Good morning!

Grains lower, soybeans higher overnight… Corn futures faced pressure overnight and as of 6:35 a.m. CT most contracts are trading low-range and down 2 to 3 cents. Soybean futures, on the other hand, are up 2 cents, which is well off overnight highs. Wheat futures also faced pressure overnight and are down 2 to 4 cents. The U.S. dollar index is marginally lower, with crude oil futures notching gains.

Expectations for today’s Weekly Export Sales Report…

China has reportedly made some big Brazilian bean purchases this week… Chinese importers have promised big purchases of U.S. farm goods as part of a partial trade agreement with the U.S., but Chinese importers have been scooping up Brazilian soybeans this week, according to two traders cited by Reuters. They say China has booked at least eight cargoes (around 480,000 MT of soybeans) from Brazil since Monday. In contrast, USDA has only announced one daily soybean sale of 142,579 MT this week and it was to “unknown” destinations. Reuters’ trade sources say China has not been making inquiries for U.S. beans. Brazilian soybean prices are sliding, and U.S. beans are still subject to 25% retaliatory duties. The result is that prices for near-term delivery are near equal, and when that is the case China tends to favor Brazilian beans due to their higher protein content.

Chinese economic growth missed expectations for the third quarter… China’s economy expanded by 6% in the third quarter from a year earlier, down from the period before, which hit the bottom end of Beijing’s target range for growth this year. It’s the slowest growth rate since 1992, when China started reporting its GDP by quarters. There are several factors to blame:

• The trade war with the U.S., which is still raging despite recent breakthroughs in negotiations between Washington and Beijing;
• Slumps in the country’s huge automotive and real estate sectors; and
• A swine fever epidemic that has decimated its pig population.

Pillsbury warns caution on Phase 1 deal… "You shouldn't be thrilled," Michael Pillsbury, a senior fellow at the Hudson Institute and outside adviser to President Donald Trump, said this week on Fox Business in regards to the partial trade deal with China. "The tactic here is to postpone the harder issues until Phase 2, but Phase 1 isn't even locked up yet and it could explode in our faces."

Aussie bank drops wheat crop peg to just 15.5 MMT… Australia’s wheat crop will likely total just 15.5 MMT, forecasts the National Australia Bank. A small crop is not a surprise as the country has been dealing with drought for three years, but the bank’s peg is well under the 18 MMT to 19 MMT most crop watchers have been calling for. Phin Ziebell, agribusiness economist at the bank, says heat, dry weather and frost are to blame.

Drier weather help wheat planting, corn harvest to pick up in France… French farmers have planted 21% of their intended soft wheat area as of Oct. 14, a solid 17-point advance from the week prior, reports the French farm office. It also reports 30% of the country’s corn crop has been harvested, more than double last week’s pace but still well behind last year when 81% of the crop had been picked. Rain slowed early harvest efforts, but improved weather this week helped farmers to pick up the pace.

Corn’s share of Japanese feed rations up vs. year-ago… Japan imported 1.905 MMT of grain for use in animal feed during August, a 5.3% decline from July and a 2.3% retreat from year-ago, according to preliminary data from the country’s ag ministry. Corn made up 48.8% of that tally (roughly 929,400 MT), which was a marginal decline from July but a percentage point gain from corn’s share last year. But the bigger overall import number last year implies slightly higher corn imports of around 932,000 MT in August 2018. Barley usage held steady with month- and year-ago at 3.5%. Sorghum use declined 0.6 points to 1.8%. And wheat’s share of feed rations held at 1.6% in August, a 0.1-point slide from August 2018.

The U.S. is slapping tariffs on $7.5 billion worth of European goods today… Aircraft produced in the European Union will be slapped with 10% tariffs, while a group of consumer products that includes wine, whiskey and cheese will be slapped with 25% tariffs. Earlier this week, the World Trade Organization cleared Washington to take action after concluding that Airbus received billions of dollars in illegal subsidies over the years.

Neal pleased with Mexico's labor steps as USMCA talks continue… Mexican President Andrés Manuel López Obrador sent a letter to U.S. House Ways and Means Chairman Richard Neal (D-Mass.) outlining steps Mexico is taking to strengthen labor standards. “I’m very pleased with Mexico’s demonstration of good faith,” Neal, who is among lawmakers working on the pending U.S.-Mexico-Canada trade accord, said in a statement. “Given the high labor and enforcement standards Democrats require from the new NAFTA agreement, I am eager to receive further details from USTR regarding the Trump administration’s preparation to meet our priorities,” Neal concluded. Speaking after a 90-minute meeting with Lighthizer, Neal said Democrats are still looking for assurances on enforcement. Asked whether the two sides might be able to reach a handshake deal by Thanksgiving, Neal replied: "I would like to think that, but I think that even based on what we discussed here today ... that there's still a ways to go."

Corn, biofuel proponents snookered by EPA… EPA's attempt at a “win-win” approach between biofuel and crude oil sectors was not the balanced approach Trump signaled it would be. The industry expected EPA to use an average of actual small refinery exemptions to keep a floor of 15 billion gallons for biofuel blending; but it actually proposed using a method to weight Department of Energy scores that could again result in blending under the 15-billion-gallon threshold. USDA Secretary Sonny Perdue and Senator Chuck Grassley (R-Iowa) did not win on this battle with the refining industry. Nor did biofuel proponents. If EPA does not alter its current stance when the final announcement comes after reading public comments, Trump could feel the pain in the critical re-election state of Iowa.

Hemp regulations expected soon… The interim final rule is currently undergoing a review by several agencies, and is on track to be finalized in the next couple of weeks. We are “nearing just about the end of the process,” USDA Secretary Steve Censky told the Senate Ag Committee. There is robust interest from farmers about the 2018 Farm Bill’s legalization of industrial hemp, noted Senator Joni Ernst (R-Iowa), who asked Censky when USDA’s interim rule for the national hemp program will be released for public comment. In his opening remarks, Cenksy said USDA’s Agricultural Marketing Service (AMS) has been “working aggressively” to ensure regulations are ready for the 2020 growing season. “We would expect to be issuing the interim final rule here within the next couple of weeks,” Cenksy said in response to Ernst’s follow up. The rule has “been in the interagency clearance process now for over 90 days” at the Office of Management and Budget (OMB), said Cenksy, adding that he believes “we're nearing just about at the end of that process.” The rule is still listed as being under review at OMB.

Grassley raises crop reporting concerns… Alleged discrepancies seen this year in USDA’s crop reports were raised by Grassley, who said those concerns have sewn “a lot of distrust among farmers” who felt some of the numbers reported were “very unrealistic.” USDA understands its reports are “relied on not only by producers, but the markets and the trade. And they really set the standard of how other private forecasts are judged,” Censky acknowledged. “We have a long history of making sure we're trying to make them just as accurate as possible.” He said discrepancies seen this year were largely due to unforeseen weather conditions. To avoid similar issues down the road, Censky said USDA will be implementing a pilot program involving additional satellite data so that USDA can adjust its forecasts if, for example, substantial rain falls after crop survey data is gathered. With additional data sources, the department “will be able to utilize — rather than just the survey information — satellite information and other information to give the best forecast,” he observed.

Turkey agrees to a brief ceasefire… Turkey has agreed to a five-day ceasefire in Syria following the meeting between Turkish President Recep Tayyip Erdogan and U.S. Vice-President Mike Pence, with Turkey to halt an offensive in northern Syria temporarily. Trump said it was “great news” and that “millions of lives will be saved.” In return, Trump will not impose further sanctions on Turkey. But fighting flared in the border region. Meanwhile, The Times of London reported that Turkey could have used banned white phosphorus against Kurdish civilians.

UAW reps approve new contract, but workers still have to vote… UAW representatives voted to approve a tentative agreement with General Motors yesterday, but the month-long strike won’t end until rank-and-file workers have a vote. The four-year deal includes wage increases and a pathway to full-time employment for temporary workers. It also eliminates a system in which workers receive different pay for equivalent jobs, based on when they were hired. But the deal will not address a previous sticking point: reopening plants and bringing jobs back to the U.S. from Mexico.

NBS says Chinese pork production down 17% from year-ago… In the first nine months of 2019, China produced 31.81 MMT of pork, a 17.2% decline from the same period last year, data from the country’s National Bureau of Statistics shows. African swine fever has wiped out much of China’s herd and prompted preemptive culling over the past year. Hog slaughtered over that period slid 17.3% to 409.78 million head. NBS also reports that the country’s herd has fallen 28.5% from year-ago to 306.75 million head. That also represented an 11.8% decline since the first of the year. At least on the surface, the NBS data does not align with ag ministry data showing the country’s hog herd is down 41% from year-ago or Rabobank’s projection that China’s pork production will drop by a quarter this year.

ASF spreading in the Philippines… The Philippines reports African swine fever has spread to two new provinces—Cavite and in Nueva Ecija on Luzon Island. Since the virus was first detected Sept. 9, the country has culled more than 30,000 pigs in an effort to protect its $5 billion hog industry. The country is the world’s seventh largest pork importer.

Cattle market investigation continues... USDA’s investigation into price movements in cattle markets following a fire at Tyson Foods’ Holcomb, Kansas, meat plant also surfaced several times during the ag panel hearing. Censky said the probe is “moving forward” but that he does not have a time frame for when it will be completed. Investigators are “taking a look at whether there was any kind of price manipulation, and any unfair trade practices that took place at that time,” Censky observed.

Concerns the cattle rally will stall soon… Nearby live cattle contracts once again pushed higher on Thursday, but deferred months set back amid concerns about just how much longer the rally can last. Adding to such concerns was an explosion at a meat processing plant that took the facility offline for a day and scaled back cash market expectations. The Iowa/Minnesota market has seen some light action at higher price levels in recent days, but all is quiet in other locations. 

Weekly export sales data a focal point for hog traders today… This week’s kill is running 10,000 head ahead of last week’s big numbers and 66,000 head ahead of year-ago levels, which put some pressure on the market yesterday. Given aggressive processing, Chinese demand for U.S. pork is essential for preventing supplies from overwhelming the market. But White House officials have indicated the much-touted Chinese purchases will partly depend on the markets. Traders will look to today’s weekly export sales update (for the week ending Oct. 10) for evidence of Chinese purchases.

Overnight demand news… Japan’s ag ministry purchased 35,590 MT of food-quality wheat from the U.S., 50,400 MT of food-quality wheat from Japan and 29,845 MT of the grain from Australia in a regular tender.

Today's reports:

• 7:30 a.m. Weekly Export Sales Report — FAS
• 2:00 p.m. Peanut Prices — NASS