Evening Report | November 18, 2022

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Your Pro Farmer newsletter is now available... The United Nations, Ukraine and Russia agreed to extend the Black Sea grain export deal by 120 days. While there were no changes to the deal, UN officials say they will work to remove hurdles to Russian grain and fertilizer shipments. The grain export deal eases concern over grain shipments via the Black Sea, but global wheat crops in Argentina and the U.S. remain drought-stressed. In Washington, Republicans secured a slight majority in the House, while Democrats retained a slight upper hand in the Senate. That have implications for a host of issues, including farm bill talks next year. USDA announced details on Phase 2 of its Emergency Relief Program and the new Pandemic Assistance Revenue Program will be coming soon. We cover all of these items and much more in this week’s newsletter, which you can access here.

Cattle on Feed Report: Feedlot placements drop more than expected

USDA feedlot numbers underscore tight supplies… The number of cattle sent to feedlots during October fell 6.1% from the same month last year, a larger drop than analysts expected that should support live cattle futures Monday. USDA, in its monthly Cattle on Feed report, said 2.108 million head of cattle were placed in U.S. feedlots last month, down from 2.246 million head in October 2021. Placements were expected to decline about 3.5%, based on a Reuters survey of analysts. Feedlot inventories as of Nov. 1 totaled 11.706 million head, down 2.0% from a year earlier and larger than the 1.7% drop analysts expected. Feedlot marketings during October totaled 1.802 million head, up 0.6% from a year earlier and slightly under analyst expectations for an 0.8% increase. 

Grain futures end week mixed with holiday week ahead… Corn futures faded from earlier gains but still ended higher for the week, as the market’s strength, despite the extension of the Ukraine export deal, encouraged buyers. Soybeans gained today but still posted the third weekly decline in the past four weeks. December corn futures rose 1/4 cent to $6.67 3/4, a gain of 9 3/4 cents for the week. January soybeans rose 11 1/4 cents to $14.28 1/4, down 28 3/4 cents for the week. December SRW wheat futures fell 3 1/2 cents to $8.03 1/4, down 10 1/2 cents for the week.

Crude oil plunges near two-month lows amid demand concerns… Front-month crude futures briefly fell under $78 a barrel to the lowest levels since late September amid concern Covid outbreaks in China may curb demand. Beijing's biggest district urged people to stay home during the weekend and Covid-19 outbreaks grew in numerous Chinese cities on Friday, even as China further fine-tuned its COVID rules by removing capacity limits at entertainment venues.

Fed’s Collins: 75-basis-point hike still on the table... Boston Federal Reserve Bank President Susan Collins on Friday said a 75-basis-point interest rate hike is still “on the table,” as the Fed needs to do more to tame inflation. “I think it’s important to say that,” Collins told CNBC. She also said she saw no clear, significant evidence inflation is coming down. As the central bank seeks a rate hike path that neither tightens too little or too much, she said, “deliberate increments – all of the possible increments – should be on the table.”

Cargill CEO: Doesn’t have to be food vs. fuel... Food prices will probably decline next year, even as global crop stockpiles stay very tight, especially for oilseeds, said David MacLennan, CEO of Cargill. “All it takes is one really bad crop, let’s say in North America or South America, to really send prices higher,” he said at the Bloomberg News Economy Forum in Singapore on Wednesday. MacLennan said the solution to the food-versus-fuel debate is to boost global crop production. “We don’t think it’s going to be an either/or dynamic,” he said. “It can be food and fuel.” Regenerative agricultural practices, greater yields and more use of technology can increase output so that it can meet demand from both sectors, he said.

Biden’s climate goals face rougher road ahead with GOP controlling House… U.S. President Joe Biden's pledges to slash emissions from farming and to end American hunger by 2030 may be harder to realize now that Republicans flipped the House of Representatives with a thin majority, Reuters reported. Biden's Democrats, who retain control of the Senate, will start negotiating in the coming months with Republican House leaders over a massive farm spending bill passed every five years that funds U.S. public food benefits and farm commodity programs. The current $428 billion bill expires on Sept. 30, 2023.

Much reduced supply-chain pressures... American retailers and consumers are entering the first holiday shopping season in three years without crushing supply-chain pressures. Industry executives are projecting full store shelves this year as retailers work through gluts in product categories from toys to furniture, a sharp contrast with the scramble for goods over the past two years. The Wall Street Journal reports executives credit broad factors for the improved outlook, including a change in supply-chain strategies to emphasize earlier delivery lead times and heftier inventories. That’s carrying a cost for retailers: Target is rolling out deep holiday discounts and shortening lead times for product orders after shipments arrived more quickly than anticipated. The pressures haven’t totally receded: While West Coast container ship delays largely have been resolved, the East Coast has a backlog of 67 ships, according to Goldman Sachs. And truckers report warehouses and inland rail hubs remain clogged.

The average number of days inbound containers at the ports of Los Angeles and Long Beach waited for inland transport last month was 3.5 days, the shortest “dwell time” since August 2020, according to the Pacific Merchant Shipping Association.

Hess CEO: OPEC ‘back in the driver’s seat’ while U.S. oil companies ‘have already hit the wall’... OPEC is “back in the driver’s seat” as the world’s top swing oil producer while U.S. shale growth has slowed, Hess CEO John Hess said. Hess told an investor conference in Miami he sees U.S. oil production reaching around 13 million barrels per day (bpd) in the next few years before leveling off, as shale output is ticking lower due to inventory depletion, inflation and investor pressure to focus on returns over growth.

“Shale was thought of as a swing producer… the Saudis and the OPEC have waited this out. Now, really OPEC is back in the driver’s seat where they are the swing producer,” Hess said, even as OPEC lacks spare capacity to easily increase its production.

Hess expects U.S. oil output will rise by around 500,000 bpd this year and next, but many companies “have already hit the wall” with only about a decade of life remaining.

FDA approves lab-grown chicken... FDA approved lab-grown chicken for the first time, greenlighting products from startup Upside Foods for human consumption. If Upside gets USDA approval next, the company said it could start pumping out 50,000 lbs. of “no-kill” meat products every year. Upside has garnered over $600 million in funding from names like Bill Gates and meat company Tyson. Meanwhile, Beyond Meat announced it would lay off 19% of staff last month, and retail sales in the plant-based meat industry overall have dropped 10% in the past year.