First Thing Today | November 2, 2023

Good morning!

Mostly firmer price action overnight... Soybeans traded sharply higher overnight, while corn and most wheat contracts posted milder gains. As of 6:30 a.m. CT, corn futures are trading a penny higher, soybeans are mostly 10 to 11 cents higher, SRW wheat is fractionally lower to a penny higher, HRW wheat is fractionally to 1 cent higher and HRS wheat is 1 to 2 cents higher. Front-month crude oil futures are $1.25 higher and the U.S. dollar index is nearly 800 points lower.

Weekly Export Sales Report out this morning... For the week ended Oct. 26, traders expect:

StoneX raises corn crop estimate, trims soybean forecast... Commodity brokerage StoneX raised its estimate of U.S. 2023 corn production to 15.302 billion bu. on a yield of 175.7 bu. per acre. Those figures are up from the firm’s October forecasts of 15.282 billion bu. and 175.5 bu. per acre. For soybeans, StoneX lowered its production forecast to 4.162 billion bu. on a yield of 50.3 bu. per acre, down from 4.175 billion bu. and 50.4 bu. per acre last month.

Record Chinese soybean imports expected this year... China’s soybean imports are likely to stay high through the fourth quarter, taking 2023 purchases to a record 105 MMT, but lackluster demand from hog farms is seen reducing purchases in early 2024, according to Reuters. Brazilian soybean supplies shipped to China are expected to be stronger than normal in the fourth quarter, reducing demand for U.S. supplies. China will import around 26 MMT of soybeans during the last three months of the year, with around 45% of the cargoes arriving from Brazil, based on the forecasts of four trading sources.

U.S. ag delegation visiting China to talk trade... Dozens of U.S. agriculture industry representatives gathered in Beijing on Thursday to meet Chinese counterparts amid growing U.S. efforts to bolster trade between the two countries. A delegation from 11 groups including the U.S. Soybean Export Council, U.S. Grains Council and U.S. Wheat Associates is visiting a week after Chinese grain buyers signed non-binding agreements to buy billions of dollars’ worth of commodities, mostly soybeans, the first such signing since 2017. The delegation will travel to Shanghai for next week’s annual China International Import Expo, where USDA is hosting a pavilion for the first time since the event started in 2018.

China strengthens capital management rules for banks... China’s financial regulator is beefing up capital rules for banks to combat financial risks, the National Financial Regulatory Administration said. The move, which will come into effect on Jan. 1, aims to help banks improve risk management and better serve the economy. The rules establish a differentiated capital supervision system that imposes higher capital requirements on larger banks and those with the higher proportion of overseas businesses. Banks will also need to set aside higher loss provisions for non-credit assets. They will be given a grace period of two years before they must be fully compliant with the new provisioning requirements, the regulator said. It also specified risk control measures for banks’ exposure to mortgage lending based on property type and source of repayment.

Euro zone manufacturing continues to contract... The HCOB euro zone manufacturing purchasing managers index dropped to 43.1 in October, down from 43.4 in September but up a tick from a preliminary estimate of 43. This marked the sixteenth consecutive month the euro zone’s manufacturing sector has been in contraction – and the sharpest in three months.

Indonesia to continue palm oil domestic market obligation policy into 2024... Indonesia will continue its domestic market obligation (DMO) for palm oil into 2024 to maintain the price stability of cooking oil, a trade ministry official said. Under the scheme, producers are only allowed to export once they have sold a portion of their products to the domestic market. The ratio of exports to domestic sales will also be maintained at the current level, where palm oil companies are allowed to export four times the volume they have sold through the DMO mechanism.

Japan compiles $113 billion package to cushion inflation... Japan’s government on Thursday compiled a package of measures to cushion the economic blow from inflation that will involve spending of more than 17 trillion yen ($113 billion), a move that could worsen the country’s already tattered finances. To fund part of the spending, the government will compile a supplementary budget for the current fiscal year of 13.1 trillion yen, according to the plan approved by the cabinet. Including spending by local governments and state-backed loans, the size of the package will total 21.8 trillion yen. The package includes temporary cuts to income and residential taxes, payouts to low-income households and subsidies to curb gasoline and utility bills. Combined, the spending plan will boost Japan’s gross domestic product (GDP) by around 1.2% on average over the next three years, according to a government estimate.

Packers cut wholesale beef prices to spur movement... Wholesale beef prices fell $3.00 for Choice and 95 cents for Select on Wednesday, though movement was strong at 136 loads. While there’s still solid retailer demand on price pullbacks, packers have struggled to push Choice beef above $309.00 and Select above $280.00.

Hog futures rally halted... Lean hog futures finished sharply lower and posted bearish reversals on Wednesday as the recent corrective buying ran out of steam. Traders also widened the discount December futures hold to the cash index, which is down another 19 cents to $76.94 as of Oct. 31, after actively tightening it over the past week-plus.

Overnight demand news... South Korea purchased 133,000 MT of corn from unspecified sources. Japan purchased 113,506 MT of milling wheat in its weekly tender, including 45,776 MT U.S., 34,950 MT Canadian and 32,780 MT Australian.

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