Good morning!
Light two-sided trade overnight... Corn, soybean and wheat futures held in tight trading ranges while swinging to both side of unchanged during the overnight session. As of 6:30 a.m. CT, corn futures are trading around a penny higher, soybeans were 2 cents lower to fractionally higher and wheat futures were 2 cents lower to a penny higher. Front-month crude oil futures are around $1 higher and the U.S. dollar index is more than 350 points lower this morning.
China increases shutdowns as Covid cases rise... Beijing shut parks, malls and museums on Tuesday while more Chinese cities resumed mass testing for Covid-19. Some analysts are saying 20% of China’s economy is being negatively impacted by the Covid lockdowns. China reported 28,127 new domestically transmitted cases for Monday, nearing its daily peak from April, with infections in the southern city of Guangzhou and the southwestern municipality of Chongqing accounting for about half the total. The wave of infections is testing recent adjustments China has made to its zero-Covid policy, aimed at making authorities more targeted in clampdown measures and steering them away from blanket lockdowns and testing that have strangled the economy and frustrated residents.
Analysts: China’s Covid resurgence delays oil demand recovery to after Q2 2023... Analysts are cutting forecasts for China’s year-end oil demand after Covid-19 cases surged to near record levels, forcing authorities to reinstate mobility curbs and delaying recovery at the world’s top crude importer. “We cautiously lower our expectations for China demand by 1.2 million barrels per day (bpd) in 4Q ’22,” Goldman Sachs analysts said in a note. “Confidence remains high in a 2Q 23 China reopening.” Sun Jianan, an analyst with consultancy Energy Aspects, also revised down China’s oil demand forecasts, by 200,000 bpd for November and December, and 190,000 bpd for the fourth quarter to 14.45 million bpd.
Saudis, OPEC allies discussing oil output boost... Saudi Arabia and other OPEC oil producers are discussing boosting oil output, a move that could lower prices and help heal a rift with the Biden administration amid new attempts to blunt Russia’s oil industry, the Wall Street Journal reports. Delegates are considering raising output by up to 500,000 barrels a day. The move could come the day before the European Union is set to impose an embargo on Russian oil.
China pauses some purchases of Russian oil ahead of price cap... Chinese buyers have paused purchases of some Russian oil as they wait for details of a U.S.-led cap to see if it presents a better price. Several cargoes of Russian ESPO crude for December-loading remain unsold and there’s hesitation among sellers and Chinese buyers to close deals before more clarity on the exact price cap level is known, Bloomberg reported, citing traders with knowledge of the matter. The price limit is set to be implemented alongside European Union sanctions on Russian crude oil on Dec. 5, with those adhering to the measure gaining access to insurance, banking and shipping services from the bloc.
HRW CCI rating declines, SRW rating inches up... When USDA’s weekly crop condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the HRW crop dropped 1.7 points to 269.0, which was 70.6 points below the five-year average. The SRW rating inched up 0.5 point to 357.5 and has improved each week since the initial rating, though that was still 4.3 points below the five-year average. Click here for details.
Crop Progress Report highlights… Following are highlights from USDA’s crop progress and condition update for the week ended Nov. 20.
- Corn: 96% harvested (90% average).
- Cotton: 79% harvested (71% average).
- Winter wheat: 87% emerged (86% average), 32% good/excellent (32% last week).
Rail strike looms... One of the two largest railroad unions said Monday it had rejected a new labor deal brokered by the White House, inching closer to a strike that could disrupt supply chains in December. The other union voted to ratify it. Unions and railroads are back at the negotiating table. By law, Congress can intervene to impose an agreement if the two sides remain deadlocked. A rail shutdown could further upend supply chains. The SMART Transportation Division said it would head back to the negotiating table with railroads with a goal of reaching a deal by Dec. 8. If no agreement is reached, the union could strike Dec. 9. However, the Brotherhood of Railroad Signalmen (BRS) is on a schedule where their cooling-off period ends Dec. 4, opening the way for a strike Dec. 5. Other unions have indicated they would not cross a picket line should BRS strike. BRS has not yet said they will extend their cooling-off period to match the Dec. 8 timeline for the SMART TD union. If BRS does not move back their potential strike date, railroads would start making plans for the strike right after Thanksgiving.
Investors watching for signs tightening cycle is slowing... Investors looking for signs that central banks are starting to ease off aggressive rate increases should look to emerging market central banks rather than the Fed, particularly those in South America, the Wall Street Journal reports. Countries such as Brazil, Chile, Colombia and Hungary started raising rates months before the Fed and are now in a position to lower them, which would give their economies a boost.
ERP payments up slightly... Payments under the Emergency Relief Program (ERP) totaled $7.16 billion as of Nov. 20, up from $7.15 billion the prior week. Payments for non-specialty crops now total $6.13 billion ($6.12 billion prior) with specialty crop payments at $1.03 billion ($1.02 billion prior).
Cold Storage Report out this afternoon... USDA will detail frozen meat stocks at the end of October. The five-year average is a 17.6-million-lb. increase in beef stocks and a 14.4-million-lb. decline in pork stocks during the month.
Cash cattle price inches higher... Cash cattle trade averaged $152.89 last week, up 18 cents from the previous week and a new high for the year – and the highest since 2015. Cash cattle are expected to trade higher again this week as market-ready supplies are tightening significantly, while packers are ramping up slaughters to build supplies for the holiday season.
Cash hog/pork fundamentals weaken... The CME lean hog index is down 80 cents to $86.97 (as of Nov. 18), deepening the seasonal price slide. Rising slaughter and pork production are also pressuring the pork cutout value, which fell $1.45 on Monday, dropping to $91.99. Seasonal pressure on cash fundamentals will limit buyer interest in nearby December lean hog futures, though bullish prospects once the seasonal pressure concludes should limit selling in deferred futures.
Overnight demand news... Taiwan purchased 43,400 MT of U.S. milling 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
- 8:00 a.m. Food Price Outlook — ERS
- 2:00 p.m. Agricultural Exchange Rate Data Set — ERS
- 2:00 p.m. Fresh Apples, Grapes, and Pears: World Markets and Trade — FAS
- 2:00 p.m. Fresh Apples, Grapes, and Pears: World Markets and Trade — FAS
- 2:00 p.m. Sugar: World Markets and Trade — FAS
- 2:00 p.m. Cold Storage — NASS
- 2:00 p.m. Poultry Slaughter — NASS