Good morning!
Grain and soy futures favoring the upside as crude oil soars… Corn futures are fractionally higher after favoring the upside in a quiet overnight session. Soybean futures are up 1 to 2 cents after seeing two-sided action overnight. Winter wheat futures have climbed 2 to 4 cents, while spring wheat futures are steady to fractionally lower. Crude oil futures have surged, registering a new seven-year high of $82.18. The greenback is slightly higher.
Rains easing drought on the northern Plains… Welcome rain fell over the weekend for the northern U.S. Plains and eastern Canadian Prairies and followup rain are expected midweek, according to World Weather Inc., who adds “moisture will seriously bolster soil moisture, easing drought but delaying fieldwork.” The central and southern U.S. Plains were quite warm over the weekend, with temperatures climbing into the 90s or 100s across much of the region, World Weather reports. Tropical Storm Pamela is expected to make landfall in Mexico midweek as a hurricane, generating storms for Texas and eventually the U.S. Midwest later this week. The Delta and Southeast should see some net drying over the next 10 days, along with West Texas.
Cargill shifts some soybean exports to Texas as repairs to Louisiana facilities continue… For the first time in about six months, a cargo of around 55,000 MT of U.S. soybeans was shipped from Cargill’s Houston terminal, a facility that typically loads wheat and sorghum. Several other shipments of beans are expected to depart from the facility this fall. The industry still dealing with damage from Hurricane Ida along Louisiana’s Gulf Coast, including some shifts in trade flows. Texas Gulf Coast Terminals have loaded just 18 vessels of soybeans so far this year vs. more than 300 at the Louisiana Gulf Coast, according to USDA data.
Russian wheat exports lagging year-ago by a wide margin… The ag consultancy SovEcon estimates Russia exported 4.3 MMT of wheat in September and it projects the country will ship 3.3 MMT of the grain this month, which would be a 14.3% and 28.9% respective year-over-year decline. So for this marketing year, Russia has exported 9.4 MMT of wheat, a 23.7% year-over-year decline. Rising world prices for wheat and the country’s rising weekly tariff on exports have curbed shipments.
The week ahead… The government is closed today for Columbus Day/Indigenous Peoples’ Day, but markets are open. House Speaker Nancy Pelosi (D-Calif.) called House members back from their recess early to vote Tuesday evening on the Senate-passed short-term debt hike measure. If the House clears the bill and President Joe Biden signs it into law, it would raise the debt limit by $480 billion to $28.9 trillion, setting up another showdown that could take place in December. Senate GOP Leader Mitch McConnell (R-Ky.) that Republicans will not help raise the debt ceiling in December. He also railed against Majority Leader Chuck Schumer’s (D-N.Y.) speech, saying the Democratic senator’s “tantrum” had “poisoned the well” with GOP senators. The Senate is on recess, but Democrats in the chamber continue debate ways to lower the $3.5 trillion price tag for Biden’s social spending and climate change agenda. The focal point for ag will be USDA’s balance sheet and crop production estimates on Tuesday.
About 25% of all critical infrastructure in the U.S. is at risk of failure due to flooding… That’s according to a new report from a nonprofit research and technology group. This critical infrastructure includes locations like police and fire stations, hospitals, airports and wastewater treatment facilities. The report also found nearly 2 million miles of road — 23% of U.S. roadways — are already at risk of becoming impassable due to flooding. The threat of flooding is growing rapidly in the U.S. as a consequence of the climate crisis. Areas along the Gulf Coast and Appalachia are especially vulnerable to flood damage.
Rising energy prices in the U.S…. Crude oil has risen 64% this year to a seven-year high. Natural-gas prices have roughly doubled over the past six months to a seven-year high. Heating oil has risen 68% this year. Prices at the pump are up nearly a dollar over the past 12 months to a national average just over $3 a gallon. Coal prices are at records. Higher energy prices could push up inflation in coming months, dampen consumer spending on other products and services, and ultimately slow the U.S. recovery, analysts note. Historically, high energy prices have often preceded recessions.
After a quiet summer, lumber prices are increasing again… Prices have jumped 50% since mid-August as inflation has steadily persisted and home prices have continued higher.
Number of women on payrolls last month fell for the first time since the Covid-19 surge in December… And the drop was even more pronounced for those ages 25 to 44, who are more likely to have to school-age children. The decline was a major driver behind a slowdown in overall job growth in the country. “Child-care issues are far from resolved,” said Sarah House, senior economist at Wells Fargo & Co., whose own child is home serving a two-week quarantine. “Parents, particularly women, are slow to return to the workforce.” For younger children, many daycare centers have remained closed or lack staff members, providing even fewer options for working parents.
President Tsai Ing-Wen: Taiwan faces “unprecedented challenges” and will defend its sovereignty… Tsai’s comments came after Chinese President Xi Jinping declared that unification with Taiwan “will and must be achieved.” Taipei hopes to ease cross-Strait ties, but resolving differences requires dialogue on the basis of parity, Tsai said. She added the government would do its utmost to maintain the status quo and would not act rashly. Beijing said Taiwan’s claim of maintaining the status quo was “an attempt to deceive the world.” The remarks come amid increasing tensions in the region exacerbated by repeated incursions into Taiwan’s air defense identification zone by Chinese planes and the recent revelation that U.S. troops have been training Taiwanese forces for at least a year.
U.S. businesses are panning the Biden administration’s new China trade policy… They say it fails to provide the tariff relief they expected for importers who lack cost-effective alternatives to Chinese products. The tariffs were imposed by the Trump administration, which gradually expanded the levies to cover most imports from China. The Biden administration has kept them in place, though U.S. Trade Representative Katherine Tai said that her office would again allow companies to appeal for exemptions, a process that had mostly expired by the end of last year.
Merck asks the FDA to authorize use of its promising Covid-19 pill… Drugmaker Merck has asked U.S. regulators to authorize use of its Covid-19 pill, which it says cuts hospitalizations and deaths by half. If cleared by the Food and Drug Administration — a decision that could come in a matter of weeks — it would be the first pill shown to treat Covid-19, and would add a new and easy-to-use weapon to the world’s arsenal against the disease.
Prices rising for hogs on China’s spot and futures markets… China’s live hog futures climbed their daily upside limit of 8% today, with futures prices tracking rising spot prices. Live hog prices on the Dalian Commodity Exchange have hit a one-month high of $2,374.44 per MT, the biggest intraday gain since the contract launched in January. Government stockpiling of pork and sliding sow inventories have helped stabilize and lift prices. Ag ministry data shows China’s sow herd fell 0.5% in July and another 0.9% in August, with the July drop marking the first decline in nearly two years. Rosa Wang, an analyst with Shanghai JC Intelligence Co Ltd., told Reuters that “losses are expanding for pig farms as prices had [earlier] dropped too much and to even below 4 yuan per 500 grams in some areas.” Falling hog prices and rising feed costs had caused producers to quickly market heavy pigs, including sows, earlier this year, tightening supply prospects down the road.
China bought 30,000 MT of pork for its state reserves on Oct. 10... The country also announced plans to buy 7,700 MT of frozen beef and frozen mutton for its reserves on Oct. 13, as well as 800 MT of frozen yak meat.
China bans beef imports from the U.K. after BSE detection… China’s customs office has banned the import of British beef from cattle under 30 months of age due to a case of bovine spongiform encephalopathy (BSE) in the country during September. The ban took effect Sept. 29. The ban will have little impact as China had yet to restart purchases of British beef, despite agreeing in 2019 to lift a ban on its beef stemming from BSE cases in the 1990s.
Strong finish for cattle complex last week… Cattle futures ended last week with technically bullish weekly high closes in the most actively traded live cattle contract, which should encourage some followthrough buying this week, despite ongoing pressure on the product market. The cash market stabilized last week, which was encouraging after several weeks of declines. The market is keeping an eye on the weather and the possibility of some severe weather on the Plains this week.
Sharp drop for pork cutout value on Friday… Lean hog futures set back and then moved sideways last week amid some profit-taking after the H&P inspired price surge. That said, December lean hogs ended last week nearly $5 above where they stood prior to the release of that highly bullish report. Of note, cash hog and wholesale pork prices usually conclude a seasonal bounce in mid-October. That pared with ongoing pressure on the beef market could spell trouble for pork prices. The pork cutout value plunged $5.27 on Friday, with all cuts except butts falling. Movement slowed to 280.54 loads.
Overnight demand news… Jordan’s state grains buyer issued an international tender to buy 120,000 MT of animal feed barley.
Today’s reports
- Government closed for Columbus Day/Indigenous Peoples’ Day