Pro Farmer's First Thing Today

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Good morning!

Corn and soybeans pull back… Disappointment regarding the details of EPA’s supplemental biofuel plan weighed on the corn market overnight, with most contracts currently trading steady to 2 cents lower. Meanwhile, bulls in the bean market recognize that much of the partial U.S./China trade accord will hinge on the details that are still being hashed out. That has soybean futures consolidating recent gains and fractionally to a penny lower as of 6:30 a.m. CT. Winter wheat futures are down 1 to 2 cents, and spring wheat futures are notching fractional losses. The U.S. dollar index is marginally higher, as are crude oil futures.

Crop progress and condition summary… Following are highlights from USDA’s Crop Progress and Condition Report as of Oct. 13:

Doubt regarding China’s commitment to buy large amounts of U.S. farm products… President Donald Trump said Friday that Chinese purchases of U.S. farm goods will reach the $50 billion range in “less than two years.” But the Chinese side hasn’t confirmed his figures, and on Tuesday Senator Chuck Grassley (R-Iowa) said he wanted to get more details on what the agreement entails. China could attach conditions to a written pact that would allow it to buy less farm products than the U.S. expects, such as by stretching out the time frame for purchases. China could also insist on language saying that prices for U.S. goods are reasonable and that Chinese purchases comply with the rules of the World Trade Organization, which bans managed trade. This is why the official Phase 1 language regarding farm product purchases will be key. That language is expected in three to five weeks.

Hong Kong legislation making its way through Congress angers China… China threatened the U.S. with “strong countermeasures” in a reaction to the U.S. House passing legislation to support Hong Kong. It’s now headed to the Senate, where it needs to be approved before being signed into law by Trump.

China farm prices rise again… China’s farm produce prices rose another 3.9% for the week ended Oct. 13, including a 14.8% rise in wholesale pork prices. Food prices make up about one-third of China’s Consumer Price Index which posted a rise of 3% in September, faster than the August rise and the quickest pace in six years.

IMF slashes forecast for global economic growth… The International Monetary Fund (IMF) slashed its forecasts for global economic growth, primarily because of the Sino-American trade war. The fund reckons world GDP will grow by just 3% in 2019, 0.3 percentage points less than it forecast six months ago. That will make it the slowest rate of expansion since the great recession of 2009.

IMF official says settling U.S./China trade tensions would ease strain on global economy… Gita Gpinath, chief economist at the IMF, welcomed news of a partial U.S./China trade agreement and urged the two sides to continue their efforts to settle the trade tensions. She said that removal of all the tariffs the U.S. and China have imposed since early 2018 would boost global growth by 0.8% by the end of 2020. She also forecast that global GDP would be reduced by 0.6% rather than 0.8% if Washington and Beijing do not impose tariffs due to take effect Oct. 15 and Dec. 15. The U.S. and China agreed not to move forward with the Oct. 15 tariffs as part of the recent accord, but the verdict is still out regarding the December tranche.

Australia hopes to approve trade deals with Hong Kong, Indonesia and Peru by year-end… Australia’s government introduced legislation to ratify trade deals with Indonesia, Hong Kong and Peru this week, with the goal of clearing the trade legislation by year-end. The country’s farmers, who have struggled with drought the past three years, are very much in favor of the deal that would lift many tariffs and boost two-way trade between Australia and each of these countries. Australia’s opposition Labor Party has indicated it supports the trade deal, but it will likely push for labor market access concessions to keep its union members happy, which could slow the approval process.

Elizabeth Warren felt the heat from fellow Democrats in a televised debate between presidential hopefuls… Warren was pressed on her plan to introduce “Medicare for All.” Senator Amy Klobuchar (D-Minn.) accused Warren of not properly explaining where the money would come from and asked Klobuchar if middle class taxes would rise. Warren did not provide an answer to the specific question. Senator Bernie Sanders (I-Vt.) tried to reassure voters of his stamina two weeks after a heart attack. He, Joe Biden and Warren, all of whom are in their 70s, were asked about their age. Meanwhile, Sanders has won the support of two of the Democratic Party’s most prominent progressives: Representative Ilhan Omar (D-Minn.), who endorsed him on Tuesday, and Representative Alexandria Ocasio-Cortez (D-N.Y.), who will do so this weekend, according to his campaign.

Mike Pence and others head to Turkey… A high-level entourage led by the U.S. vice president is planning to meet with Turkish president Recep Tayyip Erdoğan to negotiate a cease-fire between Ankara and Syrian Kurdish forces. Erdoğan has already rejected the idea.

Another wild boar near DMZ tests positive for ASF… South Korea says it found another wild boar near the border with North Korea that tested positive for African swine fever (ASF), the seventh such case. The country has started to mobilize hundreds of soldiers and civilians to hunt down wild boars near the border as part of its effort to contain ASF. The country believes wild boars from North Korea may be to blame for the spread of the virus in South Korea. There have been 14 confirmed cases of ASF in South Korean pig farms since the virus first appeared Sept. 17; bloodwork in the latest suspected case in Yeoncheon came back negative.

Signals cash cattle market will strengthen… A few cattle traded in the Iowa/Minnesota market yesterday at $110, up a buck from last week. But action was too light to set a market trend. Futures are signaling they expect the cash market to build on last week’s gains as the front-month holds a modest premium to last week’s average price of $109. African swine fever in China and other Asian nations has been a positive for meat exports. And the recent cold snap and wet weather stressed animals across much of the Plains. In addition, boxed beef prices are marching higher. All of this should give feedlots the advantage in this week’s negotiations.

Another limit close for lean hog futures… Limits are once more expanded to $4.50 in the lean hog futures market after a limit-higher close for the front-month on Tuesday. Optimism about big Chinese purchases of U.S. pork is growing, as China has recently pulled the trigger on some big buys, its pork prices are climbing and expected to move higher and trade tensions have eased for now. Pork prices are also on the rise in Europe. Meanwhile, cash hog bids climbed $1.08 yesterday and pork movement was solid despite a slight uptick in prices. This week’s kill is running 8,000 head ahead of last week and 41,000 head in advance from year-ago.

Overnight demand news… Japan’s ag ministry is seeking a total of 115,835 MT of feed-quality wheat from the U.S., Canada and Australia in a regular tender. The country also said it received no offers in its simultaneous buy and sell auction in which it was seeking 120,000 MT of feed wheat and 200,000 MT of feed barley. Egypt tendered to buy an unspecified amount of wheat from global suppliers.

Today's reports: