First Thing Today | October 31, 2023

Good morning!

Lightly traded overnight session... Corn, soybeans and wheat held in tight trading ranges in light trade overnight. As of 6:30 a.m. CT, corn futures are trading steady to fractionally higher, soybeans are 1 to 2 cents lower and wheat futures are 4 to 7 cents lower. Front-month crude oil futures are around 60 cents higher and the U.S. dollar index is about 100 points lower.

Consultant cuts Brazilian crop forecasts... South American consultant Dr. Michael Cordonnier says it’s been a tale of two extremes for weather early in the growing season in Brazil, as east-central and northeastern areas too hot and dry while southern areas have been inundated with too much rain. Cordonnier cut his Brazilian soybean and corn crop estimates 2 MMT each to 160 MMT and 123 MMT, respectively, while maintaining lower biases. For soybeans, he noted: “Any soybeans planted, or replanted, from this point forward run an increased risk of lower yields especially if the weather remains erratic in east-central and northeastern Brazil.” For corn, he cited “what probably will be lower safrinha corn acreage than originally expected” given soybean planting delays and the need for some replanting. Cordonnier kept is Argentine crop estimates at 50 MMT for soybeans and 52 MMT for corn.

HRW CCI rating below average; SRW above average... When USDA’s initial crop condition ratings of the season are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the HRW crop stood at a 318.7 reading, 52.9 points above last year but 2.1 points below the five-year average. The SRW crop started the growing season with a 369.9 CCI rating, 22.0 points above last year and 12.8 points higher than the five-year average. Click here for details.

Crop progress report highlights… Following are highlights from USDA’s crop progress and condition update as of Oct. 29.

• Corn: 71% harvested (66% average).
• Soybeans: 85% harvested (78% average).
• Cotton: 93% bolls opening (95% average); 49% harvested (47% average); 29% good/excellent (29% last week).
• Winter wheat: 84% planted (85% average); 64% emerged (64% average); 47% good/excellent (28% last year).

China actively buying wheat... China is set to import record volumes of wheat this year, as rain damage to its crop and worries over dry weather in exporting nations is fueling Beijing’s appetite to buy while prices are low. China bought around 2 MMT of new-crop Australian wheat this month for shipment starting in December, trading sources told Reuters. It has also booked about 2.5 MMT of French wheat since September for December-March shipment, they said. Overall, China’s 2023 imports are likely to reach around 12 MMT, trade sources said. China has also recently purchased several cargoes of U.S. SRW wheat.

Surge in Ukrainian rail movement to ports... Ukrainian railways witnessed more than a 50% surge in railcar grain movements to Odesa ports. In the latest week, this number surged to 4,032. According to Reuters, officials attribute this notable increase in rail movement to the establishment of the humanitarian corridor by Ukraine.

India’s cotton production could fall 7.5%... India’s cotton production in 2023-24 is likely to fall 7.5% from a year earlier to 29.5 million bales on lower planted area and as El Niño weather hit productivity, according to the Cotton Association of India. The trade body said India’s cotton imports could rise to 2.2 million bales in 2023-24, up from 1.25 million bales last year.

China’s factory activity unexpected contracts in October... China’s official manufacturing purchasing managers index unexpectedly fell to 49.5 in October from 50.2 in September, highlighting fragile economic conditions in the country and the need for more stimulus. Both new export and import orders shrank for an eight consecutive month, suggesting manufacturers were struggling for buyers overseas and ordering fewer components used in finished goods for re-export.

Euro zone inflation falls to more than two-year low... Euro zone consumer inflation declined to an annualized 2.9% in October, the lowest level since July 2021. Core inflation, which filters out food and energy prices, cooled to 4.2%, marking its lowest point since July 2022. The initial estimate of third quarter GDP for the bloc expanded 0.1% from year-ago, while contracting 0.1% on a quarterly basis.

BOJ relaxes grip on rates as end to yield control looms... The Bank of Japan (BOJ) further loosened its grip on long-term interest rates by tweaking its bond yield control policy, taking another small step towards dismantling the controversial monetary stimulus of the past decade. As widely expected, the BOJ maintained its -0.1% target for short-term interest rates and that for the 10-year government bond yield around 0%. But BOJ redefined 1.0% as a loose “upper bound” rather than a rigid cap and removed a pledge to defend the level with offers to buy unlimited amount of bonds.

ERP payments increase as USDA launches 2022 relief effort... Emergency Relief Program (ERP) payments, intended to cover losses for 2020 and 2021, are on the rise, even though USDA previously stated that all eligible payments were disbursed by Sept. 30. According to USDA data, total ERP payments reached $8.22 billion as of Oct. 29, up slightly from the previous week’s $8.19 billion. Phase 2 ERP payments also increased to $767.99 million, benefiting 10,012 recipients, compared to $742.99 million distributed to 9,968 recipients the previous week. Simultaneously, USDA is launching the ERP effort for 2022, which will operate in two tracks. ERP 2022 Track 1 aims to assist producers affected by wildfires, droughts, hurricanes, winter storms, and other eligible disasters that occurred during calendar year 2022. This track will utilize existing Federal Crop Insurance or Noninsured Crop Disaster Assistance Program (NAP) data submitted to FSA. ERP 2022 Track 2 introduces a revenue-based certification program, designed to aid producers who experienced revenue losses in 2022 due to disaster events when compared to revenue in a benchmark year. FSA has described Track 2 as an “alternative method to establish revenue.” Total ERP funding for 2022 stands at $3.7 billion, with approximately $500 million allocated for livestock producers.

Beef prices firm but movement slows... Wholesale beef prices firmed $1.71 for Choice and 77 cents for Select on Monday, though movement totaled only 59 loads. Choice cutout at $309.28 was the highest since mid-September. Despite the recent price strength in wholesale beef, packer cutting margins remain in the red.

Pork margins continue to strengthen... The CME lean hog index is down another 44 cents to $77.51 (as of Oct. 27). The pork cutout value firmed $1.46 on Monday, rising for a second straight day. Given the persistent decline in cash hog prices and recent uptick in the pork cutout value, packer cutting margins are solidly in the black.

Overnight demand news... South Korea purchased 132,000 MT of corn and 55,000 MT of feed wheat – all optional origin. Japan is seeking 113,506 MT of milling wheat in its weekly tender.

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

• 2:00 p.m. Fruit and Tree Nuts Yearbook — ERS
• 2:00 p.m. Agricultural Prices — NASS