First Thing Today | October 12, 2022

Good morning!

Weaker tone awaiting USDA reports... Corn, soybean and wheat futures faced mild selling pressure in relatively light overnight trade ahead of USDA’s October crop reports later this morning. As of 6:30 a.m. CT, corn and soybean futures are both trading 1 to 2 cents lower, winter wheat futures are 5 to 9 cents lower and spring wheat is mostly 3 to 4 cents lower. Front-month crude oil futures are around 50 cents higher and the U.S. dollar index is holding near unchanged this morning.

Big balance sheet changes coming later this morning... USDA will release its Crop Production and Supply & Demand Reports at 11 a.m. CT. The 2022-23 domestic balance sheets will reflect Sept. 1 stocks and the final 2022 wheat crop estimate, along with any changes to this year’s corn, soybean and cotton crop forecasts. That will produce some major adjustments to the supply and demand sides of the balance sheets. USDA is expected to lower its corn crop estimate by 59 million bu. from last month to 13.885 billion bu. and raise its soybean crop estimate by 3 million bu. to 4.381 billion bu., based on a Reuters survey. Ending stocks for 2022-23 are expected to fall to 1.124 billion bu. for corn, increase to 248 million bu. for soybean and drop to 554 million bu. for wheat.

China raises corn crop estimate... China’s ag ministry raised its corn production estimate by 2.75 MMT to 275.31 MMT, which would be up 2.76 MMT (1.0%) from last year. The ministry left its 2022-23 corn import forecast at 18 MMT, which would be down 4 MMT (18.2%) from last year. It also maintained its 2022-23 soybean import forecast at 95.2 MMT, which would be up 4.18 MMT (4.6%) from 2021-22.

Crop Progress Report highlights… Following are highlights from USDA’s crop progress and condition update for the week ended Oct. 9.

• Corn: 87% mature (85% average), 31% harvested (30% average), 54% good/average (52% last week).
• Soybeans: 91% dropping leaves (88% average), harvested 44% (38% average), 57% good/excellent (55% last week).
• Cotton: 84% bolls opening (81% average), 29% harvested (25% average), 30% good/excellent (31% last week).
• Winter wheat: 55% planted (58% average), emerged 26% (32% average).

France raises wheat export forecast... France’s ag ministry raised its 2022-23 French wheat export forecast outside the EU by 100,000 MT to 10.1 MMT, which would be up 15% from last year. The ag ministry trimmed its French wheat export forecast within the bloc 60,000 MT to 7.07 MMT, which would be down 12% from 2021-22.

China to auction more wheat... China will auction 40,000 MT of state-owned wheat reserves on Oct. 19. It held a similar auction today, from which results are unknown.

Biden: ‘Consequences’ for Saudi’s oil decision... President Joe Biden said Tuesday night there will be “consequences” for Saudi Arabia after it joined with Russia and other OPEC+ countries last week to cut oil production. Meanwhile, Senate Foreign Relations Committee Chair Bob Menendez (D-N.J.) has called for “a freeze in all aspects of our cooperation with Saudi Arabia,” including arms sales. Senate Majority Whip Dick Durbin alleged Saudi Arabia “is not a trustworthy ally.” Sen. Dick Blumenthal (D-Conn.) and Rep. Ro Khanna (D-Calif.) have drafted a resolution to block all arms sales to Saudi Arabia for one year and one a vote on the measure.

BOE reiterates it will end bond buying program on Friday... The United Kingdom government bond market remains in turmoil, as the Bank of England (BOE) earlier this week was forced to buy inflation-linked bonds as part of its bond-buying program. BOE Governor Andrew Bailey warned British pension funds and other investors hit hard by a slump in bond prices they had just three days left to fix their problems before the central bank would withdraw support. There are worries U.K. pension funds could be lost if the bond market rout continues.

Fed survey: Consumers expect inflation to ease... Consumers see the U.S. inflation rate cooling modestly over the next year but are less optimistic longer-term, according to the latest survey by the Fed Bank of New York. Meanwhile, Fed Bank of Cleveland President Loretta Mester said officials need to keep raising interest rates and cannot get complacent as they work to battle the strongest inflation in a generation.

SCOTUS zeroes in on key Prop 12 issues... U.S. Supreme Court (SCOTUS) justices voiced worries about the implications of a new California humane-pork law, Proposition 12, asking whether it might open the way for other states to try to impose their moral values beyond their borders. Justices suggested they might let a pork-industry challenge to the law go forward without issuing a definitive ruling on the measure’s constitutionality. If so, that could mean allowing a pork industry-backed lawsuit challenging the law to play out in the lower courts rather than rule on its constitutionality. A decision in the case is expected sometime next year.

Romania confirms new ASF outbreak... Romania has confirmed an outbreak of African swine fever (ASF) at a large pig farm in the western county of Timis. A Romanian official said, “A priority is to protect two other farms, each with tens of thousands of pigs, located a few kilometers away.”

Beef margins turn negative... Estimated beef cutting margins calculated by hedgersedge.com turned negative on Tuesday, the first time they’ve been below breakeven since 2018. Despite the negative margins and heavy carcass weights, packers are expected to stay relatively active in cash negotiations as market-ready supplies will continue to tighten in 2023.

Short-lived rebound in cash hog index... After being up 33 cents yesterday, the CME lean hog index is down 3 cents today (as of Oct. 10). While the cash index may struggle to firm as supplies rise seasonally, recent price action suggests the cash market has stabilized. And there’s still a chance the market could put in an early seasonal low.  

Overnight demand news... Taiwan buys 65,000 MT of corn that is expected to be sourced from Brazil. Algeria purchased between 480,000 and 510,000 MT of milling wheat that is expected to be sourced mostly from Russia but also some from Romania and Bulgaria. Japan tenders to buy 70,000 MT of feed wheat and 40,000 MT of feed barley.

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

• 11:00 a.m. WASDE — ERS
• 11:00 a.m. Cotton Ginnings — NASS
• 11:00 a.m. Crop Production — NASS
• 11:15 a.m. Cotton: World Markets and Trade — FAS
• 11:15 a.m. Grain: World Markets and Trade — FAS
• 11:15 a.m. Oilseeds: World Markets and TradeFAS
• 11:15 a.m. World Agricultural Production — FAS
• 2:00 p.m. Livestock: World Markets and Trade — FAS
• 2:00 p.m. Broiler Hatchery — NASS