Good morning!
Quiet start to the week... Corn, soybean and wheat futures held in relatively tight trading ranges amid two-sided trade overnight. As of 6:30 a.m. CT, corn futures are narrowly mixed, soybeans are mostly a penny lower, winter wheat futures are 1 to 3 cents higher and spring wheat futures are 4 to 5 cents higher. Front-month crude oil futures are 40 cents higher and the U.S. dollar index is around 130 points lower this morning.
China’s October soybean imports plunge... China imported 5.1 MMT of soybeans last month, the lowest monthly total since March 2020, as poor crush margins limited demand and Hurricane Ida slowed shipments out of the U.S. Gulf. China’s October soybean imports dropped 25.7% from September and were 41.2% under year-ago. Through the first 10 months of this year, China imports 79.1 MMT, down 5.0% versus the same period last year.
China’s trade surplus hits record high in October... China’s trade surplus surged to a record $84.5 billion in October, easily beating economists’ forecasts. Exports surged 27.1% versus year-ago, the 13th straight month of double-digits growth, while imports increased 20.6%. Through the first 10 months of the year, China’s trade surplus widened to $513.7 billion. Its trade surplus with the U.S. narrowed to $40.8 billion in October and stood at $320.7 billion for the first 10 months of the year.
PBOC to tread lightly on monetary policy... The People’s Bank of China (PBOC) will likely move cautiously on loosening monetary policy to bolster the economy, as slowing economic growth and soaring factory inflation fuel concerns over stagflation. Reuters reports chances of a rate cut look slim, but the central bank may opt to cut the amount of cash banks must hold as reserves against their loans if economic growth suffers, according to sources involved in internal policy discussions.
U.S. ag trade deficit widens in September... U.S. imports of agricultural products in September fell slightly to $13.97 billion, while ag exports dropped to $12 billion, the smallest total for fiscal year (FY) 2021. The result was a monthly trade deficit of $1.97 billion, the fourth straight monthly deficit. For FY 2021, U.S. ag exports totaled $172.18 billion, shy of USDA’s August forecast of $173.5 billion. Meanwhile, FY 2021 U.S. ag imports reached $163.29 billion, compared with USDA’s forecast of $157.5 billion. Despite recent monthly deficits, the FY 2021 U.S. ag trade balance stood at $8.89 billion.
Traditional infrastructure bill passes... The House late Friday passed the around $1 trillion traditional infrastructure bill, even though Democrats did not have enough votes to pass it, getting to the end zone only after 13 House Republicans went against GOP leadership suggestions and voted for the measure. President Joe Biden will sign the bill “soon.” The bill provides $110 billion in new spending for roads, bridges and major projects, and about $39 billion for transit. It also includes $66 billion in spending on rail and Amtrak, as well as $7.5 billion to build out a network of electric vehicle chargers and another $7.5 billion for low or zero-emission buses and ferries. Ports, waterways, and airports would get $42 billion in new funding.
Update on the Build Back Better (BBB) proposal... House Majority Leader Steny Hoyer (D-Md.) said the legislation would be passed before the Nov. 25 Thanksgiving holiday. In their statement, moderates said they would allow for a vote no later than the week of Nov. 15. But that could delay final action into December, when Congress must grapple with a Dec. 3 government funding deadline and raising the debt ceiling, both of which will spark conflict with Republicans. The Senate is nearly certain to change the BBB legislation, meaning the House would have to vote again, which is why many observers predict a December timeframe on the final fate of the BBB measure.
The week ahead in Washington... The Senate is in recess and the House will not convene. Both chambers return Nov. 15. Government offices are closed on Thursday for Veterans’ Day, though markets will be open. The highlight for agriculture is Tuesday’s Crop Production and Supply & Demand Reports from USDA. Due to Thursday’s government holiday, weekly export sales data is delayed until Friday.
EPA rejects a biofuel exemption petition... EPA has rejected so far one petition from an oil refiner to be exempted from the nation’s biofuel blending laws for the 2019 compliance year, Reuters reported. Renewable Fuels Association President and CEO Geoff Cooper said, “We are greatly encouraged by EPA’s decision to deny this bailout request from an oil refinery that has continually attempted to dodge its legal obligations to blend low-carbon renewable fuels… It appears EPA and DOE are indeed following the criteria for deciding SRE petitions established by the Tenth Circuit Court decision in the RFA et al. v. EPA case,” Cooper said. “EPA’s new leadership appears to be making good on its promises to rein in the SRE program, and today’s decision is consistent with the new policy direction announced by EPA earlier this year and President Biden’s position that the last administration’s SRE abuse was a ‘gigantic mistake.’ However, 65 exemption petitions are still pending, and we urge the agency to swiftly deny any and all remaining applications that fail to pass the common-sense test established by the 10th Circuit.”
Granholm discusses high gas, heating costs... Energy Secretary Jennifer Granholm said Sunday she hopes gas prices will not reach $4 per gallon soon, adding that OPEC is “controlling the agenda.” According to AAA, the national average of gas prices is now $3.42 a gallon. Bank of America is predicting crude oil prices could soar another 50% by next June. Granholm said Biden “is all over this” and using the Strategic Petroleum Reserve to counteract high gas prices is “one of the tools that he has. And he’s certainly looking at that.” She also acknowledged that Americans should expect to pay higher costs for heating their homes in the winter. “We have the same problem in fuels that the supply chains have, which is that the oil and gas companies are not flipping the switch as quickly as the demand requires.”
China’s meat imports drop to 20-month low in October... China imported 664,000 MT of meat in October, down 12.8% from last year and the lowest monthly total since February 2020, as building domestic pork production dropped prices and reduced demand for foreign supplies. Through the first 10 months of this year, China’s meat imports totaled 8.1 MMT, down 1.5% from the same period last year.
Focus remains on cash cattle trade... Feedlots won the cash cattle battle last week, with packers raising bids earlier in the week and then again later. But with December live cattle trading at sizable premiums to the cash market, additional cash strength will likely be needed to push futures the next leg higher.
Cash hog index firms... The CME lean hog index is up 37 cents today, ending a month-long string of declines. Traders will be watching to see if this could be signs of an early seasonal low or just a temporary uptick. Seasonally, the cash index is usually weak through early winter.
Weekend demand news... Exporters reported no sales or tenders.
Today’s reports
- 3:00 p.m. Crop Progress — NASS