First Thing Today | November 4, 2022
Good morning!
Corrective rebound overnight... Corn, soybean and wheat futures firmed overnight amid corrective buying as outside markets provided support. As of 6:30 a.m. CT, corn futures are trading 3 to 4 cents higher, soybeans are mostly 15 to 16 cents higher and wheat futures are 10 to 13 cents higher. Front-month crude oil futures are more than $3 higher and the U.S. dollar index is around 550 points lower.
China to make substantial changes to Covid policy soon... Substantial changes to China’s “dynamic-zero” Covid policy are set to take place soon, a former Chinese disease control official told a conference hosted by investment bank Citi on Friday, Reuters reported. Zeng Guang, a former chief epidemiologist at the Chinese Centre for Disease Control and Prevention who has remained outspoken on China’s Covid fight, said the conditions for China opening up were “accumulating,” citing new vaccines and progress the country had made in antiviral drug research. He said many new policies would be introduced in the next five to six months, without detailing what information he was basing this on. There’s speculation the border with Hong Kong could open early next year, with a broader relaxation of policy after the National People’s Congress, scheduled for early March. Meanwhile, Chinese health authorities will host a press conference on targeted Covid-19 prevention on Nov. 5.
Another slowdown in jobs growth expected... Economists polled by Reuters expect the Labor Department to report non-farm payrolls increased 200,000 last month, which would be down from 263,000 jobs added in September and the third straight monthly decline. The unemployment rate is expected to rise to 3.6% from 3.5% in last month’s report.
Pace of decline slows in FAO global food price index... The UN Food and Agriculture Organization (FAO) global food price index ticked down 0.1 point in October – the seventh straight monthly decline – though it was 2.7 points (5.5%) above year-ago. Declines in vegoils, meat, dairy and sugar were nearly offset by a rise in cereal grain prices. Compared to year-ago, prices were up 5.7% for meat, 15.3% for dairy and 11.1% for cereal grains, while vegoils dropped 18.8% and sugar declined 8.5%.
FAO lowers global grain production forecast... FAO lowered its 2022-23 global cereal grain production forecast by 4.9 MMT from last month to 2.764 billion MT. Most of the reduction was to wheat production, which FAO cut 3.4 MMT to 783.8 MMT, though that would still be up 4.5 MMT (0.6%) and record high. FAO forecasts global grain production will fall 50.8 MMT (1.8%) from year-ago.
Threat of a nationwide strike by U.S. freight railroad workers still looms... Two unions have rejected a proposed deal with railroads, while six have approved it. Others are still deciding, with votes of the two largest rail workers’ unions coming mid-November. The earliest a rail strike could happen is late November. All 12 unions must approve the contracts with the railroads to prevent a strike. There is no immediate threat of a walkout because the unions agreed to return to talks through at least late November to avoid an economically crippling strike. If the impasse persists, Congress may intervene and block a strike. Some of America’s top agricultural transporters are calling on congressional leaders to take swift action to avert a rail strike. A strike or lockout “would be catastrophic for the agricultural and broader U.S. economies. Congress must act to prevent this from occurring if the parties cannot reach agreement,” they said in a letter to congressional leaders.
Euro zone producer prices remain highly elevated... Euro zone producer prices rose slightly less than expected in September thanks to some deceleration of energy costs but were still 41.9% higher than a year earlier. Energy prices jumped 108.2% versus year-ago, though that was down from a 117.1% surge in August. Without energy, producer prices still jumped 14.5% from year-ago.
U.S., Taiwan will hold in-person trade talks in New York next week... The two sides seem to be deepening their ties despite opposition from China. The trade initiative aims to reach agreements in areas including regulatory practices and anti-corruption standards. It was announced weeks after President Joe Biden launched the Indo/Pacific Economic Framework in May — a deal designed to counter China’s influence in the region, which did not feature Taipei. Meanwhile, a senior Chinese diplomat in Washington said Beijing has no timetable for unification with Taiwan.
Congress mulls ERP extension for 2022 crop/livestock disasters... The Emergency Relief Program (ERP) covering losses from 2020 and 2021 has spent $7.1 billion to date through Phase 1. USDA is expected to announce Phase 2 details within a week to cover the gaps left from Phase 1. Producers with shallow losses that did not trigger an indemnity will have the opportunity to apply as well as producers who did not have crop insurance. With Phase 2 still ahead, USDA does not expect a top up of Phase 1 payments. When Congress returns for its lame-duck session in December, extending ERP for eligible 2022 disasters will be a priority for many given the challenges of the past year.
Brazilian meat processors expect protest disruptions to ease by Monday... Brazilian road blockades are compromising about 45% of the country’s poultry and hog slaughter capacity, a sector source told Reuters. Some plants were halted while others reduced slaughters, the source said, adding the most affected state is Santa Catarina in the south. The situation is expected to improve by Monday as protests will likely fade.
December cattle trading no cash premium... December live cattle futures settled at $151.95 on Thursday, the exact level of last week’s average cash cattle price. While light cash trade so far this week has occurred at roughly $1 higher prices and there’s a bullish outlook as market-ready supplies tighten, traders have been reluctant to build in premium.
Cash hog index faces heavier pressure... The CME lean hog index is down 95 cents (as of Nov. 2) to $92.34. That marks a new low for the fall and is the lowest level since Feb. 14. Based on the wider-than-normal discount December lean hog futures hold to the cash index, traders anticipate more near-term seasonal pressure over the next six weeks.
Overnight demand news... Iraq purchased 150,000 MT of hard milling wheat expected to be sourced from Canada, Lithuania and Australia.
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
- 10:00 a.m. Livestock and Meat International Trade Data — ERS
- 2:00 p.m. U.S. Agricultural Trade Data Update — ERS
- 2:00 p.m. Dairy Products — NASS
- 2:00 p.m. Peanut Prices — NASS
- 2:30 p.m. Commitments of Traders — CFTC
