Rumors of China loosening Covid restrictions sparks rallies.
Grain futures moved higher overnight, as rumors out of China potentially reopening much sooner than anticipated created a flurry of buying, sending crude oil nearly $4.00 higher, pulling metals and the other host of commodities with it to the upside. This morning’s job data showed a build of 261,000 in October versus estimates of 200,000, but the unemployment rate still ticked by a 10th%. This has the US dollar down at half a point while stock indexes maintain overnight strength.
Ukrainian Corridor Pact negotiations continue this week, with confusion over Russia’s intentions going beyond November 19. Also, the concern of a likely rail strike emerging after November 21 is building. Next week’s midterm elections on Tuesday will affect the US dollar. Then we have Wednesday’s November crop production data that estimates are intending we will see the carry-outs growing. Grains have numerous crosscurrents that create days opposite each other, with trends hard to discern. Soybean oil is garnering its strength following the world veg oil market and rising oil prices.
The US and Mexico met on Thursday to better understand each other’s position on food/energy. Mexico is slated to end the import of GMO corn by 2024, which impacts billions of dollars of US ag products to Mexico. We exported 670 Mil Bu of corn to Mexico in the 2020 one/22 season. What has yet to be discerned is whether the GM ban applies to just food corn or all imported corn that is also used for feed.
With China having recently approved Brazilian corn for shipment, there has been talk that China was seeking Brazilian corn for December and early 2023 shipment. The amount side was 1 MMT that has been sold already, while others suggest there are still ongoing negotiations. US corn and wheat are non-competitive to most world destinations, with South American weather now seen as improving slightly.
Following another 5-6 cool/dry days across central and southern Brazil, a more normal rainfall pattern develops with cool temps warming back to near normal levels. Argentine rainfall will also increase next week as a high-pressure Ridge over NW Brazil shuns upper air humidity southward. The overall forecast for South America improves, with only patchy areas of dryness will be noted across Argentina by mid-November. La Niña appears to be reaching its zenith and is forecasted to weaken rapidly.
Yesterday had seen live cattle close higher while feeder cattle were lower, with a steady outlook anticipated this morning. Negotiated fed cattle for Thursday was slow on light demand, but sales in Texas were quoted $1 higher from Wednesday and steady with last week at $150. Dressed trade in Nebraska was up $2-3 and $242-243. The beef cow slaughter rate has accelerated in the last two months, and slaughter in the week of October 2 rose to a new high for the year of 84,759 head and is the largest weekly kill since November 2011. The cumulative kill is now record large and 114% of last year. Relative to the January 1 beef cow inventory, 10.6% of the herd has been slaughtered.