Good morning!
Soybeans continue to lead higher; corn and wheat follow suit… Soybeans continued Monday’s rally overnight, corn is pressing into the upper end of the recent sideways range and wheat saw corrective buying off yesterday’s for-the-move low. As of 6:30 a.m. CT, corn futures are around 3 cents higher, soybeans are 8 to 10 cents higher and wheat futures are 2 to 4 cents higher. Front-month crude oil futures are modestly lower while the U.S. dollar index is trading around 100 points lower on 11-week lows.
Cordonnier keeps South American crop estimates unchanged but has lower bias… Weather remained hot and dry over the past week with record high temperatures in central Brazil and only widely scattered showers, though southern areas continue to face heavy rains. The heat dome is breaking down this week, allowing more showers to move into central Brazil. After last week’s cut, Dr. Michael Cordonnier opted to leave his Brazilian soybean crop estimate at 158 MMT with a neutral to lower bias. He also kept his Brazilian corn crop estimate at 121 MMT with a lower bias, noting that safrinha corn acreage will decline, but by how much is still up to question. Some producers are estimating they may reduce their safrinha corn acreage by 25% to 50%. Cordonnier left his Argentine crop estimates at 50 MMT for soybeans and 52 MMT for corn, noting a slightly higher bias for soybeans though a moderately lower bias for corn.
HRW CCI declines, SRW rating improves... 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 rose 2.0 points to 320.9, while the SRW crop declined 1.6 points to 374.2. Both crops continue to be rated well above year-ago levels.
Crop progress report highlights… Following are highlights from USDA’s crop progress and condition update as of Nov. 19.
· Corn: 93% harvested (91% average).
· Cotton: 77% harvested (71% average).
· Winter wheat: 95% planted (96% average); 87% emerged (85% average); 48% good/excellent (47% last week).
China importing significant amounts of Brazilian soybeans in October… Chinese imports of soybeans from Brazil were up 71% to 4.81 MMT from the prior October. The U.S. share of Chinese imports shrank to 228,264 MT from 772,787 a year ago. Bulk commodity imports significantly rose year-on-year in corn, barley, sugar and soybeans, though fell sharply in wheat and pork.
U.S. Treasury index makes up year’s losses… The index, which monitors the $26 trillion U.S. Treasury market, has rebounded to approximately its year-end 2022 levels. Earlier in the year, it experienced a decline of up to 3.3%. This recovery is attributed to several factors, including the easing of inflationary pressures and indications that the labor market may be showing signs of weakness. As a result, traders are increasingly speculating that the Federal Reserve has concluded its cycle of raising interest rates.
U.S. dollar continues to decline… The dollar index has experienced its fourth consecutive day of decline, reaching 103.2 on Tuesday, marking its lowest point since August 30th. This drop is attributed to growing speculation that the Federal Reserve (Fed) has completed its series of interest-rate hikes. Traders are now closely monitoring the release of the FOMC (Federal Open Market Committee) minutes later in the day to gain more insights into the central bank’s intentions for the upcoming year.
Drop in prices for essential battery metals challenges EV shift… The transition to electric vehicles (EVs) in the U.S. is facing an unexpected challenge. A sharp drop in prices for essential metals like lithium, cobalt, and others used in EV batteries is impacting mining companies. As a result, these companies are postponing or suspending new mining projects and expansions. This disruption in the supply chain threatens to exacerbate shortages of these critical materials in the coming years and potentially slow down the Biden administration’s efforts to transition away from gasoline-powered cars.
Positive economic indicators mask lingering warning signal... Despite many positive economic indicators such as businesses hiring, increased consumer spending, and output growth, there is one persistent warning signal that economists are closely monitoring. The Conference Board’s Leading Economic Index (LEI) for October recorded a 0.8% decline from the previous month, marking its 19th consecutive drop. The LEI combines various indicators, including jobless claims, building permits, and interest-rate spreads, to identify potential shifts in the economy.
Slight rise in ERP payments… As of Nov. 19, total payments made under the Emergency Relief Program (ERP) have seen a slight increase, reaching $8.24 billion. Phase 1 payments remained unchanged at $7.45 billion. In contrast, Phase 2 payouts have risen to $794.08 million, benefiting 10,091 recipients, compared to the previous week’s total of $788.02 million, distributed among 10,046 recipients. There is currently no available payment information for Track 1 of the ERP related to losses in the year 2022.
Hamas and Israel close to truce… A Hamas leader said the militant group is “close to reaching a truce agreement” with Israel, which aligns with similar statements made by the White House. The National Security Council spokesperson, John Kirby, mentioned on Monday that negotiators are making progress toward the release of hostages held by Hamas but did not provide further details about the potential deal. Approximately 239 hostages are believed to be held in Gaza, taken during Hamas’ attacks on Israel on Oct. 7, resulting in around 1,200 casualties, as reported by the Israeli military.
Cash cattle average drops… Last week’s average fell $2.09 to $177.82 from $179.91 the prior week, the lowest since mid-May. Recent weakness is likely to continue, though the tightness of quality market ready cattle supplies remains limited, likely limiting the downside.
Cash hog fundamentals weaken... The CME lean hog index is down another 57 cents to $74.52 (as of Nov. 17), marking a new low in the seasonal decline. Wholesale pork prices slipped despite recent strength, falling $2.07 to $86.09.
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.
Tuesday
· 2:00 p.m. Agricultural Exchange Rate Data Set — ERS
· 2:00 p.m. Sugar: World Markets and Trade — FAS