First Thing Today | October 19, 2023

Good morning!

Quiet overnight grain trade... Corn and wheat mildly favored the downside, while soybeans traded mostly higher in quiet, two-sided price action overnight. As of 6:30 a.m. CT, corn futures are trading fractionally to 2 cents lower, soybeans are steady to 4 cents higher in most contracts and wheat futures are 1 to 3 cents lower. Front-month crude oil futures are around $1.00 lower and the U.S. dollar index is about 100 points lower this morning.

House GOP remains stuck in rut... The House remains in a state of gridlock as lawmakers failed for the second time to elect a new speaker, with no clear resolution in sight. Rep. Jim Jordan (R-Ohio) fell well short of the required 217 votes on both Tuesday and Wednesday — 22 GOP lawmakers voted against Jordan’s speakership on Wednesday, highlighting the ongoing divisions within the House GOP conference. Jordan plans to proceed with a third speaker ballot today at noon ET.  House Republican leaders are facing pressure from members who are eager to elect Rep. Patrick McHenry (R-N.C.) as speaker pro tempore for the next approximately 80 days. The resolution, drafted by Rep. Dave Joyce (R-Ohio), is expected to receive strong support. House Democrats have indicated their willingness to vote for it, but it is unclear what they have asked for to get their support. If the resolution passes, it would allow Jordan to effectively suspend his campaign for speaker without formally withdrawing. Jordan could then commit to resuming his bid for speaker once McHenry’s term concludes in January.

House vacuum and shutdown concerns trigger talks of a one-year farm bill extension... Key Senate Republicans are advocating for a one-year extension of the farm bill, signaling a shift away from hopes for a full-blown farm bill reauthorization this year. This change in focus is attributed to the current power vacuum in the House and uncertainties surrounding the need to avert a government shutdown in November. The next spending package needed to keep the government open past Nov. 17 “would really be a good opportunity to go ahead and put an extension on there,” the committee’s ranking Republican, John Boozman (R-Ark.), said in an interview with Bloomberg. Other senior committee Republicans, including Sen. Chuck Grassley (R-Iowa), have also voiced support for a short-term farm bill extension. They argue that the uncertainty surrounding a five-year reauthorization is causing concern among farmers and community lenders who need to plan for the 2024 growing season. However, Senate Ag Committee Chairwoman Debbie Stabenow (D-Mich.) maintains that it’s premature to abandon the idea of a full five-year farm bill. The Congressional Budget Office (CBO) will provide a new baseline estimate early in 2024 and there are concerns it may not favor the resources needed for the five-year bill. Stabenow said pulling the plug now on the five-year reauthorization could have unintended consequences, noting a “sense of urgency” to get a five-year reauthorization “as soon as we can.”

Weekly Export Sales Report out this morning... For the week ended Oct. 12, traders expect:

China a step closer to commercial planting of GMO corn, soybeans... China’s ag ministry approved 37 genetically modified corn seed varieties and 14 GMO soybean varieties, moving one step closer to commercial planting of GMO crops. Large-scale trials of GMO corn and soybeans were carried out in 20 counties in five provinces this year, which the ag ministry said showed “outstanding” results. The list of approved varieties is open for public comment until Nov. 15. It is not clear if Beijing will fully allow commercial sales and production of GMO varieties next year as the government is expected to control areas where they can be planted.

Brazil to subsidize wheat trades... The Brazilian government allocated 400 million reais ($79 million) to subsidize wheat trades in 2023-24 in a bid to shore up prices. The plan is to guarantee trades at such a price level using an auction mechanism in which growers, wheat millers and traders can participate, the government said. The government set 87.77 reais ($17.36) per 60-kg bag as the minimum price for “type 1 loaf wheat” in the program, which is about 44% above current domestic prices.

China’s Country Garden closer to defaulting... Country Garden bondholders are seeking urgent talks with the troubled property developer after it missed a $15 million coupon repayment, putting it at risk of default, Reuters reported, citing three sources with direct knowledge of the matter. Ratings agency Moody’s said on Thursday it could downgrade Country Garden’s “corporate family rating” if the recovery prospects for its creditors weaken further. Moody’s said Country Garden’s senior unsecured rating of C was already at the lowest of its rating scale.

USDA sends final rule on livestock markets to OMB, aims to promote ‘inclusive competition’... USDA submitted a final rule titled “Inclusive Competition and Market Integrity Under the Packers and Stockyards Act” to the Office of Management and Budget (OMB). This rule encompasses “proposed revisions” to regulations under the Packers and Stockyards Act (PSA), with the objective of promoting inclusive competition and market integrity within the livestock, meats, poultry and live poultry markets. The Agricultural Marketing Service has clarified that the rule includes “supplemental amendments” aimed at defining conduct that USDA considers “unfair, preferential, unjustly discriminatory, or deceptive, and a violation of the PSA.” It also seeks to clarify criteria and types of conduct that would be viewed as “unduly or unreasonably preferential, advantageous, prejudicial, or disadvantageous, and violations of the Act, including retaliatory practices that interfere with lawful communications, assertion of rights, and associational participation.” Notably, USDA has another final rule related to transparency in poultry grower contracting and tournaments currently under review at OMB. Despite scheduled meetings concluding by late September, it remains uncertain when either rule will be published, as the recently submitted rule was originally targeted for finalization in September.

Smithfield prepares for U.S. listing... Smithfield Foods’ Chinese owner WH Group is working with banks to take the U.S.-based pork producer public again in the U.S., the Wall Street Journal reported, citing people familiar with the matter. “The company regularly evaluates relisting Smithfield’s stock in the U.S., but there is no time-table for it,” WH Group said in an emailed statement to Reuters. Other major meat companies, like Brazil’s JBS, are also considering U.S. listings amid challenging conditions in the industry.

Slow developing cash cattle market... Packers have been slow to establish cash cattle bids, with only light sales reported so far this week at roughly $1.00 higher prices in the far northern market. Unless there’s a surprise development today, it’s likely the bulk of this week’s cash cattle activity will be pushed into Friday – and likely after USDA’s Cattle on Feed Report Friday afternoon.

Cash hog discount about average... The CME lean hog index is down another 45 cents to $80.70 (as of Oct. 17). After a modest 47.5-cent rise on Wednesday, December lean hog futures finished $12.675 below today’s cash quote. That’s roughly equal to the five-year average decline in the cash index from now until mid-December when the contract will be cash-settled.

Overnight demand news... Japan purchased 89,873 MT of milling wheat, including 20,898 MT U.S. and 68,975 MT Canadian, and 10,146 MT of feed wheat.

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

• 7:30 a.m. Weekly Export Sales — FAS
• 8:00 a.m. Food Expenditure Series — ERS
• 2:00 p.m. U.S. Bioenergy Statistics — ERS
• 2:00 p.m. Livestock Slaughter — NASS
• 2:00 p.m. Milk Production — NASS