First Thing Today | October 26, 2023

Good morning!

Varied price tone in grains overnight... Grain markets traded on both sides of unchanged overnight, with corn weaker, beans near unchanged and wheat firmer this morning. As of 6:30 a.m. CT, corn futures are trading a penny lower, soybeans are narrowly mixed, winter wheat markets are 1 to 3 cents higher and spring wheat is mostly 3 to 5 cents higher. Front-month crude oil futures are around $1.50 lower and the U.S. dollar index is about 300 points higher.

Johnson takes over as House speaker... New House Speaker Mike Johnson (R-La.) takes the reins of the bitterly divided House Republican majority. Johnson pledged to try to “restore the people’s faith in this House.” He cited sending aid to Israel, fixing a “broken” southern border, and reining in federal spending as his top legislative priorities. Johnson pledged that his office “is going to be known for decentralizing power.” Johnson is proposing a stopgap bill that lasts until either Jan. 15 or April 15, “in order to ensure the Senate cannot jam the House with a Christmas omnibus.” This is in concert with the prevailing understanding that a continuing resolution (CR) is needed. But the question on a CR is under what conditions. Some right-wing House members demand any spending stopgap include conservative policy measures, something the Senate would surely reject, while other Republicans say they’ll refuse to support any short-term spending bill. Some, however, indicated they’d give Johnson more leeway than they granted Kevin McCarthy (R-Calif). A letter from Johnson to members said he wanted a new farm bill debated in the House in December, but key unresolved issues remain among top farm bill leaders. While reports have surfaced of some additional funding being made available in the Senate, the additional funding is far from the level needed to significantly improve the Title I farmer safety net. Bottom line: A big part of Johnson’s job is to bring order to the recent Republican chaos. The initial test will be how Johnson deals with the threat of a government shutdown pending a Nov. 17 deadline on additional action on FY 2024 spending, and White House requests for aid to Israel, Ukraine, Taiwan and for border security.

Weekly Export Sales Report out this morning... For the week ended Oct. 19, traders expect:

Southeast Australia frost has low impact... World Weather Inc. says, “Frost occurred this morning in southeastern Australia as expected, although most of it was soft and non-threatening to winter crops approaching reproduction or to those that were already reproducing and filling. Some localized damage was suspected, although not confirmed and the biggest impact might have been to the quality of lentils that were maturing. Most of the wheat and barley should not have been seriously impacted since most temperatures stayed above freezing.”

Ukraine suspends new Black Sea grain corridor... Ukraine has suspended use of its new Black Sea grain corridor due to what it sees as a threat from Russian warplanes, Kyiv-based Barva Invest consultancy said. The consultancy said a de facto suspension had already been in place for two days at the behest of the military, which cited a threat from increased Russian military aviation activity in the area.

India may extend rice handout program to March... Indonesia is considering extending its rice handout program to March 2024 amid concerns over supply disruptions as drought linked to the El Niño weather pattern hit harvests, the country’s food procurement agency Bulog said. Bulog has been giving 10 kilograms of rice to 21.3 million lower-income households every month in Indonesia to help them cope with rising prices of the staple, in a program originally set to run from September to November. The government recently extended the program through December but is considering a second extension.

House to complete work on energy and water appropriations... House members are scheduled to start voting by 11:30 a.m. ET on amendments to the Energy and Water Development appropriations bill for fiscal year (FY) 2024. The Energy Department, Army Corps of Engineers and related agencies would receive $52.4 billion in discretionary funding for FY 2024 under the measure. The amount would be $1.6 billion less than the FY 2023 enacted level and $7.5 billion less than the White House requested, according to the House Appropriations Committee report. The measure would total $58 billion before the rescission of $5.6 billion in unobligated funds from Democrats’ tax, health and climate law, according to a summary from committee Republicans. The bill would also block funding for several actions, including a Biden administration rule implementing the new definition of “navigable waters” under the Clean Water Act.

UAW and Ford reach tentative deal to end strike... The United Auto Workers (UAW) union and Ford, its largest employer, came to a tentative agreement aimed at bringing an end to a strike that will see approximately 16,600 autoworkers back on the job in the coming days. The agreement includes a provision for workers to receive a minimum of 25% more in compensation until 2028. While the UAW expressed its satisfaction with the tentative deal with Ford, more than 29,000 other union members remain on strike at America’s two other unionized automakers, General Motors and Stellantis. The strike, ongoing since Sept. 15, has had a significant impact on some of the largest and most profitable factories in the United States.

Beef, pork stocks remain well below average... USDA’s Cold Storage Report Wednesday afternoon showed beef stocks at the end of September totaled 420.2 million lbs., up 24.8 million lbs. (6.3%) from August, which was greater than the five-year average increase of 11.1 million lbs. during the month. But beef inventories dropped 105.9 million lbs. (20.1%) from year-ago and were 60.7 million lbs. (12.6%) below the five-year average. Frozen pork inventories totaled 462.8 million lbs., down 6.5 million lbs. (1.4%) from August, whereas the average over the past five years was a 3.0-million-lb. increase during September. Pork stocks fell 74.3 million lbs. (13.8%) from last year and were 69.4 million lbs. (13.0%) lower than the five-year average.

China’s hog numbers down from year-ago... China’s sow herd at the end of September totaled 42.4 million head, down 2.8% from last year, the ag ministry said. The pig herd dropped 0.4% to 44.23 million head.  

Choice beef finding a little footing... Choice boxed beef prices firmed $1.52 on Wednesday to $307.50, which is $10.74 off the Oct. 4 low. Select beef dropped $2.34 to $281.66 but are also off their lows earlier this fall. While packer margins remain in the red, they have improved with wholesales prices, especially Choice beef, finding some recent support.  

Traders narrow discount in December hog futures... The CME lean hog index is down another 26 cents to $78.41 (as of Oct. 24), extending the persistent seasonal slide. December lean hog futures firmed $1.125 on Wednesday, narrowing the front-month contract’s discount to $10.91. That’s slightly less than the five-year average decline from now until contract expiration in mid-December.

Overnight demand news... Taiwan purchased 52,000 MT of U.S. milling wheat.

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. Tree Nuts: World Markets and Trade — FAS