Good morning!
Light buying overnight… Corn futures are 1 to 2 cents higher and soybeans are up 3 to 4 cents after holding to narrow ranges overnight. Winter wheat futures are up 5 cents, while spring wheat has climbed 7 to 8 cents. Crude oil futures have retreated from a seven-year high hit yesterday. The greenback is slightly lower.
Expectations for today’s Weekly Export Sales Report… The report is for the week ending Sept. 30.
| 2020-21 (MT) | 2021-22 (MT) |
Corn | NA | 350,000-800,000 |
Soybeans | NA | 600,000-1,200,000 |
Wheat | NA | 250,000-550,000 |
Soymeal | -50,000-100,000 | 50,000-250,000 |
Soyoil | -5,000-10,000 | 0-30,000 |
Global food prices up nearly a third from year-ago… Global food prices climbed 1.2% in September, according to the Food and Agriculture Organization of the United Nations’ (FAO’s) food price index. The index climbed 1.5 points from August to a reading of 130 points in September, which was up 32.1 points (32.8%) from September 2020 and a 10-year high. “The latest rise of the FFPI was largely driven by higher prices of most cereals and vegetable oils,” FAO says. On the production front, FAO comments that while it still expects a record-setting global cereal crop of 2.8 billion MT in 2021, that would still fall short of anticipated consumption, drawing down inventories. FAO raised its global wheat crop estimate by 7.2 MMT to 776.7 MMT, which would be in line with the 2020 crop. It cited higher yield estimates for some areas of Eastern Europe like Ukraine and strong production prospects in Australia.
Farm optimism slides as inputs rise, ag trade prospects dim… The Ag Economy Barometer produced by CME Group and Purdue University dropped 14 points during September to a reading of 124, the lowest since 2020. Producer optimism about both current and future conditions on their farms fell, with a growing number of respondents worried about rising input costs. More than a third of them said they expect farm input prices to climb by more than 12% in 2022, an increase that would be more than six times the average farm input inflation rate over the past decade. Also, 55% of respondents said their farm machinery purchase plans have been impacted by low farm machinery inventories. Producers remain bullish about farmland values, with both the short- and long-term farmland values expectations indices rising this month. Expectations regarding future ag trade prospects have also weighed on farm sentiment. In early 2020, 70% of farmers surveyed expected ag exports to increase over the next five years. That figure has fallen steadily since, dropping to a new low of 37% in September.
Debt limit ceasefire pushes issue back to December… As expected, GOP Senate Leader Mitch McConnell (R-Ky.) offered Democrats an alternate route to temporarily raise the debt limit until December. He proposed two options. One would allow Democrats to fast-track the suspension of the debt limit using the budget reconciliation process. The other would raise the limit to a specified figure. McConnell made the offer just over a week before a possible debt default. Democrats emerged said they could agree to the McConnell offer, which McConnell reportedly ran by centrist Senators Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.). It’s a debt ceiling ceasefire; now the stage is set for a year-end convergence of Congress’ major fiscal agenda items, with government funding set to expire on Dec. 3.
Manchin to progressives: Pick one of Biden’s three signature policies for helping working families… The centrist Democrat wants progressives to choose among an expanded child tax credit, paid family medical leave or subsidies for childcare. Biden has proposed extending the expanded, $3,600-per-child tax credit, which he funded for one year in the American Rescue Plan, for another four years. That would cost $450 billion. The costs for providing paid family medical leave are murky. The White House proposed $225 billion over 10 years in April, but the House Ways and Means Committee estimates it at $500 billion. For Biden’s child and infant care proposals, including subsidies for poor and middle-class families for daycare and two years of universal preschool, the House wants to spend $450 billion.
CBO ‘unclear’ when it will have cost estimate of House reconciliation bill... The Congressional Budget Office (CBO) said Wednesday that it is “unclear” when it will complete a cost estimate of the entirety of the Democratic-backed social spending package approved by House committees. “The legislation being considered by the House is complex, and provisions in some committees’ recommendations interact with those of other committees,” CBO Director Phillip Swagel said in a letter to Senate Minority Leader Mitch McConnell (R-Ky.). “Moreover, the agency has had to devote substantial resources to providing technical assistance as committees continue to modify their proposals.” Talk about punting.
U.S. could tap SPR, halt crude exports in bid to quell prices: DOE’s Granholm... U.S. Energy Secretary Jennifer Granholm said the Biden administration is considering tapping the Strategic Petroleum Reserve (SPR) in a bid to temper rising gasoline prices. However, she also commented that releasing SPR supplies was “very much marginal assistance overall given the scope of the problems.” She also did not rule out banning U.S. crude oil exports. Granholm said that “all tools are on the table,” and “everybody was hoping there would be additional supply made available so that prices would not be jacked up,” the latter comment in reference to OPEC+ countries failing to increase their output targets. The U.S. is doing “all it can” relative to issues with natural gas supplies that have spiked prices in Asia and Europe, she noted, including looking into possible “manipulation of the market” by Russia.
Coal supply shortages are pushing prices for the fuel to record highs… Reasons, according to the Wall Street Journal (WSJ): The post-pandemic boom to supply-chain strains and ambitious targets for reducing carbon emissions. And it is expected to last at least through the winter, raising fears in many countries of fuel shortfalls in the months ahead. Another reason: China, the world’s second-largest economy and its biggest coal consumer, is at the heart of the current crunch. As Beijing has sought to meet its climate targets, it allowed coal inventories to dwindle. It halted imports of Australian coal amid a diplomatic row. Global production of coal, which generates around 40% of the world’s electricity, is about 5% below pre-pandemic levels.
Russia offers to ease Europe’s gas crisis, with stipulations… Russian President Vladimir Putin said Russia could export record volumes of natural gas to Europe this year. Quick certification of the controversial Nord Stream 2 natural gas pipeline would be one way to achieve this, according to Deputy Prime Minister Alexander Novak. Putin said state-run Gazprom PJSC has fulfilled all of its supply contracts and his country has no desire to see the “speculative frenzy” that’s currently gripping markets. Putin asked his government and energy executives for proposals on how to stabilize the energy market, and Nord Stream 2 wasn’t the only proposal. Novak, former energy minister, also suggested selling some additional volumes on Gazprom’s own electronic platform based in St. Petersburg.
Biden’s virtual summit with Chinese President Xi Jinping to be held by year-end… Biden administration officials had sought an in-person meeting. But Xi has not left Chinese territory for such engagements in nearly two years. The announcement on Wednesday from American officials came after a six-hour meeting between Jake Sullivan, the national security adviser, and his closest Chinese counterpart, Yang Jiechi, Beijing’s top diplomat. No date was provided; other officials are also expected to participate.
WSJ reports Biden administration’s emerging China strategy focuses at home and on allies… First, rebuild the U.S.’s own domestic economic strength by investing in infrastructure, research and development. Second, push U.S. companies to manufacture more at home, to insulate the country from supply disruptions and build up domestic innovative capacity. Third, work with allies on new trading arrangements that deal with those features of China’s system the World Trade Organization can’t constrain. None require cooperation from China, but all require cooperation from others that may not be forthcoming. Hardest of all, notes the WSJ item, is bringing back U.S. industrial supply chains. “Despite tariffs, Covid-19 and other disruptions, few American companies are reshoring operations and most find leaving China unthinkable.”
Where are top-up payments for hog producers?... As previously reported, USDA evaluated past CFAP program assistance and determined previous payment methodologies using flat rates across all swine inventory were not targeted and did not reflect the variation in levels of losses between producers. As a result, the proposed assistance under the prior administration in providing a flat rate swine payment based on CFAP 1 inventories will not be pursued. Where there’s flexibility, USDA will instead continue to target assistance based on gaps or disparities in previous assistance.
Strong beef export data provides a lift… USDA data analyzed by the U.S. Meat Export Federation showed the U.S. exported more than $1 billion worth of beef during August, with strong Chinese buying powering the record surge. The data helped lift futures Wednesday and the market will get another update on weekly exports today. Choice boxed beef values fell $1.09 at midweek and Select dropped $4.87, with 157 loads changing hands. Cash cattle prices improved to $123 to $124 on Wednesday in the Iowa, Kansas and Nebraska market, with Texas seeing additional trade at $124. That’s steady to higher compared with action earlier this week but in line with last week’s range of trade.
Big pork price swings continue… October lean hog futures are still trading at nearly a $4.50 discount to the CME lean hog index, with contract expiration nearing. December lean hogs hold an even wider, $12-plus discount to the index. The pork cutout value surged $4.73 yesterday, with hams jumping nearly $17. Movement dropped to 288.56 loads and the cutout value is still down more than $3 for the week.
Overnight demand news… Egypt bought 180,000 MT of Russian wheat and 60,000 MT of wheat from Ukraine in a tender yesterday. Taiwan bought an estimated 48,000 MT of milling wheat to be sourced from the United States. Jordan issued new tenders to buy 120,000 MT of feed barley and 120,000 MT of milling wheat from optional origins.
Today’s reports
- 7:30 a.m. Weekly Export Sales — FAS