Good morning!
Soybeans lead overnight losses in post-election reaction... Soybean futures faced heavy selling overnight, while corn and wheat also traded lower in reaction to the U.S. election results. As of 6:30 a.m. CT, corn futures are trading 2 to 3 cents lower, soybeans are 18 to 21 cents lower and wheat futures are mostly 7 to 9 cents lower. The U.S. dollar index is more than 1,900 points higher and front-month crude oil futures are around $1.20 lower.
Trump returns to White House, GOP may gain full control of Congress... Donald Trump won all battleground states in a virtual red wall while the blue wall (Pennsylvania, Michigan and Wisconsin) cratered for Democratic challenger Kamala Harris as she faced the greatest political comeback in U.S. history. Trump also won battleground states of North Carolina and Georgia and was close in Nevada and Arizona, two states not yet officially called. It appears Trump will eventually garner over 300 electoral votes. Republicans did much better than most expected in Senate races, with a total of 53-56 seats, up from their 49 total in the current Congress. Several House races are still too close to call, but it appears Republicans will hold on to its narrow majority in the chamber. However, Democrats were leading in some close races and several California races could still tip the House chamber to Democrats. If the GOP keeps control of the chamber, that means another contentious House Speaker vote and perhaps changes in its rules.
Markets react sharply to Trump victory... Trump’s victory rippled through global markets, as U.S. stock futures rallied, Treasury bonds tumbled (yields jumped), the U.S. dollar surged the most since 2020 and commodities faced broad selling pressure. The knee-jerk market reaction signals investors believe a second Trump administration will look a lot like the first one: a stream of policies (tax cuts, deregulation, tariffs) that will simultaneously stoke economic growth, corporate profits and inflation.
Trump’s Cabinet... Trump should have learned from mistakes during his first term and will not likely make poor choices of some Cabinet members. The new GOP Senate next year will be able to provide the votes for Trump to get the Cabinet he wants. Unclear is what role Robert F. Kennedy Jr. will play in Trump 2.0. He would not likely be confirmed by the Senate for any Cabinet post, so an advisor role seems likely.
Ag sector will focus on Trump 2.0’s trade policy... Trump has said “tariffs” is his favorite word in the dictionary and has consistently vowed to use them against China. He has also said he would put 10% to 20% tariffs on imports from other countries, but that is seen as leverage in discussions for a key goal of his new term: reciprocal trade agreements. Key will be if former U.S. Trade Representative Robert Lighthizer comes into the new Trump administration as most expect, and if so, under what role. It may be as Commerce or Treasury Secretary. Trump recently said he would slap tariffs on Mexico if its new president doesn’t comply with holding illegal immigrants in her country.
China will work with U.S., but more rivalry expected under Trump... China will work with the U.S. on the basis of mutual respect, it said on Wednesday as it braced for Donald Trump returning to the White House, but strategists said Beijing was expecting battles over trade, technology and security issues. China’s foreign ministry said, “Our policy towards the U.S. is consistent. We will continue to view and handle China/U.S. relations in accordance with the principles of mutual respect, peaceful co-existence and win-win cooperation.” Trump has proposed tariffs on Chinese imports of 60% or more and ending China’s most-favored-nation trading status. Analysts say the prospect of a trade war has rattled China’s leadership.
China’s state banks sell dollars to prevent rapid yuan depreciation... China’s major state-owned banks sold dollars in the onshore spot foreign exchange market to prevent the yuan from weakening too fast, four people with knowledge of the matter told Reuters. The yuan weakened to the weakest level against the dollar since Aug. 22.
Euro zone PMI higher than initial estimate... The HCOB composite purchasing managers index (PMI) compiled by S&P Global rose to 50.0 in October from 49.6 in September and above the preliminary reading of 49.7. Manufacturing continued to contract although at a slower pace (46 vs. 45) while services growth improved (51.6 vs. 51.4). Shrinking levels of business activity in Germany and France offset expansion in Spain, Ireland and Italy. Meanwhile, euro zone producer prices fell 3.4% from year-ago in September.
South Dakota votes against carbon pipelines... A key state ballot issue in South Dakota is poised to have gone against carbon pipelines. This referendum let voters decide whether to uphold a pipeline bill that was passed by legislators. With 82% of votes in, 60% voted no and 40% voted yes. A no vote would mean the state law in question would be rejected, raising new questions about the Summit Carbon Solutions pipeline and similar projects.
Retail beef demand remains strong... Choice boxed beef prices firmed 30 cents to $317.21 on Tuesday, while Select fell $1.92 to $285.24. Movement totaled 142 loads, signaling there’s still strong retailer demand. Packer margins have tightened but are still mildly in the black. After red ink for much of this year, packers will do all they can to keep margins in the black, which means they will control throughput and likely try to get cattle bought at lower prices this week.
Cash hog index continues to climb, pork cutout falls... The CME lean hog index is up another 41 cents to $89.79 as of Nov. 4, the 13th straight daily gain and the highest level since Aug. 16. The pork cutout value fell $2.58 to $101.43 on Tuesday. After sharp losses again yesterday, December lean hog futures held an $8.665 discount to today’s cash quote.
Overnight demand news... Japan is seeking 65,000 MT of feed wheat and 25,000 MT of feed barley. Jordan tendered to buy 120,000 MT of optional origin 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
· 9:30 a.m. Weekly Ethanol Production — EIA
· 11:00 a.m. Livestock and Meat International Trade Data — ERS
· 2:00 p.m. Broiler Hatchery — NASS