First Thing Today | September 29, 2023

Good morning!

Grains quiet ahead of USDA reports... Corn, soybean and wheat futures held in tight price ranges in a lightly traded overnight session ahead of USDA’s reports later this morning. As of 6:30 a.m. CT, corn futures are trading fractionally to a penny lower, soybeans are mostly a penny higher and wheat futures are 2 to 4 cents higher. Front-month crude oil futures are around $1.00 higher and the U.S. dollar index is about 400 points lower.

Grain Stocks, Small Grains Summary out later this morning... USDA’s Quarterly Grain Stocks Report at 11:00 a.m. CT will set final 2022-23 ending stocks for corn and soybeans. The report has a history of surprises, especially for corn, with analysts routinely missing those estimates by a wide margin. Traders expect USDA to report Sept. 1 stocks at 1.429 billion bu. for corn, 242 million bu. for soybeans and 1.772 billion bu. for wheat. The report has also historically featured revisions to the previous year’s soybean crop and since 2020 the prior year’s corn production. USDA will also issue its final estimates for 2023 wheat production in the Small Grains Summary. Traders expect all wheat production to come in at 1.729 billion bu., which would be down 10 million bu. from the August estimate.

Mississippi River nears all-time low at Memphis... The Mississippi River dropped to a reading of -10.62 feet on the Memphis, Tennessee, gauge on Thursday, just above its all-time low of -10.81 feet on Oct. 21 last year, according to NWS data. The river is expected to remain below the -10 foot mark into at least mid-October, according to the latest forecast. The low-water crisis is unfolding at a critical juncture as the harvest of corn and soybeans is rapidly advancing, and simultaneously, barge rates are on the rise.  Barge rates have soared to over 900% of their underlying tariff in some locations due to the impact of low water levels. Portions of the river have been closed 22 times since Sept. 1 for dredging or to remove barges that have run aground – at least 36 groundings have been reported, the U.S. Coast Guard said.

Gov’t shutdown looms as McCarthy struggles to secure votes for funding extension... The House is expected to address a Republican-proposed stopgap bill today, aiming to extend government funding. However, House Speaker Kevin McCarthy (R-Calif.) is facing challenges in gathering the necessary votes to pass the bill, leaving Congress on the brink of triggering a shutdown. Both the Senate and House are deadlocked in negotiations on how to ensure the government’s continued operation, and with funding set to expire at midnight on Saturday, a shutdown appears inevitable. McCarthy’s stance remains uncertain as he has not confirmed whether he would seek a compromise with Democrats if conservative renegades reject his stopgap proposal. This situation poses a significant test to his leadership as Speaker, with some House conservatives suggesting the potential for a vote to remove him from his position.

Another farm bill impact if gov’t shuts down: CBO... The Congressional Budget Office (CBO) told lawmakers it will cease work Oct. 10 without funding. That could cause big issues for the farm legislation, as agriculture lawmakers say they’re already waiting for critical budget estimates they need to write the measure.

Economic impacts from a gov’t shutdown... A rule of thumb among Federal Reserve staff members is that each week of shutdown shaves off 0.2 percentage point from the annualized GDP growth rate, according to David Wilcox, who used to work at the Fed and is now at Bloomberg Economics. But the losses aren’t lasting and typically get made up in the following quarter. Meanwhile, the bond market believes “no data, no hike” regarding the Fed’s Nov. 1 policy decision.

Key difference this time if there’s a shutdown... There’s never been a comprehensive shutdown that lasted more than about a week, according to Ariana Salvatore, a Morgan Stanley researcher. The difference from the last shutdown in 2019 is this time none of the federal agencies have been funded for 2024. Congress has been unable to pass all 12 appropriations bills on time through each chamber since 1997.

House Republicans passed three GOP-drafted FY 2024 spending bills... Spending bills for Defense, Homeland Security and State-Foreign Operations were passed by House Republicans, while the Agriculture spending bill went down in a widely expected defeat. Overall, House Republicans have now passed four FY 2024 spending bills — the three from last night plus the MilCon-VA bill in July.

UAW strike update... United Auto Workers (UAW) President Shawn Fain is set to deliver a video address today at 9:00 a.m. CT, when he may announce the possibility of additional strikes at auto plants unless significant progress is made in negotiations with GM, Ford and Stellantis. Reuters reported the UAW has presented a counteroffer to Stellantis, intensifying the labor discussions. Observers are particularly interested in whether the UAW will target facilities responsible for manufacturing powertrains for pickups and large SUVs. Currently, there are 18,300 UAW members on strike, comprising approximately 12% of the total 146,000 union workers. President Joe Biden recently made an unprecedented move by visiting a Detroit plant earlier this week and standing in solidarity with striking UAW members on the picket line, marking an historic involvement by a sitting president in a labor dispute.

WSJ: U.S. and China advance talks, paving the way for Xi/Biden summit... The U.S. and China are making significant progress in diplomatic exchanges, fueling anticipation for an upcoming summit between Chinese President Xi Jinping and Biden, the Wall Street Journal (WSJ) reports. Key developments include discussions about Vice Premier He Lifeng, a top Chinese economic-policy official, visiting Washington, which would be the highest-ranking Chinese official to do so since Biden’s inauguration. Additionally, preparations are underway for Foreign Minister Wang Yi’s visit to Washington in October, aimed at laying the groundwork for the Xi/Biden summit. These steps follow China’s role in facilitating the release of an American soldier from North Korean custody, indicating positive momentum in bilateral relations. Nevertheless, challenges persist due to deep-seated differences and concerns about a potential government shutdown delaying summit planning.  Meanwhile, both nations continue to navigate their complex relationships with Russia and the Asia-Pacific Economic Cooperation forum. Bottom line: The goal remains improving relations between the world’s two largest economies, with a focus on economic discussions and preventing further escalations in tensions.

Euro zone inflation falls to two-year low... Consumer inflation in the euro zone rose 4.3% from year-ago in September, according to initial readings, though that was down from a 5.2% increase in August and the slowest annual growth since October 2021. Excluding food, energy, alcohol and tobacco, consumer inflation fell to 4.5% from 5.3% in August, the lowest since August 2020. The data is likely to strengthen the European Central Bank’s ideas it has raised interest rates enough to bring down inflation.

Update on USDA implementation of disaster programs...

• Emergency Relief Program (ERP) Phase 2 payments will run this week and signed and certified prior to any government shutdown if it happens. 
• 2022 signup for ERP will be on hold if a lapse occurs. 
• 2021 Emergency Livestock Relief Program (ELRP) AND 2022 ELRP will be processed before any lapse, so also processed this week.

Negative H&P Report... Traders expected USDA’s Hogs & Pigs Report to show the hog herd contracted fractionally as of Sept. 1. Instead, it showed the herd size up 194,000 head (0.3%) from year-ago – 787,000 head more than the average pre-report estimate implied. The breeding herd contracted 1.2% from last year but the market hog inventory increased 268,000 head (0.4%). Market hog inventories indicated slaughter will run slightly above year-ago through winter. The data is expected to weigh on hog futures this morning.

China clears some Russian pork imports... China has cleared the way for pork imports from regions of Russia without African swine fever, its customs agency said.

New high in cattle futures... October live cattle futures posted a contract high at $187.575 on Thursday, despite steady/weaker cash cattle prices. While that marked a new all-time high on the continuation chart, futures have struggled to post a strong breakout as the cash market is stuck in neutral.

Overnight demand news... Exporters reported no tenders or sales.

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. Agricultural Prices — NASS
• 2:00 p.m. Peanut Prices — NASS
• 2:30 p.m. Commitments of Traders — CFTC