Good morning!
Mostly firmer tone to start the week... Soybeans and wheat were mildly firmer in overnight trade, while corn traded narrowly on either side of unchanged. As of 6:30 a.m. CT, corn futures are trading steady to fractionally higher, soybeans are 3 to 6 cents higher and wheat futures are 1 to 2 cents higher. Front-month crude oil futures are more than $2 higher and the U.S. dollar index is nearly 150 points lower.
China to further ease Covid restrictions... China is set to announce the further easing of some of the world’s toughest Covid curbs as early as Wednesday, sources told Reuters. A new set of nationwide rules are due to be announced soon, two sources with knowledge of the matter said, paving the way for more coordinated easing. China may announce 10 new Covid-19 management measures as early as Wednesday. Beijing is also weighing whether to scale down its management of the virus to reflect the less serious threat it poses as early as January, the sources added.
Argentine crop stress to continue, mostly favorable conditions in Brazil... Argentina’s weather will remain stressful for crops this week amid limited rain and warm to hot temperatures, according to World Weather Inc. The forecaster says Brazil’s weather will be generally favorable, with weekend rains forecast to continue early this week. But some areas in the center-west and south-central parts of the country could be missed by the greatest rainfall.
Brazilian soybean, first corn planting about complete... Brazil’s soybean planting reached 91% complete as of last Thursday, according to AgRural, slightly behind last year’s 94% pace for the date. Planting of the first-season corn crop stood at 93%, just behind last year’s 94% pace.
The West imposes sanctions on Russian crude... The new sanctions put the conflict with Moscow into an unpredictable new phase that could inject further volatility into global oil markets. The European Union and U.K. barred inbound shipments of Russian crude Monday. In tandem, the EU, U.S. and allies placed curbs on shipping, insuring and funding Russian crude anywhere in the world. The restrictions are the first major attempt to curb Moscow’s fossil-fuel revenue, which steadied the Russian economy after a barrage of sanctions on other industries. But there is a deliberate loophole, enabling companies to facilitate Russian oil shipments to countries outside of Europe if the price is no higher than $60 a barrel.
OPEC keeps oil output steady as Russian cap begins... The Organization of the Petroleum Exporting Countries and Russia-led allies known as OPEC+ will keep output steady, but will cut it by two million barrels a day, as agreed in October. This comes as the Group of Seven’s $60-a-barrel price cap on Russian oil kicks in today and the European Union bans most imports of Russian oil, as noted previously. OPEC could still increase production in early 2023. Although OPEC+ isn’t scheduled to review production until its June 4 meeting, the alliance is prepared to meet at any time and take immediate additional measures to address market developments if needed, the Wall Street Journal reported.
Ukraine’s wheat exports slow in November... Ukraine’s wheat exports fell to 1.58 MMT in November from 1.98 MMT in October, the UGA Ukrainian grain traders union said on Monday. UGA said Ukrainian exporters had declared 5 MMT of grains and oilseeds for export during November and the “grain corridor” contributed 2.3 MMT last month, down more than 1.2 MMT from October. Since July 1, Ukraine has exported 18.3 MMT of grain, down nearly 30% from the same period last year, according to the country’s ag ministry. That included 9.8 MMT of corn, 6.9 MMT of wheat and 1.5 MMT of barley.
The week ahead in Washington... Lawmakers are in a rush to get things done before adjourning, including a fiscal year 2023 funding measure. It looks like Congress will again do a huge omnibus bill loaded with funding and special add-ons. The Appropriations panel leaders of both chambers will have two weeks to broker a full-year government funding agreement or a temporary continuing resolution (CR) before current government funding expires Dec. 16. Ag disaster funding via a revised Emergency Relief Program (ERP) for eligible 2022 crops and livestock is a likely candidate to be attached to the omnibus package. A push for year-round E15 could also be included. A lingering Water Resources Development Act (WRDA) measure will be completed, especially since a must-have National Defense Authorization Act (NDAA) is being attached to it. The Senate Ag Committee continues its new farm bill hearings, with the focus Tuesday on ag research programs. Senate Democrats plan to hold leadership elections Thursday, when current leaders are expected to maintain their positions. The economic focus will be Friday’s U.S. producer price index for November. The focus for agriculture will be Friday’s December Supply & Demand Report, including any changes to domestic usage forecasts and global production. USDA will not update its U.S. corn and soybean crop estimates this month.
Surveys show economists expect a recession within the next year... A Wall Street Journal survey found economists think there is a 63% chance of recession in the next year. A survey of economists and investors by the Federal Reserve Bank of Philadelphia shows expectations that gross domestic product will fall in three or four quarters are by far the highest since it started in 1968. But just because economists are convinced of their predictions doesn’t mean they are right. Since that Philly Fed survey started, not a single recession was spotted a year in advance. Economists missed the 1990, 2001 and 2008 recessions completely.
U.S./EU trade spat... Europe is bracing for a confrontation with Washington over the Inflation Reduction Act, the new law that encourages businesses to invest more in the United States. Europeans argue the act is a beggar-thy-neighbor scheme designed to lure investors away from Europe, just as the region’s economy teeters on the verge of recession. Talks on the trade skirmish continue today.
China again sells all wheat put up for auction... China sold all 39,709 MT of state-owned wheat reserves put up for auction last week. The average sales price was 2,797 yuan ($401.35) per metric ton.
Choice beef under $250... Packers continue to run heavy slaughters while carcass weights are high. The extra beef is putting pressure on wholesale beef values as packers cut prices to keep product from backing up in the pipeline. Choice beef dropped $3.64 on Friday, falling below $250.00 for the first time since mid-October.
Cash hog index continues to weaken... The CME lean hog index is down another 37 cents to $82.87 (as of Dec. 1). December lean hog futures finished 44 1/2 cents below that level signaling traders don’t anticipate heavy near-term pressure on the cash market. With just over a week until the December contract expires, it will likely hold close to the cash index.
Weekend demand news... Pakistan purchased 450,000 MT of Russian 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
- 10:00 a.m. Export Inspections — AMS