First Thing Today | October 20, 2023
Good morning!
Corn and wheat firmer, soybeans weaker overnight... Corn and wheat futures firmed amid mild followthrough buying overnight, while soybeans pulled back a little. As of 6:30 a.m. CT, corn futures are trading fractionally to a penny higher, soybeans are 3 to 5 cents lower, winter wheat futures are mostly 3 to 5 cents higher and spring wheat is mostly a penny higher. Front-month crude oil futures are more than $1.00 higher and the U.S. dollar index is modestly weaker.
Jordan faces resistance in latest leadership battles... Rep. Jim Jordan (R-Ohio) said he would push for another vote to become House speaker. He has a press conference scheduled for 8:00 a.m. ET, with the next vote on his speaker role scheduled for Friday at 10:00 a.m. ET. The House currently faces its longest period without a Speaker since before Watergate, leaving lawmakers concerned they may appear incapable of basic governing functions. The root of the issue lies in the GOP’s internal power dynamics, with the far-right gaining prominence and causing disruptions. The inability to reach a consensus highlights the party's priorities, which are increasingly divided. Bottom line: There is no clear path forward. The absence of effective leadership and ongoing brinkmanship threaten to prolong the crisis, with the future direction of the GOP uncertain.
Even more House GOP uncertainty... Rep. Patrick McHenry (R-N.C.) told GOP colleagues at a closed-door meeting Thursday he might resign as Speaker pro tempore if Republicans push him to try to move legislation on the floor without an explicit vote to expand his powers, NBC News reports. If that happens, “you’ll figure out who the next person on Kevin’s list is,” McHenry told the room, referring to McCarthy’s secret list of lawmakers who would serve in case of a vacancy. Of note: A source informs that McCarthy’s first choice for Speaker pro tempore was Garret Graves (R-La.), but he turned it down, choosing instead to help McCarthy in other ways.
Washington remains in limbo... As long as the House doesn’t have a speaker, lawmakers can’t approve crucial legislation, such as funding to avoid a government shutdown or aid to Israel as the country’s war rages on with Hamas. Meanwhile, a new farm bill is becoming a distant goal with the paralysis in the House and major farm policy differences in the Senate.
Amazon drought halts some grain movement... Some grain shipments on rivers in Northern Brazil have been halted due to a drought that has dropped Amazon River tributaries to the lowest level in over a century, according to shipping services provider Serveporto. Some barge companies “halted navigation on the Tapajos and Madeira rivers, affecting grain terminals, the primary logistics transportation method in the region,” Serveporto said. The Itacoatiara grain terminal owned by Hermasa, an arm of Brazilian grain company Amaggi, and two large container terminals close to Manaus, are operating with reduced capacity. Serveporto also said low water levels are affecting incoming vessels at Santarem port, in Para state, mainly because of draft restrictions there.
Brazil soybeans dominate China’s September imports... Of the 7.15 MMT of soybeans China imported during September, 6.88 MMT (96.2%) came from Brazil, which was a 23% jump from last year. The U.S. exported only 133,692 MT of soybeans to China during September, down 88.4% from last year. Through the first nine months of this year, China imported 54.87 MMT of soybeans from Brazil, up 18% from the same period last year, and 20.08 MMT from the U.S., up 8%.
Economists raise U.S. growth projections, lower recession odds... A Bloomberg survey of economists showed expectations for third quarter GDP to rise to 3.5%, the highest level in almost two years. While economic growth is seen slowing in the following two quarters, economists still raised their estimates for GDP from the prior month’s survey.
China leaves benchmark lending rates unchanged... The People’s Bank of China (PBOC) held lending rates unchanged, as widely expected. The one-year loan prime rate (LPR), which is used for corporate and household loans, was left unchanged at a record low of 3.45%; the five-year LPR, a reference for mortgages, was maintained at 4.2% for the fourth straight month.
Argentina faces complex challenge... Argentina is heading to the polls on Sunday to elect a new president, with Javier Milei emerging as the favorite candidate. Milei’s radical proposal to dollarize the national currency is a highly intricate endeavor. The fact Argentines are seriously considering such a drastic step reflects the severe economic turmoil caused by inflation rates soaring up to 130%. The most significant challenge lies in enticing billions of dollars, held in cash and abroad, to return to the traditional banking system. Additionally, there is a substantial risk the peso may continue to depreciate, remain at a low value and ultimately prevent successful dollarization. Such an outcome could potentially trigger hyperinflation, adding to the complexity of the situation.
Japan’s consumer inflation declines to one-year low... Japan’s annual consumer inflation fell to 3.0% in September from 3.2% the previous month, the lowest reading since September 2022. Core inflation, minus food and energy prices, dropped to 2.8% above year-ago from a 3.1% gain the previous month but above the Bank of Japan’s target of 2.0% for the 18th consecutive month.
Feedlot inventory expected to be fractionally lower than year-ago... Traders expect USDA’s Cattle on Feed Report this afternoon to show the feedlot inventory as of Oct. 1 down 0.3% from year-ago at 11.420 million head, which would be the 13th consecutive month of year-over-year declines. Placements are expected to have declined 2.0% while marketings are seen down 6.8% from year-ago.
Feeders crumple amid corn rally... Feeder cattle futures faced heavy selling on Thursday as the corn market surged. With corn signaling a seasonal low is firmly in place, feeders could face more pressure, though they are short-term oversold. That could result in a pause or some corrective buying ahead of the weekend.
Weakening cash fundamentals limit upside in hogs... The CME lean hog index is down another 25 cents to $80.45 (as of Oct. 18). The pork cutout value dropped 82 cents on Thursday to $87.13. As long as cash fundamentals continue to weaken, the upside will remain limited in hog futures, despite the discounts built into winter-month contracts.
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. Cotton Ginnings — NASS
- 2:00 p.m. Cattle on Feed — NASS
- 2:00 p.m. Chickens and Eggs — NASS
- 2:00 p.m. Peanut Prices — NASS
- 2:30 p.m. Commitments of Traders — CFTC
