Good morning!
Grain futures prices mixed overnight… As of 6:00 a.m. CDT, December corn was down a penny, November soybeans down 4 cents and December HRW and SRW wheat futures markets were 2 1/4 cents higher. The corn market is in a pause mode amid a choppy trading week. Soybeans are seeing a modest corrective pullback early today after hitting a three-week high Wednesday. Winter wheat futures markets are seeing tepid short covering early today as prices linger near their contract lows. The key outside markets today see the U.S. dollar index higher and hitting another nine-week high. Nymex crude oil prices are a bit weaker and trading around $62.25 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently 4.13 percent.
Rapid U.S. corn, soybean harvest pace widens cash basis amid tight storage… Basis levels for corn and soybeans across the Midwest continue to widen as harvest “is running head on into extraordinarily tight storage capacity,” reports Margy Eckelkamp in a Farm Journal feature story. “Due to the risk of lost export demand, some elevators across the Northern Plains that lack local crush demand may not accept soybeans over fears of not being able to access the export market later,” said Tanner Ehmke, grains and oilseeds economist with CoBank in his latest report. “For elevators reluctant to take delivery and short soybean basis, basis is being set at historically low levels with storage fees set at higher rates.” While domestic soybean crush build out provides a destination — and improved regional basis — for some of the soybeans, it does not offset the big crop and the missing exports to China. Ehmke said with stronger corn demand and it being a bit easier to store in piles or bunkers, elevators will be incentivized toward corn over soybeans. “The challenge for elevators will be prioritizing scarce grain storage,” Ehmke said. “Among the top 12 corn-producing states, the U.S. is facing a 1.4-billion-bushel shortage of upright grain storage this year, with elevators relying more on bunkers and emergency storage like ground piles. This year’s shortage stands in stark contrast to last year when those states had a combined 361 million bushels of excess storage.”
Fed’s FOMC minutes suggest more rate cuts coming this year… The Wednesday afternoon release of the minutes of the last Federal Reserve Open Market Committee (FOMC) meeting in September showed FOMC members had a willingness to lower interest rates further this year, but many expressed caution due to concerns over inflation. Most members reckoned it likely would be appropriate to ease monetary policy further over the remainder of this year, with new projections showing officials expected two additional quarter-point cuts by year’s end. Participants stressed the importance of taking a balanced approach in promoting the committee’s employment and inflation goals as they considered their next move. Fed officials at that gathering voted 11-1 to lower the Fed funds interest rate range by a quarter percentage point to 4% to 4.25%, the first such cut this year. One official, the newly-sworn-in Stephen Miran, favored a half-point reduction and voted against the decision. The markets showed no significant reactions to the FOMC minutes, as they contained no big surprises.
Bond market suggesting “jumpy” markets once U.S. economic data starts flowing again… While there are presently no indications the U.S. government shutdown is close to ending, when it does and backed-up U.S. economic data starts to flow, the marketplace will see increased volatility. That’s what U.S. Treasury traders believe, and bond traders have the reputation of being the smartest guys/gals in the room. The pent-up U.S. data includes reports on employment and inflation. “The delay may complicate the collection of economic figures, making it harder for the Federal Reserve to decide whether to ease again, and options activity shows demand for hedges against a range of Fed scenarios. Traders are preparing for potential turbulence in the $30 trillion U.S. Treasuries market, with options pricing indicating a likelihood of volatility once the data is released, and some expecting jumpy price action if the data is an outlier,” said a Bloomberg report.
Israel, Hamas closer to ending war… Israel and Hamas have reached a deal for the release of all hostages held by Hamas in Gaza, a major step toward ending their two-year war. The agreement was reached after several days of indirect negotiations between the warring sides in the Egyptian resort of Sharm El-Sheikh, brokered by the U.S., Egypt, Qatar, and Turkey. As part of the deal, Israel is to release jailed Palestinians and allow a ramp-up of aid supplies to Gaza, while Israeli forces will withdraw in steps until they reach a buffer zone just within Gaza’s border.
Malaysian palm oil futures hold firm at 7-week high… Malaysian palm oil futures rose for the third straight session Thursday, to around MYR 4,575 per MT, maintaining a seven-week high. Gains were driven by stronger rival Dalian oils as markets in China reopened after a week-long holiday, along with expectations of seasonally lower production in the coming weeks. Export sentiment also strengthened after cargo surveyors noted Malaysian shipments up 7.3–9.6% in September from August, while Reuters estimated stockpiles fell 2.5% to 2.15 million tons. In Indonesia, the world’s top producer, the government plans to introduce B50 biodiesel in 2026 and may launch 10% bioethanol in gasoline to curb emissions and fuel imports. Still, caution ahead of September’s monthly data capped gains. Demand from India, the world’s largest buyer, stayed weak, slipping 15.9% to 833,000 tons in September and potentially dropping to 600,000 tons as festive buying peaks.
Feeder cattle futures at record high… Feeder cattle futures led gains in the cattle futures markets Wednesday, with November feeders setting a record high. The live and feeder cattle bulls have once again shown incredible resilience after they were left for dead in mid-September. The live cattle futures bulls still have some stiff overhead technical resistance levels to overcome in order for new for-the-move highs to occur. USDA Wednesday reported very light cash cattle trade taking place at an average of $230.00 for steers and $228.00 for heifers. Cash cattle trading last week averaged $230.76. That’s down $1.89 from the prior week’s average of $232.65.
Lean hog futures in pause mode… The lean hog futures market paused Wednesday. Last week’s price downdraft did produce serious near-term chart damage to suggest a market top is in place. Selling interest was limited Wednesday due to the rallies in the cattle futures markets and due to lean hog futures’ discounts to the cash hog index. Cash and fresh pork fundamentals have been weakening. The latest CME lean hog index is down 60 cents at $101.42. Today’s projected cash hog index is down another 72 cents at $100.70. Wednesday’s national direct 5-day rolling average cash hog price quote is $98.35.