Good morning!
Weaker tone for corn, soybeans and wheat overnight... Soybean futures faced light profit-taking overnight, while corn and wheat futures also weakened. As of 6:30 a.m. CT, corn futures are around a penny lower, soybeans are 2 to 3 cents lower, winter wheat futures are 2 to 4 cents lower and spring wheat is 6 to 8 cents lower. Nearby soymeal futures are mildly firmer this morning but failed to push above Monday’s highs overnight. Front-month crude oil futures are around 50 cents higher and the U.S. dollar index is around 110 points higher this morning.
As expected, Biden signed BIF into law on Monday... President Joe Biden on Monday signed a $1 trillion bipartisan infrastructure (BIF) bill that he said will overhaul the nation’s infrastructure and boost the economy that has been battered by the Covid-19 pandemic. The president called the legislation as a job creator and an example of him fulfilling a campaign promise to reach across the aisle to get things done. The legislation will deliver $550 billion of new federal investments in America’s infrastructure over five years, including money for roads, bridges, mass transit, rail, airports, ports and waterways. The package includes a $65 billion investment in improving the nation’s broadband infrastructure and invests tens of billions of dollars in improving the electric grid and water systems. Another $7.5 billion would go to building a nationwide network of plug-in electric vehicle chargers, according to the bill text. State transportation agencies will likely see the first infusion of highway funds from the infrastructure package by the beginning of December. That money will come via the regular funding formulas the Transportation Department uses to allocate money to states.
Biden, Xi covered a wide range of topics at Monday’s meeting... President Biden and Chinese President Xi Jinping used a virtual meeting Monday evening to cool tensions between the two powers as the leaders seek to manage issues they disagree on and identify ways to communicate to avert conflict. The meeting lasted more than three hours, with the White House saying the two discussed a range of topics including Afghanistan, North Korea and Iran, as well as human rights, climate change and concerns over Taiwan. The discussion didn’t produce any major resolutions, officials said, in line with White House prior statements that sought to manage expectations of the meeting in recent days. On trade and economic issues, Biden called on China during the meeting to fulfill its commitments under the Phase 1 trade deal signed early last year. Biden said he made it clear to Xi about the need to protect American workers and industries from what the White House called China’s “unfair trade and economic practices,” fulfilling U.S. business leaders’ hopes that Biden would address broader issues, including China’s industrial subsidies.
Consultant maintains South American crop estimates... Weather in Brazil remains mostly favorable for crop development. As a result, Crop Consultant Dr. Michael Cordonnier left his Brazilian crop estimates at 144 MMT for soybeans and 118 MMT for corn, though he has a neutral to slightly higher bias for both crops. Weather hasn’t been as favorable in Argentina, though recent rains were enough for Cordonnier to maintain his crop estimates of 50 MMT for soybeans and 53 MMT for corn. He has a neutral to lower bias toward the soybean crops.
Brazil lowers tariffs on ethanol imports, a host of other goods and services... Brazil cut import tariffs by 10% on many goods and services until Dec. 31, 2022. The list of goods included ethanol, for which the tariff was reduced to 18%. The USDA ag attaché in the country says, “Although the measure is temporary, it may become permanent if adopted by the Mercosur trade bloc.” The import tariff reduction is aimed at curbing inflation on Brazil’s domestic market. This could present an opportunity for U.S. ethanol exports to Brazil amid rising domestic production.
SovEcon raises Ukraine’s 2021 corn crop estimate, sees much smaller 2022 wheat crop... The Black Sea ag research firm raised its Ukrainian corn crop estimate by 1.5 MMT to a record 39.9 MMT, as the country continues to report strong yields. USDA projects Ukraine’s corn crop at 38 MMT. SovEcon issued its first forecast for Ukraine’s 2022-23 wheat crop, pegging it at 27.1 MMT, which would be down 4.8 MMT (15.0%) from its estimate for this year. It forecasts wheat acreage will decline by 100,000 hectares to 6.8 million hectares and expects yields to be “substantially” below trend due extremely dry conditions, noting “a lot will depend on precipitation during the winter and spring.”
CCI ratings improve for HRW, SRW crops... 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 improved 5.9 points to 332.9, with improvements noted in each state except Kansas and Montana, which were unchanged on the week. The SRW crop rose 2.0 points to 367.1, driven by improved Illinois conditions. The HRW CCI rating is still 9.0 points below the five-year average for mid-November, while the SRW rating is 4.9 points above average. Click here for details.
Crop Progress & Condition Report highlights… Following are highlights from USDA’s crop progress and condition update for the week ended Nov. 14.
- Corn: 91% harvested (86% on average)
- Soybeans: 92% harvested (93%)
- Cotton: 64% harvested (64%)
- Winter wheat: 94% planted (94%), 81% emerged (83%), 46% “good” to “excellent” (45%)
IEA: Oil price rally set to ease as supplies rebound... This morning’s monthly report from the International Energy Agency (IEA) said the end is in sight for the crude oil’s rally, even as some oil traders and producers predict $100 oil. Demand growth remains robust, but supply is catching up and changes in oil stockpiles seen in October suggest “the tide might be turning,” according to the IEA’s monthly report. “The world oil market remains tight by all measures, but a reprieve from the price rally could be on the horizon,” the Paris-based IEA said. “Production in the U.S. is ramping up in tandem with stronger oil prices.” IEA kept its outlook for oil demand growth largely steady at 5.5 million barrels per day (bpd) for 2021 and 3.4 million bpd next year.
CFAP 2 payments now at $18.8 billion... Total payments approved under the Coronavirus Food Assistance Program 2 (CFAP 2) stood at $18.82 billion as of Nov. 14, with original CFAP 2 payments at $13.99 billion, up slightly from prior figures while top-up payments were largely unchanged at $4.82 billion. Total payments under CFAP 1 are at $11.79 billion, with $10.6 billion in original CFAP 1 payments and $1.19 billion in top-up payments as of Nov. 14, little changed from prior figures.
Tyson Foods earnings rise on surging meat prices... Tyson Foods reported a jump in sales after sharply raising prices for its beef, chicken and pork, citing growing costs the company said were likely to persist. Increased meat prices allowed the company to overcome pandemic-related labor shortages. Over the most past quarter, its average beef prices rose by nearly one-third since last year, while pork prices jumped by 38% and chicken about 19%. “The inflation we incur needs to be passed on,” said finance chief Stewart Glendinning. Tyson’s earnings rose to $1.36 billion in the fourth quarter, more than doubling from that period last year, and its beef unit’s operating margins jumped from 9.7% a year ago to 22.9%.
A lot of cattle changed hands again last week... Last week’s average cash price came in at $131.47, up another $2.24 and the highest weekly average since early June 2017. Packers bought 119,000 head after buying 97,000 head the previous week. Feedlots have essentially gotten current with marketings the past two weeks. Based on the muted buying in December live cattle futures on Monday, traders may sense a pause in the cash market this week.
Pork cutout unable to hold Monday morning’s gains... The pork cutout value firmed $7.49 Monday morning but ended the day 78 cents lower as strong initial gains in most cuts weren’t sustained. The cash hog index is also down another 51 cents to $76.17 today. The weakening cash fundamentals will continue to limit buyer interest in futures, especially in the lead-month December contract.
Overnight demand news... South Korea purchased 68,000 MT of corn – likely to be sourced from South America or South Africa – but passed on a tender to buy 65,000 MT of feed wheat. Japan is seeking 121,805 MT of U.S. and Canadian milling wheat in its regular weekly tender.
Today’s reports
- 2:00 p.m. Livestock, Dairy, and Poultry Outlook: November 2021 — ERS
- 2:00 p.m. Sugar and Sweeteners Outlook: November 2021 — ERS