Good morning!
Some stabilization for corn and soybeans overnight… Corn and especially soybeans faced pressure after USDA’s higher-than-expected Sept. 1 grain stocks estimates yesterday, but corn is currently trading fractionally to a penny higher and soybeans are 1 to 3 cents lower and holding within the lower end of yesterday’s trading range. Production and stocks data for wheat favored market bulls, and winter and spring futures extended gains overnight, with most contracts 9 to 11 cents higher. Crude oil futures and the U.S. dollar index are slightly lower.
Welcome moisture for HRW wheat areas… Welcome rain fell overnight for HRW wheat producing areas and more is expected through Saturday from the Texas and Oklahoma Panhandles through eastern crop areas of Kansas and Oklahoma, reports World Weather Inc. The weather watchers said the rain “will further raise topsoil moisture, which will be welcome and beneficial for improvements to planting, emergence, and establishment of the winter wheat crop.” World Weather adds that followup rain will be needed for the western half of HRW wheat producing areas after this week’s rains, adding that there are some chances for moisture Oct. 10-12 and in week two of its outlook. The moisture in the Delta has raised concerns about fiber quality and boll rot. But drying next week should help prevent major damage, World Weather reports.
Soybean crush expected to hit four-year low for the month of August… U.S. processors likely crushed 169.0 million bu. (5.070 million short tons) of soybeans during August, according to analysts surveyed by Reuters. That would be a 2.7 million bu. improvement from July and the biggest tally in three months. But the total would still be down 5.7 million bu. from August 2020 and represent the smallest August crush in four years. Those surveyed expect soyoil stocks to close August at 2.128 billion lbs., with would be up 58 million lbs. from July 31 and 183 million lbs. above year-ago levels.
Corn use for ethanol expected slide from July to August… Analysts surveyed by Bloomberg expect USDA to report 422.0 million bu. of corn was used for ethanol production during August, which would be a 2.7% improvement from August 2020’s 411.1 million bu. but a 6.0% decline from July’s 449.1 million bu. corn use for ethanol.
Russian wheat tariff will hit a new high next week… Tariffs on Russian exports of wheat will shoot to a new high of $57.80 per MT for the week of Oct. 6-12, a $4.30 jump from the week prior. The weekly formula-based duties intended to curb food price inflation have climbed steadily since their June launch.
Ukraine’s grain exports running well ahead of year-ago… Ukraine has harvested two-thirds of sown area, bringing in 46.99 MMT of grain, the country’s ag ministry reports. Production is expected to hit a record-high of 80.6 MMT this season. Given the rebound in production, it’s not surprising that three months into the year, Ukraine’s grain exports of 14.36 MMT are running 18.3% ahead of year-ago. Wheat exports stand at 8.94 MMT. The ministry expects Ukraine to export a total of 60.7 MMT of grain in 2021-22, including 24.4 MMT of wheat, 30.9 MMT of corn and 5.2 MMT of barley.
India imported a record amount of vegoils in September… India’s palm oil imports hit a record 1.4 MMT in September as buyers took advantage of newly lowered duties to stock up ahead of key festivals. Its purchases more than doubled its buys in September 2020. The country’s overall vegetable oil imports surged 72% from year-ago to a record 1.8 MMT. In recent months, India has lifted restrictions of imports on refined palm oil in addition to slicing base import taxes on palm oil, soyoil and sunflower oil.
Cotton AWP highest in nearly a decade... The adjusted world price (AWP) for upland cotton rose to 83.92 cents per pound, effective today, the second time the AWP has been above 80 cents per lb. this marketing year and the highest since it was 86.63 cents per lb. the week ended Nov. 18, 2011. USDA also said Special Import Quota #24 would be established Oct. 7 for 53,532 bales of upland cotton, applying to supplies bought not later than Jan. 4, 2022, and entered into the U.S. not later than April 4.
Euro-zone inflation hits highest level in 13 years as energy prices soar… Headline inflation came in at 3.4% last month, according to preliminary data from Europe’s statistics office. This was the highest level since September 2008 when inflation stood at 3.6%. It comes after German consumer prices rose by 4.1% in September — the highest level in almost 30 years. Surging energy prices have driven the rise.
Biden signs bill to avert partial government shutdown... President Joe Biden on Thursday signed a stopgap bill that will keep the government funded through Dec. 3, at which point Congress will need to issue another CR to fund the remainder of the fiscal year. The House and Senate each passed the continuing resolution earlier Thursday. The bill includes $28.6 billion in additional disaster relief ($10 billion for ag disasters in 2020 and 2021) and $6.3 billion for Afghan refugee resettlement. Sources indicate it could be early next year before ag disaster aid payments are made. Also of note, the Senate took its first procedural step to raise the debt limit Thursday night, setting up another partisan clash.
Party infighting holds up ‘infrastructure’ efforts… House Speaker Nancy Pelosi (D-Calif.) canceled a vote late Thursday on Biden’s bipartisan infrastructure (BIF) bill amid deep Democratic infighting. Democrats might scale back their social safety net and climate change bill. Reports note that Pelosi’s BBB offer to moderate Senators Joe Manchin (D-W.V.) and Kristen Sinema (D-Ariz.) included a top line of $2.1 trillion broken into three buckets: (1) family issues (e.g., child care and paid leave), (2) health care (locking in subsidies for ObamaCare) and (3) climate change.
How U.S. social safety net compares with other countries... The $3.5 trillion fiscal package Democrats initially hoped to pass would have been an ambitious expansion of the social safety net, offering regular child allowances, paid sick and parental leave, universal preschool and free college. Led by Biden, Democrats seek to emulate the comprehensive welfare states common in Western Europe, without the high taxes Europeans routinely pay, the Wall Street Journal reports. Relative to other industrialized economies, the U.S. is an outlier on many metrics of government support. It spends barely 1% of gross domestic product on direct benefits to families with children, third lowest in the 38-member Organization for Economic Cooperation and Development. The U.S. is also the only country in the OECD whose national government doesn’t offer paid maternity leave.
Section 301 tariffs on China unlikely to be lifted anytime soon... In an interview with Politico this week, U.S. Trade Representative Katherine Tai said the Biden administration wants to “build” on the existing tariffs imposed by the Trump administration and confront China for failing to live up to terms of the Phase 1 agreement between the two countries. “I think it’s going to be important to review China’s performance with China, and that’s going to be the critical first step in my mind,” Tai said relative to the Phase 1 deal. Tai also revealed that the review of the U.S. trade policy with China is still ongoing but would be completed “very soon.”
China goofed up relative to Phase 1 accord with U.S…. How? The country would not be so lacking in energy supplies had they followed the energy purchase commitments in Phase 1. According to the Peterson Institute for International Economics, China’s energy purchases at $12.6 billion were only 56% of the seasonal targeted rate. It appears China was too focused restoring depleted grain supplies and got caught short-bought on energy needs.
Experimental pill cuts worst effects of Covid-19, Merck says... Pharmaceutical company Merck says its experimental Covid-19 pill reduced hospitalizations and deaths by half in people recently infected with the coronavirus. Merck plans to seek emergency use authorization in the U.S. and submit marketing applications to other global drug regulators. If authorized by regulatory bodies, molnupiravir could be the first oral antiviral medicine for Covid-19.
U.S. dominating China’s grain-fed beef market… During the first eight months of 2021, China imported 83,000 MT of beef from the U.S., a ninefold increase from last year at this time, according to Chinese customs data. The U.S. surpassed Australia as the top exporter of grain-fed beef to China with China limiting purchases from the latter due to political tensions. “They don’t have a lot of other options when it comes to the well-marbled, grain-fed product,” said Joe Schuele, spokesman at the U.S. Meat Export Federation. “That’s the product that really stands out in China.” Grain-fed beef is a mid- to high-end product in China, while grass-fed beef typically goes to cheaper channels like mass-market restaurants and supermarkets. Brazil, Argentina and Uruguay dominate the grass-fed market, where a slowing economy is curbing demand. The number of U.S. facilities allowed to ship beef to China has surged to more than 500 thanks to the Phase 1 trade agreement.
Beef prices still sliding… Cattle futures came under heavy pressure Thursday, with feeders leading losses and December live cattle settling at their lowest level since early May. Boxed beef values continue to slide and this week’s cash cattle action extended the sideways to lower trend. Choice beef dropped $2.35 and Select fell $2.46, and movement slowed to 129 loads. Cash cattle action this week has ranged from $122 to $124, with southern locations leading.
Hogs headed for a test of the summer highs… Lean hog futures extended their rally after pausing midweek, with futures gapping to the upside and settling high range and not far off the July highs. A move above those levels would set the stage for a test of tough resistance at the June contract highs. The pork cutout value is on the rise, climbing another $1.18 Thursday thanks to a near $15 jump in pork bellies. But cash hog bids remain under pressure; they slipped a national average of 73 cents yesterday.
Overnight demand news… There is no business to report.
Today’s reports
- 8:00 a.m. Commodity Costs and Returns — ERS
- 1:00 p.m. Weekly Red Meat Production Report — AMS
- 2:00 p.m. Milk Cost of Production Estimates — ERS
- 2:00 p.m. Cotton System — NASS
- 2:00 p.m. Fats & Oils — NASS
- 2:00 p.m. Grain Crushings — NASS
- 2:00 p.m. Peanut Prices — NASS
- 2:30 p.m. Commitments of Traders Report — CFTC