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Thanksgiving schedule... Markets and government offices are closed on Thursday for Thanksgiving. As a result, there will be no Pro Farmer market updates tomorrow. On Friday, markets are open for an abbreviated trading session from 8:30 a.m. to 12:05 p.m. CT. Due to the shortened schedule, we will only send out two reports – “First Thing Today” Friday morning at around 8:00 CT and “After the Bell” briefly highlighting the day’s price action after the closes. Happy Thanksgiving from Pro Farmer.
Winter wheat drought footprint continues to shrink... As of Nov. 26, the Drought Monitor showed 74% of the U.S. was covered by abnormal dryness/drought, down four percentage points from the previous week. USDA estimated 28% of the U.S. winter wheat crop was experiencing D1-D4 drought conditions, down 12 points from last week and 10 points less than last year at this time. USDA’s estimate doesn’t include D0 (abnormally dry) conditions.
In HRW areas, dryness/drought covered 70% of Kansas (no D3 or D4), 42% of Colorado (1% D3, no D4), 47% of Oklahoma (no D3 or D4), 67% of Texas (13% D3 or D4), 94% of Nebraska (8% D3, no D4), 100% of South Dakota (10% D3, no D4) and 95% of Montana (17% D3 or D4).
In SRW areas, dryness/drought covered 52% of Missouri (no D3 or D4), 64% of Illinois (no D3 or D4), 55% of Indiana (no D3 or D4), 67% of Ohio (7% D3 or D4), 99% of Michigan (no D3 or D4), 10% of Kentucky (no D3 or D4) and 66% of Tennessee (4% D3, no D4).
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ABM: Mild, short-term La Niña possible during winter... The El Niño–Southern Oscillation (ENSO) remains neutral, with sea surface temperatures (SSTs) in the central equatorial Pacific Ocean at ENSO-neutral levels. The Australian Bureau of Meteorology’s (ABM) model suggests SSTs are likely to remain within the ENSO-neutral thresholds through February. But ABM notes, “Of the six other climate models surveyed, two models suggest SSTs in the tropical Pacific are likely to exceed the La Niña threshold throughout December to February, which is sufficient time to be classified as a La Niña event, though this would be considered a very short-lived event compared to the historical record. All models forecast neutral ENSO values by March.”
Fed’s favored inflation gauge rises in October... The Personal Consumption Expenditures (PCE) price index increased to 2.3% above year-ago in October from a 2.1% rise the previous month. The core PCE price index, excluding food and energy costs rose 2.8%, the highest since April.
The PCE price index — rose at an unrevised 1.5% annualized rate in the third quarter. Core PCE climbed 2.1% in the third quarter.
The figures support recent comments by many Fed officials that there’s urgency to aggressively cut interest rates so long as the labor market remains healthy and the economy continues to strengthen.
U.S. Q3 GDP expands 2.8%... The U.S. economy expanded an annualized 2.8% in the third quarter, unchanged from the initial estimate, but down from 3% growth in the previous period. Consumer spending, which accounts for about 70% of U.S. economic activity, accelerated to a 3.5% annual pace last quarter, up from 2.8% in the April-June period. That was the fastest growth in consumer spending since the first quarter of 2023, though down from an initially estimated 3.7% rise. Exports also contributed to the third quarter’s growth, increasing at a 7.5% rate, the most in two years. Still, the third-quarter growth in both consumer spending and exports was lower than initially estimated. Imports, which are a subtraction in the calculation of GDP, were revised down.
Trump’s trade strategy... President-elect Donald Trump’s trade strategy, particularly his proposed tariffs on imports from Mexico, Canada and China, appears to be more of a negotiating tactic than a straightforward economic policy. Analysts interpret this approach as part of Trump’s broader strategy to leverage tariffs as tools for negotiation rather than strictly for trade regulation or economic improvement.
Trump has announced plans to impose a 25% tariff on all imports from Mexico and Canada and a 10% tariff on goods from China, effective from his inauguration day. His rationale links these tariffs not just to trade deficits but also to pressing domestic issues such as illegal immigration and drug trafficking. Trump argues that these tariffs are necessary to combat what he describes as an “invasion” of drugs and undocumented immigrants flowing into the U.S. from these countries.
This framing suggests Trump is using tariffs as leverage to compel these countries to take action on immigration and drug smuggling. For instance, he has stated that the tariffs will remain in place “until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!” This indicates a willingness to use economic pressure to achieve political and social goals.
Economists express skepticism about the effectiveness of such tariffs in achieving their stated goals. Critics argue that imposing tariffs without preparing alternative sources for affected goods could lead to increased prices for consumers and potential job losses in industries reliant on imports. The potential for retaliatory measures from trading partners could also escalate into a broader trade conflict, which might harm the U.S. economy overall.
Despite the potential risks associated with Trump’s tariff proposals, market responses have been relatively muted. Investors seem to be factoring in the likelihood that these threats are part of a longer negotiation process rather than immediate actions.
Trump transition agreement reached with Biden. Key points:
- Private funds: Trump’s transition team will not utilize government facilities or email accounts, opting instead to raise private funds. Nominees will not undergo FBI vetting.
- Delayed landings: Despite early Cabinet announcements, delayed agreements with the Biden administration have hindered nominees from accessing federal briefings.
- Ethics plan: The posted ethics plan restricts lobbying during and after transition work, barring ties to foreign governments or political parties and mandating a six-month cooling-off period.
Turkey drops customs tax on sunflower seed imports for oil processing... Turkey has eliminated the 8% customs tax on imports of oil sunflower seeds, aiming to stabilize sunflower oil prices, according to a government decree. The tax, imposed in August on 1 MMT of imports, will no longer apply. However, a 20% customs tax on 400,000 MT of crude sunflower oil remains in effect, along with a reduced tariff of 12% (down from 27%) on imports outside the quota. The original tariff was intended to run from Jan. 1 to April 30, 2025. The policy shift is designed to ensure adequate industry supply and price stability.