Good morning!
Grain futures drift lower overnight… As of 6 a.m. CT, December corn was down 1 ¾ cents. November soybeans fell 5 ¼ cents, December soybean meal dropped $6.40 and December soybean oil gained 46 points. December hard red winter wheat was down 2 3/4 cents, while December hard red winter wheat fell 2 ½ cents.
Corn saw a corrective bounce on Monday, buoyed by short covering after ending last week with a steep selloff that took December to a two-month low. The selloff followed USDA’s shock decision to raise its corn yield and production estimates. Important support lies at last week’s lows, with harvest pressure for corn and soybeans set to continue. USDA will release weekly export inspections data this morning, with weekly crop progress figures set for this afternoon – both have been delayed by a day due to the Columbus Day holiday on Monday.
Key outside markets see oil futures lower, with the Nymex WTI crude down 1.9% at $104.60 a barrel, threatening to snap a three-day winning streak. The dollar was weaker versus major rivals, with the ICE U.S. Dollar Index down 0.3% but near an 18-month high. The 10-year Treasury yield stood at 5.196%, while index futures point to a mixed start to stock trading as big Wall Street banks kick off earnings season.
Drones sink ship off Bulgarian coast… A ship was sunk by drone attack off the coast of Bulgaria Tuesday, leaving 11 sailors missing, marking what may be the second deadly sinking of a cargo vessel in the area during the past week, Reuters reports. Bulgaria summoned Russia’s ambassador. Bulgarian officials said two cargo ships were hit by drones and one was sunk. The report said that Bulgarian Prime Minister Rumen Radev stopped short of blaming Moscow for the attack but said the outcome “benefits the Russian federation.” Cargo ships, including grain carriers, have been struck near Bulgaria and Romania this month, serving to further choke off traffic from the Black Sea.
Unsettled weather moves into the Plains… Cool and wet weather will prevail the next 48 hours along and west of the Rockies, with the focus for showers and thunderstorms shifting into the heartland as the system and a ridge in the Gulf funnel unstable air northward toward a slow-moving frontal boundary, the National Weather Service said. This pattern will support several days of heavy rainfall and scattered flash flooding from the Corn Belt to the Texas Big Bend, where storm total rainfall could exceed two to four inches of rain through Thursday. “Widely scattered severe thunderstorms capable of large hail, damaging winds, and a tornado or two are also possible today from Kansas City to Lubbock,” the short-range forecast said. Unseasonable warmth will continue across the Midwest for a few more days across the Midwest and Southeast, where several daily record highs could fall.
Cordonnier skeptical of USDA corn yield… Pro Farmer crop consultant Michael Cordonnier echoed skepticism regarding the USDA’s surprise decision to lift its U.S. corn yield estimate by 2.7 bushels per acre to 181.2 bpa in October. Questioning how yield estimates could rise while crop condition ratings fell, he said production figures may be trimmed in November or January. Cordonnier raised his U.S. corn yield estimate to 180.0 bpa while calling the USDA’s 53.1 bpa soybean yield reasonable. Meanwhile, Brazil’s soybean planting is off to a record pace at 19.7% complete (versus the 11.5% average), despite El Niño concerns. Mato Grosso leads at 33.2% finished, and Paraná reached 36% despite recent rain delays. If favorable weather holds, early-planted soybeans should allow an early January harvest, opening an ideal window for planting safrinha corn.
GOP pushback on Russia diesel deal grows… A growing number of Republicans are criticizing the deal announced Friday by President Donald Trump that would ease sanctions on Russia and allow it to supply more diesel to global and U.S. markets. Analysts have questioned whether the amounts involved will provide significant relief while critics see the deal empowering Russia in its war with Ukraine. “Sanctions on Russian fuel exports have, for the last several years, deprived funding for Putin’s unjust war in Ukraine and provided leverage to help end it,” said Sen. Jerry Moran, R-Kan., according to Agri-Pulse. “We should be tightening sanctions further, not undercutting them by allowing the import of Russian diesel and risking erasing our leverage, damaging our credibility with allies, and emboldening our adversaries.” Republicans and Democrats on the Senate Foreign Relations Committee had previously criticized the deal.
IMF leaves global growth forecast unchanged… The International Monetary Fund forecast global growth of 3.1% this year in its latest World Economic Outlook, unchanged from its April forecasts. It sees global headline inflation at 4.7%, unchanged from its July forecast but up from 4.1% in 2025. The Wall Street Journal says the forecasts warn that if the Iran war drags on for longer, pushing up commodity prices and raising borrowing costs further, global growth will be significantly lower and inflation much hotter. Silvana Tenreyro, IMF chief economist, warned that borrowing costs have risen sharply in advanced economies, public debt is at historic highs and fiscal cushions have been depleted by a series of crises, the report said.
Fund managers boost commodity exposure… The BofA Global Fund Manager Survey, a closely watched guide to positioning across financial markets, found commodity allocations ticked up to net 21% overweight. Fund managers expect Brent crude to trade at ~$94/bbl by year-end, up from current levels. Allocators note that a drop in oil below $80/bbl represents a potential Q4 bullish surprise for equities. Energy equity exposure sits at net 4% underweight (down from net 1% overweight). A net 4% of respondents view gold as undervalued (down slightly from 5%). A net 47% of respondents expect a “boom” (above-trend growth and inflation), while net 5% expect global CPI to decline over the next 12 months. Top tail risks include a disorderly rise in bond yields (31%) and an AI bubble (23%). Managers say the biggest potential spark for a “credit event” comes from capital spending by AI hyperscalers (39%) and government debt (28%).
Food inflation focus… The September consumer price index reading will be a key event for financial markets this week, with a contraseasonal snapback in gasoline prices and a surge in diesel prices last month with the rest of the report showing disinflation elsewhere, said Thomas Simons, chief U.S. economist at Jefferies, in a note. Economists surveyed by the Wall Street Journal, on average, expect CPI to show a 0.6% rise after a 0.4% bump in August, with the year-over-year rate accelerating to 3.7% from 3.4%. Core CPI, which strips out volatile food and energy costs, is expected to show a monthly rise of 0.2% after a 0.3% increase in August, with the year-over-year rate ticking up to 2.5% from 2.4%. Simons said he expects food prices to grow at a subdued 0.2% on the month, but that there is a risk that higher shipping costs translate into higher food prices due to tight margins across the supply chain.
- Warsh speaks… It will be all eyes on Federal Reserve Chairman Kevin Warsh when he speaks at an International Monetary Fund event in Thailand at 10:30 p.m. CT Thursday.
Palm oil weakens… Malaysian palm oil futures slipped below MYR 4,600 a ton, pressured by weaker edible oils on the Dalian and Chicago markets and lower crude prices, which undercut palm oil’s competitiveness as a biodiesel feedstock, reports TradingEconomics. The report said sentiment remained bearish after monthly data from the Malaysian Palm Oil Board showed September inventories up 24.5% month on month to a record 3.51 million tons, marking a sixth straight monthly rise. At the same time, production rose 16.5% to 2.12 million tons, the highest since August 2015, while exports fell.
Cattle see profit-taking pressure… December live cattle fell $0.45 to $226.60 on Monday. November feeder cattle lost $0.85 to $341.10. Cattle markets saw some corrective price action on profit taking following Friday’s close at multi-week highs. USDA reported cash cattle trading last week averaged $220.14 up 34 cents from the week-prior average of $219.80. The noon report on Monday showed gains in boxed beef prices, with Choice grade up $1.93 at $375.28 and Select grade up $0.47 at $354.77. Movement at midday was light at 42 loads.
Hogs bounce off contract low… Lean hog futures ended higher Monday, seeing a tepid bounce after falling to a contract low to end last week. Cash fundamentals remain weak. Tuesday’s projected CME index price is down $1.10 at $76.51. The national direct five-day rolling average cash hog price on Monday was $74.79. Monday’s noon pork report from USDA showed cutout value up $4.72 at $85.22, led by gains for butts and bellies.