First Thing Today | September 29, 2022

Good morning!

Firmer tone in grain, soy markets this morning... Overnight trade was light and two-sided, though buyer interest is building with grain and soy markets trading near session highs early this morning. As of 6:30 a.m. CT, corn futures are trading 3 to 4 cents higher, soybeans are 11 to 14 cents higher and wheat futures are 6 to 10 cents higher. Front-month crude oil futures are modestly firmer, while the U.S. dollar index is around 350 points higher.

Russia moves closer to annexing areas of Ukraine as tensions mount... Russian President Vladimir Putin will host a signing ceremony in the Kremlin on Friday to incorporate four Ukrainian regions into Russia, a major step towards formally annexing around 15% of Ukraine. Putin will give a speech and meet with the leaders of the self-styled Russian-backed Donetsk People’s Republic and Luhansk People’s Republic as well as the Russian-installed leaders of the parts of the Kherson and Zaporizhzhia regions that Russian forces occupy. The West and Ukraine say Russia is violating international law by seizing another part of Ukraine, whose post-Soviet borders Moscow recognized shortly after the fall of the Soviet Union. Meanwhile, Putin signed a decree on Thursday authorizing the Russian government to ban some Western trucks from transiting across Russian territory. The decree allows for a ban on trucks carrying freight that are registered in countries that have applied similar restrictions against Russia.

NATO says Nord Stream leak was sabotage... NATO said that a series of leaks on the Nord Stream pipelines between Russia and Europe were the result of acts of sabotage that would be met with a collective response from the military alliance. EU leaders are to meet next week and discuss the Nord Stream pipeline leaks, an EU official said, noting the situation means “the strategic infrastructure in the entire EU has to be protected.” The officials said the situation “changes fundamentally” the nature of the conflict. Russia’s foreign ministry said ruptures to the Nord Stream pipelines that have caused gas leaks off the coasts of Denmark and Sweden occurred in territory that is “fully under the control” of U.S. intelligence agencies.

China’s state banks told to prepare for yuan intervention... The People’s Bank of China (PBOC) has asked major state-owned banks to be prepared to sell dollars for the local unit in offshore markets as it steps up efforts to stem the yuan’s descent, Reuters reported, citing four sources with knowledge of the matter. State banks were told to ask their offshore branches, including those based in Hong Kong, New York and London, to review their holdings of the offshore yuan and ensure U.S. dollar reserves are ready to be deployed, three of the sources told Reuters. The simultaneous selling of dollars and buying of yuan could put a floor under the Chinese currency, which has lost more than 11% to the dollar so far this year and looks set for its biggest annual decline since 1994, when China unified its official and market rates. Sources said the intervention plan involved using state lenders’ dollar reserves primarily. But the total amount of dollar selling is yet to be determined as the yuan’s movements are largely dependent on dollar moves and the Fed's tightening trajectory, the sources said.

PBOC to step up economic support... PBOC said it will step up efforts to consolidate an economic recovery, citing an array of risks to the global economy while pledging to implement prudent monetary policy and keep liquidity reasonably ample. PBOC will focus on stabilizing employment and prices and will seek ways to help reduce corporate financing and consumer credit costs. Other measures cited by the central bank on Thursday included speeding up the use of special loans to ensure housing sales are completed and plans to guide commercial banks to provide financing support for the scheme. PBOC also pledged to keep the syuan exchange rate basically stable, enhance currency flexibility, strengthen expectation management and guide firms and financial institutions to adhere to the concept of “risk neutrality.”

China plans big Q4 treasury bond issuance to support its economy... China’s finance ministry plans to issue about 2.5 trillion yuan ($347.4 billion) in treasury bonds in the fourth quarter to help underpin the slowing economy, two sources with direct knowledge of the matter told Reuters. That would be a 21% jump from the amount of bonds issued in the fourth quarter of last year. The ministry has also urged local governments to complete issuing the roughly 500 billion yuan in special bonds by the end of October under carryover quotas from previous years, the sources said.

Euro zone economic sentiment plunges... Euro zone economic sentiment fell more sharply than expected in September, as confidence dropped among companies and consumers, who are also downbeat about price trends in the coming months. The European Commission’s monthly economic sentiment index fell to 93.7 points in September from a downwardly revised 97.3 in August. Confidence fell in all economic sectors amid a rise in inflation expectations across the board, with the decline most pronounced among manufacturers and consumers.

Weekly Export Sales Report out this morning... For the week ended Sept. 22, traders expect:

Ian’s impact on the U.S. energy sector relatively limited... As of midday Wednesday, the Bureau of Safety and Environmental Enforcement (BSEE) said that 9.12% of oil and 5.95% of natural gas production in the Gulf of Mexico was shut in because of the storm. The agency’s update indicated it was the final update, underscoring the apparent limited impact the storm has had on energy operations in the Gulf. The update indicated 11 platforms were evacuated, (2.11% of those in the Gulf), 5 rigs were evacuated (35.71% in the Gulf) and three dynamically positioned rigs (15.79% of the DP rigs) were moved off location.

FDA proposing changes for ‘healthy’ label on food packages... FDA is proposing changes to the nutrition standards that foods must meet before they can carry the “healthy” label on their packages. Foods that make the claim would need to have limits on individual nutrients like fat, saturated fat, cholesterol and sodium, and they must contain minimum amounts of vitamins A and C, calcium, iron, protein and dietary fiber. But since the “healthy” claim was first defined in 1994, FDA said an update was needed to reflect changes in nutrition and dietary science. For example, certain cereals that have high amounts of added sugars still meet the definition of “healthy,” but salmon — which is high in beneficial polyunsaturated fat — does not. FDA said the goal of the proposal is to help consumers improve their dietary patterns.

H&P Report to show more herd contraction... Analysts expect USDA’s Hogs & Pigs Report this afternoon to show the U.S. hog herd contracted 0.8% from year-ago, which would place the Sept. 1 inventory at around 74.3 million head. The market hog inventory is expected to be 0.9% smaller and the breeding herd 0.4% smaller than year-ago – both would be the lowest levels since 2017. The pre-report expectations also signal summer farrowings declined 0.8% and fall farrowing intensions will be down 1.0% from last year, though winter intensions are expected to be up 0.5%.

Steady cash cattle trade in Southern Plains... Some light cash cattle trade was reported Wednesday at roughly steady prices in the Southern Plains, though most feedlots held out for hopes of firmer prices despite this week’s pressure on live cattle futures. Cash negotiations remained quiet in the northern market. Unless packers are shorter on near-term needs than cash sources expect or futures stage a strong recovery rally, it appears unlikely cash cattle prices would firm this week.

Pork cutout back above $100... The pork cutout value firmed $1.76 Wednesday to $100.77. While movement slowed to 275.8 loads yesterday, there apparently was enough value buying under $100.00 on Tuesday’s drop below that level to encourage packers to raise bids. The question now is whether there’s enough retailer demand for packers to keep raising prices.

Overnight demand news... Taiwan purchased 51,800 MT of U.S. milling wheat. Japan purchased 61,800 MT of milling wheat in its weekly tender, including 28,550 MT U.S. and 33,250 MT Canadian. South Korea tendered to buy up to 69,000 MT of optional origin corn. Iraq tendered to buy a nominal 50,000 MT of milling wheat from unspecified origins.

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
• 2:00 p.m. Fruit and Tree Nuts Outlook: September 2022 — ERS
• 2:00 p.m. Hogs and Pigs — NASS