Good morning!
Soybeans drop to a six-month low… Corn futures are trading high-range and fractionally lower after holding within Friday’s trading range overnight. Soybean futures have fallen 7 to 8 cents, with the November contract dropping to the lowest price since March 31. SRW wheat futures are 2 to 3 cents higher, HRW wheat is down 1 to 2 cents and spring wheat futures are choppy. Crude oil futures are marginally higher. The U.S. dollar index is slightly lower.
Too wet in some key cotton producing areas… The central and southwestern U.S. Plains are likely to be dry over the next seven days, allowing for aggressive fieldwork after last week’s rains, reports World Weather Inc. Meanwhile, it reports West Texas received too much rain in some areas over the weekend, while the Delta is expected to remain too wet most of this week. This will keep concerns about the U.S. cotton crop front-and-center.
Dry weather holding back winter wheat planting in Russia… Dry weather may limit winter wheat plantings in Russia, according to several analysts, with sowing running behind the normal pace. SovEcon estimates the area sown to winter wheat could fall 700,000 hectares to 1.2 million hectares from year-ago levels, while the consultancy IKAR forecasts plantings will slide 500,000 hectares to 1.0 million hectares from last year’s 17.8 million hectares (44.0 million acres). In September, SovEcon was calling for a 500,000-hectare to 1.0-million-hectare drop from year-ago, whereas IKAR anticipated a 500,000-hectare pullback. “There is a quite strong reduction in sowing in the Volga and Central regions mainly due to weather problems,” IKAR said, though it added that southern regions could still make up for some of that fall. Winter wheat typically accounts for around 70% of Russia’s total wheat crop. Russia is expected to remain dry this week.
Canadian canola exports down sharply from year-ago given short crop, strong domestic demand… Canada’s canola crop was the smallest in 13 years, shooting up prices for the oilseed and leaving Canada’s customers with limited alternatives. Domestic crushers are also scrambling to buy as much canola as possible. Canada exported just 388,000 MT of canola for the first seven weeks of the 2021-22 crop year that started in August, a 71% retreat from year-ago. Canada’s biggest export markets are typically China, Japan, Mexico and the United Arab Emirates. Australia and Ukraine should benefit from Canada’s production woes, but the countries typically export far less than Canada.
OPEC+ meets... OPEC+ countries will decide whether to increase oil production levels or keep them steady as oil ministers meet both virtually and in Vienna today. The price of oil hit a three-year-high last week and could rise further if OPEC+ fails to agree a supply increase. The topic has attracted the White House, with National Security Adviser Jake Sullivan reportedly broaching the subject with Saudi Crown Prince Mohammed bin Salman on his visit to the kingdom last week. In July, the group led by Saudi Arabia and Russia agreed to boost monthly output by 400,000 barrels per day until at least April 2022, phasing out 5.8 million barrels per day in cuts. There’s some chatter the production boost could grow.
The week ahead… Both chambers approved a 30-day extension of surface transportation programs and President Joe Biden signed the measure into law. The House isn’t in session and will next convene Tuesday morning. Leaders scheduled the next two weeks as committee work weeks but said that members would be given 72 hours’ notice if they needed to return to act on “significant legislation.” Biden met behind closed doors at the Capitol with rank-and-file House Democrats on Friday to rally their support and serve as a referee on lingering issues and self-imposed deadlines that have not been met. Biden urged Democrats to compromise on a $2-trillion price tag for the social policy and climate change package rather than the initial $3.5 trillion level pushed by party progressives (liberals). Biden also said the vote on the around $1 trillion bipartisan infrastructure plan would not take place solo but is linked with the BBB vote. Also of note, the House Ag Committee will hold a hearing on the livestock industry Thursday. And the September jobs report will be out Friday.
Nine centrist House Dems vs. 96 progressives (liberals)… Guess who “won” the latest battle and which group Biden favored? The losers were the meager number of lawmakers who had tried to force an infrastructure vote. The winners of no funding were the liberals. The partial losers were House Speaker Nancy Pelosi (D-Calif.) who now can’t follow through on her vote pledges, and in a sense, Biden. In a “Dear Colleague” letter released Saturday, Pelosi said she wanted to pass the bipartisan infrastructure bill by Oct. 31, when the 30-day recently extended authorization of federal highway program expires.
Biden administration to lay out China trade policy… U.S. Trade Representative Katherine Tai is scheduled to speak on the administration’s trade policy in a speech to a Washington think tank this, in a first step toward addressing unresolved issues between the U.S. and China, nearly nine months into the Biden presidency. The U.S. plans to launch new trade talks with China, but it will maintain tariffs on Chinese imports (and consider imposing additional levies) as leverage to get China to fulfill terms of the 2020 trade deal with the U.S., according to Biden administration officials. U.S. companies will again be allowed to seek exemptions from tariffs. The Biden administration plans to keep some provisions of the Phase 1 deal intact, including those that have benefitted agriculture. While they intend to press China on issues that were left out of the Phase 1 deal, senior administration officials doubt China will be willing to consider serious negotiations over a second phase.
Antony Blinken leads fence-mending mission to France… The secretary of State will meet his French counterpart, who has sharply criticized a new security partnership among the U.S., U.K. and Australia in the Indo-Pacific that coincided with the cancellation of a French-Australian submarine contract, on a visit to Paris from Monday to Wednesday.
U.S. marked 700,000 deaths due to Covid-19… So far 65% of Americans aged 12 or over have been fully vaccinated. California’s governor, Gavin Newsom, took measures to raise his own state’s vaccination rate (just over 70%) by ordering the country’s first statewide vaccine mandate for schoolchildren. As early as next autumn — provided the Food and Drug Administration approves — Californian youngsters will need the jabs before enrolling in public or private schools.
One of the largest oil spills in recent Southern California history occurred over the weekend… At least 126,000 gallons of oil leaking into the waters off Orange County. Local officials are calling it an environmental catastrophe as black globules along with dead birds and fish wash ashore. The spill was caused by a breach connected to the Elly oil rig, which was operated by a California subsidiary of Houston-based Amplify Energy Corporation.
Details on expanding meat processing capacity… USDA Secretary Tom Vilsack today will announce details of a loan guarantee program to expand meat processing capacity and reducing the impact of plant disruptions that depress livestock prices and cause spikes in retail meat prices.
Beef demand construction concerns continue to weigh on futures… Boxed beef values continue to slide, with Choice falling $2.62 on Friday and Select dropping $4.48. The ongoing price slide keeps concerns alive that the summer price rise destroyed demand. Last week’s kill fell 0.6% from the week prior and 4.1% from year-ago, with beef production dropping an even more dramatic 5.8% from year-ago, according to USDA. Futures moved lower last week, with the December contract settling at its lowest level in more than five months.
Momentum to the upside for lean hog futures… Lean hog futures surged in response to a highly bullish Quarterly Hogs & Pigs Report last week and the market could build on those gains next week. The market will be watching to see how the market performs at its summer highs. Whether hog futures can sustain the delayed seasonal upturn this month will depend in part on retail demand. Pork prices have recently strengthened, especially relative to beef prices. On Friday, the pork cutout value fell $2.90, but it still ended a few bucks higher for the week.
Weekend demand news… Pakistan bought 550,000 MT of wheat in an international tender. Jordan’s state grains buyer issued a new tender to buy 120,000 MT of feed barley. The country has recently canceled several barley tenders due to low participation. Jordan also issued a separate tender to buy 120,000 MT of milling wheat. The Taiwan Flour Millers’ Association issued an international tender to buy 48,000 MT of grade 1 milling wheat from the United States. Egypt’s state grains buyer is seeking to buy 30,000 MT of soyoil and 10,000 MT of sunflower oil. Turkey tendered to buy 310,000 MT of animal feed barley.
Today’s reports
- 10:00 a.m. Weekly Export Inspections — AMS
- 2:00 p.m. Dairy Products — NASS
- 3:00 p.m. Crop Progress — NASS