Good morning!
Light buying as market readies for USDA reports that have historically sparked volatility… Corn and soybean futures are trading high range and 1 cent higher in most contracts after a quiet overnight session. Winter and spring wheat futures are also trading in the upper end of their overnight trading range with gains of 3 to 4 cents. Crude oil futures are slightly lower. The greenback hit a new one-year high overnight.
Quarterly Grain Stocks and Small Grains Summary out today… These reports have a history of spurring some major market moves. Analysts surveyed by Reuters expect the report to show Sept. 1 corn stocks at 1.155 billion bu., soybean stocks at 174 million bu. and wheat stocks at 1.852 billion bushels. That would be the smallest Sept. 1 stocks figure since 2013 for corn, 2014 for soybeans and 2007 for wheat. On average, analysts expect USDA’s final all wheat crop estimate to come in at 1.680 billion bu., with the spring wheat crop estimate falling to around 327 million bushels. The reports will be out at 11:00 a.m. CT.
Expectations for today’s Weekly Export Sales Report… The report is for the week ending Sept. 23.
| 2020-21 (MT) | 2021-22 (MT) |
Corn | NA | 400,000-900,000 |
Soybeans | NA | 700,000-1,200,000 |
Wheat | NA | 250,000-550,000 |
Soymeal | 0-100,000 | 50,000-250,000 |
Soyoil | -5,000-10,000 | 0-20,000 |
China’s official PMI dips into contraction territory for first time since February 2020… China’s official purchasing manager’s index (PMI) dropped 0.5 points from August to September to a reading of 49.6—below the 50.0 level that separates contraction from expansion for the country’s factory sector. That marks the first dip into contraction territory since February 2020 and was lighter than the 50.1 reading analysts surveyed by Reuters expected. China’s economic recovery has recently slowed, with manufacturing hindered by rising costs, electricity rationing and production bottlenecks. A rise in Covid-19 cases and resulting shutdowns have added to disruptions. And Evergrande’s debt crisis is also concerning; the property giant missed another repayment on Wednesday. Meanwhile, the Caixin PMI that focuses more so small and export-focuses businesses rose from 49.2 in August to 50.0 in September, topping analysts’ expectations for a reading of 49.5.
Chinese feedmakers closing their doors due to power crunch… At least half the soybean crushing plants in northern and northeastern China have been shut since last week and will stay closed until at least after the National Day holiday on Oct. 1 due to the country’s power outages, a plant manager and a feed purchase manager told Reuters. This is resulting in a spike in feed costs as supplies tighten, compounding troubles for Chinese livestock producers and hog farmers, in particular, who are already struggling with losses and weak margins. “Right now, pig farmers are being squeezed on each end. The price for hogs is incredibly low and demand is weak; at the same time the price for soybean meal and feed is rising,” said Darin Friedrichs, senior Asia commodity analyst at StoneX. He added this could impact drying of the corn crop. The power shortages stem from new measures curbing emissions.
China to hold 2022 TRQs steady with this year… China set its low tariff rate quotas (TRQ) for wheat, corn, cotton and rice imports in 2022 at the same level as in 2021. They stand at: 9.64 MMT for wheat, 7.20 MMT for corn, 894,000 MT for cotton and 5.32 MMT for rice, the state planner said. In recent years, Chinese purchases of some of these products have blown past these levels. Chinese customs data shows the country’s 2021 corn imports through August stand at 21.40 MMT, with wheat imports at 6.96 MMT. The Phase 1 trade agreement requires China to fulfill its TRQ obligations, something that had not occurred previously.
Late retreat for India’s monsoon… India’s monsoon rains will likely begin withdrawing from the country’s northwest region Oct. 6, reports the Indian Meteorological Department (IMD). The rains usually begin receding in mid-September from that area. But this year, cyclones delayed the retreat and brought heavy rain to much of the country this week. India’s August rains were 9% under the long-term average, but 30% more moisture than normal fell in September, which should narrow the cumulative rainfall deficit to 1%, according to IMD.
Lawmakers to vote on measure averting a government shutdown today… Both the Senate (first) and then the House are expected to clear a stopgap spending measure through Dec. 3 today, averting a partial government shutdown. The CR will include an extension of authority for USDA’s livestock price reporting system. It also contains $28.6 billion in disaster relief (including $10 billion for ag disasters in 2020 and 2021) and provides $6.3 billion to address needs created by the end of the more than 20 years of war in Afghanistan. One of the five Sente amendments offered includes one from Senator Patrick Leahy (D-Vt.), chair of the Appropriations Committee, removing debt-limit language from the continuing resolution. There should be wide bipartisan support for the measure in both chambers.
CBO projects Treasury will run out of cash near the end of October/beginning of November… Yesterday afternoon, the Congressional Budget Office said it projects “that, if the debt limit remains unchanged, the Treasury’s ability to borrow using extraordinary measures will be exhausted, and it will most likely run out of cash near the end of October or the beginning of November, consistent with CBO’s prior estimate. If that occurred, the government would be unable to pay its obligations fully, and it would delay making payments for some activities, default on its debt obligations, or both.” Treasury Secretary Janet Yellen says the government could default if the debt ceiling isn’t raised by Oct. 18.
Savannah port working to clear backlog… The Port of Savannah, Georgia, the fourth-largest U.S. gateway for seaborne imports, is trying to clear a backlog of more than 20 container ships that has grown in the waters outside the port, in the latest logjam to hit the country’s swamped supply chains. The backup is part of the congestion that has delayed cargo around the world this year, raised shipping costs and created periodic shortages of some goods.
Warning of risks of a supply chain meltdown… In an open letter to the United Nations General Assembly, business leaders from the International Chamber of Shipping, IATA and other transport groups (that account for more than $20 trillion of annual global trade) sounded the alarm on the risks of a supply chain meltdown. “We are witnessing unprecedented disruptions and global delays and shortages on essential goods including electronics, food, fuel and medical supplies. Consumer demand is rising, and the delays look set to worsen ahead of Christmas and continue into 2022. Our calls have been consistent and clear: freedom of movement for transport workers, for governments to use protocols that have been endorsed by international bodies for each sector and to prioritize transport workers for vaccinations... before global transport systems collapse.”
Two French slaughterhouses get green light to ship beef to China… China’s certification watchdog has given approval to two French slaughterhouses to export beef to the country. In June, China lifted a two decades-long embargo on French beef and three weeks ago the two sides reached an agreement on hygiene and inspection requirements. While Chinese demand for pork and pork imports has recently waned, its demand for beef has been growing steadily.
Concerns about beef demand destruction on the rise… Concerns are mounting that the summer surge in beef prices have destroyed demand for beef, with boxed beef values still under pressure. On Wednesday, Choice beef plunged $4.23 and and Select tumbled $2.57, with movement solid at 158 loads. Cash cattle trade picked up mostly around $122 in the Iowa market yesterday, with trade also underway in Kansas and Nebraska from $122 to $124 and Texas seeing cash action mostly around the $124 mark.
Momentum favors bulls in lean hog market… Lean hog futures faced some profit-taking pressure on Wednesday, with traders taking advantage of this week’s dramatic gains and strength in the U.S. dollar index. But the trend of the market still clearly favors market bulls given last Friday’s decidedly supportive Quarterly Hogs & Pigs Report for 2021 and 2022. The market will be watching to see how future perform at an eventual test of the summer highs. The preliminary figure for the lean hog index is $92.92, up 77 cents and the third day in a row the index has climbed. The pork cutout value surged $6.99 on Wednesday and 329 loads changed hands, with ham prices surging $30.69. The pork cutout is now up nearly $11 for the week.
Overnight demand news… Jordan made no purchase in its tender to buy 120,000 MT of wheat; it also made no purchase in its tender to buy 120,000 MT of barley. Tunisia’s state grains agency issued an international tender to buy around 125,000 MT of soft wheat and 100,000 MT of barley.
Today’s reports
- 7:30 a.m. Weekly Export Sales — FAS
- 11:00 a.m. Grain Stocks — NASS
- 11:00 a.m. Small Grains Summary — NASS
- 2:00 p.m. Dairy: Per Capita Consumption; Milk: Supply and Utilization of All Dairy Products — ERS
- 2:00 p.m. Per Capita Consumption of Selected Cheese Varieties — ERS
- 2:00 p.m. Agricultural Prices — NASS