Good morning!
Corrective trade from recent price action overnight... Soybean, soymeal and soyoil futures faced moderate to heavy pressure overnight, while the corn and wheat markets firmed. As of 6:30 a.m. CT, corn futures are trading 4 to 6 cents higher, soybeans are 13 to 19 cents lower, winter wheat futures are 10 to 13 cents higher and spring wheat is 5 to 6 cents higher. Front-month crude oil futures are about 25 cents lower and the U.S. dollar index is around 100 points lower.
Beneficial weekend rains in Argentina but more needed... Rainfall amounts were greater than expected across areas of Argentina over the weekend, but this week’s forecast shows a return of hot, dry conditions. Weekend rainfall will provide temporary relief from drought stress, though much more is needed to induce a trend change, according to World Weather Inc. Rainfall in Brazil during the weekend was greatest in Goias, eastern Mato Grosso, eastern Minas Gerais and southeastern Bahia, World Weather reported. While conditions remain favorable for much of the country, crop stress in far western areas and Rio Grande do Sul in far southern Brazil will be closely monitored.
Russia attacks strike Odesa port area... Russia bombed the Southern part of Ukraine over the weekend, where some export facilities lost power. The Ukrainian port of Odesa was not operating on Sunday. Assessments are ongoing regarding grain export impacts and other infrastructure damage. “There are problems, but none of the traders are talking about any suspension of shipments. Ports use alternative energy sources,” Ukrainian Agriculture Minister Mykola Solsky said, according to Reuters. Two other ports —Chornomorsk and Pivdennyi — authorized to export grains from Ukraine under a deal between Russia and Ukraine were partially operating, he said. “Chornomorsk port is now operating at about 80% of capacity,” Solsky told Reuters.
Russia wants adjustments to Black Sea grain deal... Russia wants to adjust the Black Sea grain initiative to ensure more food supplies go to the world’s poorest countries in Africa and Asia, state-run TASS news agency quoted Deputy Foreign Minister Sergei Vershinin as saying on Monday. “The four-sided deal was reached under the slogan of ensuring food security mainly of the poorest countries of Asia, Africa and Latin America,” he said. “Unfortunately, today the figures do not confirm that most grain is supplied particularly to those countries. We believe there should be adjustments.” Turkish President Tayyip Erdogan discussed the Black Sea grain export agreement on Sunday with the leaders of Russia and Ukraine, as both sides seek changes that would boost their exports.
The week ahead in Washington... Lawmakers have until Dec. 16 to reach a deal on a full-year spending bill for fiscal year 2023, which began Oct. 1, or pass a short-term measure delaying the deadline to avoid a partial government shutdown. To reach a longer-term deal, agreement on the biggest hurdle is needed: partisan deadlock between Republicans and Democrats, who are split over $26 billion in nondefense spending in talks to craft an omnibus spending measure. The closely watched consumer price index data for November will be released on Tuesday, just a day before the Fed again raises interest rates. Most traders are betting on a smaller 50-basis-point increase this month after a string of 75-basis-point hikes. Much of the focus will be on Fed Chair Jerome Powell’s post-meeting comments and the summary of economic projections from Fed officials.
Momentum grows for aid to rice growers... Odds are rising Congress via a coming omnibus spending bill could include aid for rice growers who have faced surging inputs costs, especially fertilizer, while not experiencing the relatively high prices received by other growers, especially corn and soybeans. An aid program of over $300 million is being discussed, with payments per planted acre of the 2022 crop of $110 to $130. Apparently, this would be separate from an expected extension of the Economic Relief Program for eligible 2022 crops and livestock. Unknown is if financial aid will be provided rice millers. Sources caution details can still change along with the fate of the aid package, but contacts on both sides of the political aisle signal support is rising for the assistance.
UK economy rebounds in October but outlook remains bleak... Britain’s economy rebounded in October a little more strongly than expected from September when output was affected by a one-off public holiday to mark the funeral of Queen Elizabeth, but the outlook remains bleak. GDP grew by 0.5% in October after September’s 0.6% contraction. In the three months to October, Britain’s economy shrank by 0.3%, a smaller fall than a median forecast for a 0.4% contraction in a Reuters poll but the biggest drop since early 2021 when the country was under tight Covid restrictions.
Aggressive fight against inflation continues... The world’s biggest central banks will this week complete the most aggressive year for interest-rate hikes in four decades with their fight against inflation still not over even as their economies slow. The European Central Bank and the Bank of England are likely to follow the Federal Reserve with half-point moves, analysts note. And higher borrowing costs are also ahead for Switzerland, Norway, Mexico, Taiwan, Colombia and the Philippines.
Rising interest rates pushing up the costs of borrowing... That could make for some tough choices in Washington. “Debt has risen to levels that are high by historical standards, but — until last year — that increase has coincided with very low interest rates that have kept the costs of debt service relatively low. However, the high levels of debt mean that increases in interest rates like those that we have seen in the past year will either have a large impact on our country’s budget deficits or will require increases in taxes or reductions in spending,” Brandeis University’s Daniel Bergstresser writes at EconoFact.
China new bank loans jump less than expected... Chinese banks extended 1.21 trillion yuan ($173.48 billion) in new yuan loans in November, nearly doubling October’s 615.2 billion yuan but falling short of analysts’ expectations. New loans totaled 19.91 trillion yuan during the first 11 months of this year, central bank data showed, compared with a record 19.95 trillion yuan in the same period last year.
Packers likely to slow play cash cattle trade... Packers halted the string of gains in the cash cattle market last week and are expected to be rather passive in cash negotiations this week. Cash sources expect packers will likely try to make it through the holiday season by mostly using previously contracted supplies and animals bought with time.
Cash hog index continues to fall... The CME lean hog index is down another 48 cents to $81.99 (as of Dec. 8). That’s the lowest level since Jan. 27 but $11.04 above last year at this time. We anticipate a seasonal low will come soon, but buyer interest in futures will remain limited until the cash index posts a clear bottom and starts to firm.
Weekend demand news... Exporters reported no tenders or sales.
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
- 10:00 a.m. Export Inspections — AMS
- 11:00 a.m. Feed Grains Database — ERS
- 2:00 p.m. Season Average Price Forecasts — ERS
- 2:00 p.m. Wheat Data — ERS