Good morning!
Rains weigh on corn and soybeans… Corn futures are 3 to 6 cents lower to start the week amid an improving weather trend for dry areas of the Midwest. Soybeans are down 10 cents in the September contract and 1 to 2 cents in deferreds. Winter wheat futures have climbed 5 to 7 cents, with spring wheat futures 3 to 5 cents higher. The U.S. dollar index is just above unchanged. Crude oil futures are slightly lower after hitting a new multiweek high earlier in the session. Rigs seems to have escaped major damage from Hurricane Ida.
More rain for northern areas of the Midwest, Ida causes limited crop damage... More rain fell from the Dakotas and eastern Nebraska across the northern Midwest to Michigan during the weekend. Rains were spotty and light across the southern half of Iowa, in Illinois and much of Indiana. Moisture from Tropical Storm Nora, which hit west-central Mexico during the weekend, could reach the southwestern U.S. early this week and the northern U.S. Plains and upper Midwest late this week. Hurricane Ida hit southeastern Louisiana over the weekend, with wind gusts as high as 128 miles per hour recorded and accumulation of up to 20 inches for southeastern Louisiana. It was one of the most powerful storms to ever hit the U.S. Meteorologist Drew Lerner with World Weather Inc expects the biggest crop damage to be the eastern Louisiana sugarcane crop. Damage to cotton, corn, soybeans and rice should be limited.
IKAR reports Russian wheat prices still climbing… Russian wheat export prices continue to climb. Russian wheat with 12.5% protein loading from Black Sea ports for supply in late September or early October was $299 per metric ton free on board (FOB) at last week’s close, up $4 from the previous week, the ag consultancy IKAR reported. That would be the seventh week in a row of rising prices. SovEcon, on the other hand, reported prices for wheat fell $1 to $298 per metric ton. The ag research firm also reported wheat exports sped up last week ahead of a big jump in the weekly export tax. Some fear export taxes will continue to climb. Also of note, frosts are possible in northeastern Russia’s New Lands this week.
Ukraine’s farm ministry expects big jump in grain exports this season… Ukraine’s farm ministry expects the country to export 60.68 MMT of wheat in 2021-22, including 23.8 MMT of wheat. A rebound in production is expected to bolster shipments, and exports are off to a strong start. Preliminary data cited by the farm office puts the 2021 wheat crop at 32 MMT and the corn crop at 37.1 MMT, helping push grain production to an all-time high of 80.6 MMT. Earlier this month, the consultancy APK-Inform forecast Ukraine would export 57 MMT of grain in 2021-22, including 21.1 MMT of wheat and 31.0 MMT of corn.
The week ahead… The House and Senate are both in recess. The Senate is expected to return Sept. 13 while the House is expected back the week of Sept. 20. Despite the recess, House committees will be working to meet a Sept. 15 deadline to craft and pass respective portions of the $3.5 trillion social infrastructure package. Afghanistan will continue to dominate Washington as the focus continues on the extraction of Americans still in the country and the exit of Afghanis that have helped the U.S. and could be targeted by the Taliban. Final pullout from Afghanistan began Saturday. Statistics Canada will release its report on production of crops today. USDA will release farm income on Thursday and ag trade data Friday. The economic data highlight of the week will be Friday’s release of August employment figures from the Bureau of Labor Statistics.
U.S. on Friday carried out a drone strike against Isis-K “planner” in eastern Afghanistan… This was our first move to retaliate against the terrorist group for its deadly attack on Kabul airport on Thursday. According to U.S. Central Command on Friday night, American forces conducted an “over-the-horizon counter-terrorism operation” in Nangarhar province of the country. “Initial indications are that we killed the target(s). We know of no civilian casualties,” a spokesperson said. On Saturday, the Pentagon said the U.S. military strike the day before killed two “high-profile” ISIS targets and wounded a third. Meanwhile, Afghan fatalities rose to nearly 200 after last Thursday’s suicide bombing in Kabul.
The real price tag of “social” infrastructure measure… The Committee for a Responsible Federal Budget estimates that the alleged $3.5 trillion outline would really cost more like $5 trillion to $5.5 trillion, when adjusting for the accounting gimmicks.
Fed’s Powell gives some signals tapering may be coming, but with caveats… Federal Reserve Chairman Jerome Powell signaled in his virtual Jackson Hole speech Friday that the central bank may begin winding down its emergency bond-buying program this year. But he also offered caveats like rising inflation, the labor market that he believes could be stronger and the Delta variant of Covid-19. Bottom line: Powell avoided answering when the Federal Open Market Committee (FOMC) will start trimming its $120 billion in monthly Treasury and mortgage-backed securities purchases and how long will the wind-down take. Many private analysts look for a Fed announcement in November that the process will begin in December.
OPEC+ seen sticking to planned output hike… OPEC and its allies are expected to press on with their planned revival of oil production when they meet this week, as prices bounce back from their August stumble. The coalition led by Saudi Arabia and Russia is gradually restoring the vast amount of crude production halted during the pandemic and will probably ratify the next monthly installment when it gathers Wednesday, according to a Bloomberg survey of traders and analysts. Several OPEC+ delegates privately predict the same outcome.
Ships waiting to enter the biggest U.S. gateway for trade with Asia reached the highest number since the pandemic began… This is exacerbating delays for companies trying to replenish inventories during one of the busiest times of the year for seaborne freight. Forty-four container carriers were anchored and awaiting a berth space outside the twin ports of Los Angeles and Long Beach, California, as of late Friday, topping the record of 40 initially set in early February, according to officials who monitor marine traffic in San Pedro Bay. The average wait rose to 7.6 days, from 6.2 in mid-August, according to L.A. port data. Imports are pouring into the world’s largest economy just as inland transportation — like trucking and railroads — contends with its own bottlenecks of shipping containers that aren’t being moved fast enough into distribution centers and warehouses.
WOTUS rule redo... On Friday we noted that Republican lawmakers have asked for a 60-day extension of the comment period for the Biden administration recommendations to rewrite the 2020 Navigable Waters Protection Rule (NWPR), previously dubbed the Waters of the U.S. (WOTUS) rule. The current 30-day comment period ends on Sept 3. EPA says there only will be an extension for State government agencies to comment but not for the regulated public.
China will continue to buy pork for its reserves to shore up prices… China’s state planner today said it will continue to buy pork for its state reserves to support weak prices. Panic selling of heavy animals earlier this summer led to a collapse in Chinese hog prices. The country bought more than 50,000 MT of meat during July.
Boxed beef prices turn back, prompting futures to do the same… Boxed beef prices softened three of the past four days, adding to traders’ belief the product market has hit a high as retailers finished their Labor Day purchases. Choice beef dropped $1.93 and Select plunged $4.07 on Friday, and movement fell to 69 loads. The reversal in beef prices led to a pullback in live cattle futures after the market pushed to new contract highs to kick off the week. Retail demand will likely moderate now that the summer grilling season is winding down, though demand as a whole is expected to remain robust.
Pork production down from last year’s elevated levels… USDA estimates last week’s kill at 2.444 million head, near steady with the week prior but down 7.9% from year-ago levels. Pork production was expected to slide 8.2% from year-ago and 0.2% from the week prior, reflecting a slight dip in average hog weights from week- and year-ago levels. Packer profit margins remain solid at $31.05 a head on Friday, according to HedgersEdge.com. That’s little changed from the week prior. The pork cutout value dropped edged 19 cents higher Friday and movement improved to 306.86 loads.
Weekend demand news… Pakistan tendered to buy around 550,000 MT of wheat. Taiwan’s MFIG purchasing group issued an international tender to buy up to 65,000 MT of animal feed corn from the U.S., Brazil, Argentina or South Africa. Jordan’s state grain buyer issued a new tender to buy 120,000 MT of animal feed barley. The Korea Feed Association bought around 66,000 MT of corn expected to be sourced from South America or South Africa. Algeria’s state grains agency issued an international tender to buy milling wheat sourced from optional origins. Egypt is seeking to buy an unspecified amount of wheat from global suppliers.
Today’s reports
- 10:00 a.m. Weekly Export Inspections — AMS
- 3:00 p.m. Crop Progress — NASS