Senate approval from all 50 Democrats, has been put off by committee Chair Joe Manchin (D-W.Va.), but inaction from the Senate would leave the commission evenly split 2-2 between Democrats and Republicans at a time when the Biden administration needs to move quickly on clean energy development to meet its climate goals.

— Progressive advocacy group Public Citizen sent a letter to 10 legislative leaders, the Federal Trade Commission and the Committee on Foreign Investment in the United States to launch an investigation after a Forbes report (link) that a China-based team at TikTok parent ByteDance planned to use the TikTok app to surveil specific American citizens without their knowledge or consent. Public Citizen lends a prominent liberal voice to growing bipartisan concern about the app’s risks to user privacy.

— More cities are reporting outbreaks and lockdowns, particularly in Xining, Lhasa and Zhengzhou, but China watchers say it is very hard to get a clear picture as there are likely some deficiencies with the reported data in at least some areas. Apple should be concerned about the outbreak at the Zhengzhou Foxconn facility, both in terms of making sure Foxconn is taking care of its workers and about how it may impact production.

— Mexico to proceed with GMO corn ban. Mexico doesn’t plan to amend its ban on GMO corn imports that starts in 2024. Deputy Agriculture Minister Victor Suarez told Reuters (link) Mexico is on track to halve its U.S. imports of yellow corn via increased domestic production and will look to make direct deals with farmers in the U.S., Argentina and Brazil who produce non-GMO corn to secure the remaining supplies. “There are many alternatives to importing non-GMO yellow corn from the United States,” Suarez said.

This appeared to reverse assurances Ag Minister Victor Villalobos made to USDA Secretary Tom Vilsack last year, that Mexico would not limit imports of GMO corn from the United States. Suarez said he did not believe Mexico’s decree presented any violation of the U.S.-Mexico-Canada Agreement (USMCA), saying the country was “under no obligation to buy and grow GM corn.”

Pressure on Biden administration continues to come for them to launch a complaint under the USMCA over Mexico’s crop provisions that U.S. lawmakers and U.S. corn growers fear could lead to them losing an important marke. Meanwhile, Sen. Chuck Grassley (R-Iowa) again tweeted on the issue. “It’s long overdue for Pres Biden & USTR to use USMCA to challenge Mexico on their threat of banning GMO corn + start believing what Mexico has been saying all along Pres Biden stop being weak This game of chicken will cost Iowa farmers big time,” he said on Twitter. The U.S. has challenged Canada’s implementation of dairy tariff rate quotas (TRQs) under USMCA, winning a decision via dispute settlement provisions, but the U.S. has also charged that Canada’s subsequent action to resolve the situation still did not meet terms of USMCA.‘

— RFS set timeline nears. The Nov. 16 court-negotiated deadline for EPA to propose the Renewable Fuel Standard (RFS) proposed levels for 2023 is fast approaching, and the so-called “set” rule has not yet been forwarded to the Office of Management and Budget (OMB) for review. OMB can take up to 90 days to review a regulation sent forward from an agency. OMB also typically holds meetings with stakeholders on rules.

— European Union struck a deal on a law to effectively ban the sale of new gasoline and diesel cars from 2035, aiming to speed up the switch to electric vehicles and combat climate change.

— Restaurants hit a short order timeline. Despite restrictions being lifted nationwide, restaurants are open an average of 6.4 hours less than they were in October 2019, according to a Datassential study. There are a few key reasons, the study says. Among them: Restaurants are having trouble staffing for longer hours, and workers are returning to offices on hybrid schedules, meaning more time at home and less time out. It’s even worse for independently owned restaurants, which have lost 7.5 hours weekly, compared to chains that have more than 501 locations, which cut hours by an average of 4 hours a week.

— Summary:

• Global Covid-19 cases at 629,604,231 with 6,587,115 deaths.
• U.S. case count is at 97,414,382 with 1,070,064 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.

— Arizona Senate race shifts back to toss up. According to Jessica Taylor of the Cook Political Report with Amy Walter: “As the overall environment continues to improve in the Republicans’ direction, the closer we get to Election Day, just 11 days out, we are shifting another race rating in the GOP’s direction. A month after we initially moved Arizona Sen. Mark Kelly into the Lean Democratic column, the race now goes back into Toss Up amid a spate of tightening private polling that has left Democrats worried about one of their strongest incumbents.”

— More than 13.8 million pre-election ballots have been cast in 44 states ahead of the 2022 midterms, according to data from election officials. With several competitive statewide races less than two weeks away, Florida has the largest number of pre-election ballots cast, at more than 1.9 million. Texas, California and Georgia each have also seen more than 1 million ballots cast.

— Trump’s taxes. An appeals court has cleared the way for the IRS to turn over Donald Trump’s tax returns to the House Ways and Means Committee. The case is one of several long-running lawsuits where the Democratic-led House is trying to access years of financial records related to Trump, especially his tax returns. The Supreme Court could still intervene if Trump appeals.

— Cotton AWP declines again. The Adjusted World Price (AWP) for cotton eased to 68.95 cents per pound, effective today (Oct. 28), down from 73.76 cents per pound the prior week and the lowest since it was at 67.77 cents per pound the week of May 28, 2021. The AWP still remains 16.95 cents above the national average loan rate that would trigger marketing loan benefits. Cotton futures prices fell to their lowest level since December 2020.

— Rural areas to get $759 million in grants for high-speed internet. USDA, dubbed the “Department of Announcements,” announced Thursday it is making available $759 million in grants and loans to enable rural communities to access high-speed internet, part of the broader $65 billion push for high-speed connectivity from last year’s infrastructure law.

— Paul Pelosi hospitalized after violent attack at House speaker’s San Francisco home. Paul Pelosi, husband of House Speaker Nancy Pelosi, was “violently assaulted” by a suspect who broke into the couple’s San Francisco home early Friday, the speaker’s spokesperson said in a statement (link). The speaker was not in San Francisco at the time of the attack, her spokesperson Drew Hammill said in the statement released Friday. The suspect was taken into custody, and the motivation for the attack is unclear, according to the statement. Paul Pelosi, 82, was taken to the hospital following the attack and is expected to make a full recovery, according to the statement, which requested privacy for the speaker and her family.

— USDA opened registration for its 99th annual Agricultural Outlook Forum, USDA’s largest annual event. The event will be held in Arlington, Va. on Feb. 23-24, 2023, and all sessions will be livestreamed on a virtual platform. Link to program. Link to session details.

— North Korea fired two short-range ballistic missiles into waters off the east coast of the Korean Peninsula today, increasing the already high tensions in the region, South Korean military officials said. The launch was North Korea’s 28th this year, according to a CNN count, and is being viewed by South Korean officials as another “serious act of provocation” that threatens peace and stability on the peninsula.

— Musk begins Twitter ownership with firings. Elon Musk has taken ownership of Twitter, firing top executives immediately but providing little clarity over how he will achieve the lofty ambitions he has outlined for the influential social media platform. “The bird is freed,” he tweeted after he completed his $44 billion acquisition.

Meanwhile, the Securities and Exchange Commission is reportedly investigating Tesla over claims it made about its Autopilot driver assistance system, with regulators reviewing whether the automaker misled investors about the safety of the system. The civil regulatory probe is separate from a criminal investigation by the Department of Justice that’s evaluating whether Tesla oversold claims about the safety of self-driving vehicles.

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 |