First Thing Today: Corn and wheat rebound, soybeans slip overnight
Global food prices hit 10-plus year high... Global food prices jumped to their highest level since July 2011, according to the Food and Agriculture Organization of the United Nations (FAO) food price index. The index rose 3.0% in October from the previous month and was 31.3% higher than last year. The gain in food prices was led by a 9.6% month-to-month rise in vegoil prices to an all-time high. Cereal grain prices increased 3.2%, dairy rose 2.2% and sugar firmed 1.8% compared with September. Meat prices were the only component to decline, down 0.7% from the September value.
FAO trims world cereal grain production, but it’s still record-large... FAO cut its 2021-22 global cereal grain production forecast by 6.7 MMT to 2.793 billion MT, though that would still be up 21.5 MMT from last year and a new record. Most of this month’s reduction stems from a cut to the global wheat production forecast, which FAO now pegs at 771 MMT, down 6.2 MMT from October and 0.8% lower than the previous year’s output.
Weekly Export Sales Report out this morning… For the week ended Oct. 28, traders expect:
|
|
2021-22 (in MT) |
Last week |
|
Corn |
700,000-1,400,000 |
890,448 |
|
Wheat |
180,000-500,000 |
269,265 |
|
Soybeans |
1,000,000-2,000,000 |
1,183,374 |
|
Soymeal |
100,000-250,000 |
161,475 |
|
Soyoil |
0-20,000 |
14,623 |
House Democrats push to pass both infrastructure measures... House Majority Leader Steny Hoyer (D-Md.) announced Wednesday night that both bills could see a floor vote as soon as today, but more likely on Friday. The House yesterday released updated Build Back Better (BBB) language and those late additions will likely complicate its chances in the Senate. It restores a previously dropped paid-leave program that Sen. Joe Manchin (D-W.Va.) has objected to. It also raises the deduction cap for state and local taxes, a plan that Sen. Bernie Sanders (I-Vt.) called regressive and includes other tax provisions not in the prior version or specifically mentioned in the White House framework. House Democrats also added protections for immigrants in the country illegally, and some lawmakers seek more. If House Democrats pass the social and climate spending legislation with the paid leave proposal in the bill, they would effectively be forcing Senate Democrats to decide if they will try to strip it out. Any senator can force a vote on trying to change the spending bill once it's on the Senate floor, and most amendments can be adopted by a simple majority. That could allow all Republicans and Manchin to try to remove the paid leave provision.
Update on Tuesday’s elections... In Ohio, Democrat Shontel Brown and Republican Mike Carey each easily won a pair of House special elections in reliable territory for their parties. When they join Congress, the House makeup will be 221 Democrats and 213 Republicans. In Florida, the Democratic primary in the special election to fill the House seat of the late Rep. Alcee Hastings (D) is headed to a recount. New Jersey Democratic Governor Phil Murphy was re-elected, defeating Republican Jack Ciattarelli by a razor-thin margin. No New Jersey Democrat had won re-election to the governorship in 44 years. Meanwhile, New Jersey state Senate President Stephen Sweeney appears to have lost re-election to Edward Durr, a man who “has never held public office, has been a commercial truck driver for 25 years and claims to have spent a whopping $153 during the primary portion of his campaign” – “nearly half of which went to Dunkin' Donuts.”
Trucking a stubborn choke point in the freight backlog... Trucks haul more than 70% of domestic cargo shipments. Yet many fleets say they can’t hire enough drivers to meet booming consumer demand as the U.S. economy emerges from the pandemic. The freight backup has intensified longstanding strains in the industry over hours, pay, working conditions and retention. Meanwhile, the worker shortfalls are pushing up transportation costs and delaying deliveries for retailers and manufacturers already coping with disruptions ahead of the holiday peak. The American Trucking Associations, a trade group, estimates the industry is some 80,000 drivers short of what is needed to keep goods moving freely this year — up from an estimated shortage of 61,500 drivers before the pandemic.
COP26 update from Glasgow... At least 20 countries have agreed to end financing for fossil fuel projects in a deal that’s expected to be announced today as part of the COP26 summit in Glasgow. Several countries made a similar deal this week to end international financing for coal. Meanwhile, more than 450 companies across 45 countries have also signed on to the Glasgow Financial Alliance for Net Zero, which aims to deliver $100 trillion in financing over the next three decades to combat the climate crisis.
OPEC+ countries meet today... The oil producers will decide whether to increase production as the world faces a growing supply crunch, fueled by an economic rebound in the developed world. Oil prices have risen to seven-year highs in recent weeks as demand has steadily rebounded following a steep fall at the outset of the Covid pandemic. The average gas price has ticked up to $3.38 per gallon, according to figures from the U.S. Energy Information Administration. That crunch on consumers is the reason why President Joe Biden is pushing OPEC to pump more oil and force the price down. Observers note the U.S. may well go the same route as China, which has drawn on its own fuel reserves to keep prices down locally. The U.S. holds roughly 600 million barrels of crude oil in its strategic petroleum reserve, and Energy Secretary Jennifer Granholm suggested in October that it could soon be tapped.
China signs largest LNG deal with U.S. firm... China’s state-owned Sinopec signed a contract with U.S. Venture Global LNG to buy 4 MMT of liquefied natural gas (LNG) annually for 20 years. The deal is the largest LNG long-term contract signed between Chinese and U.S. companies and will double China’s imports from the United States. No details were given on when the shipments would start, though Reuters reported industry analysts expect the Plaquemines, Louisiana plant that will supply the LNG will begin production in 2024. Separately, Unipec, a subsidiary of Sinopec, will also buy a total of 3.5 MMT of LNG from the Calcasieu Pass project owned by Venture Global LNG for a shorter duration.
China facing oversupply of pork... China’s sow herd is 6% larger than normal, according to the deputy director of the country’s ag ministry Animal Husbandry and Veterinary Bureau, resulting in an oversupply of pork. As a result, Beijing is calling for farmers to cull inefficient sows. The ag ministry official says sow stocks won’t return to “reasonable” levels until next year and urged farmers not to "blindly gamble on the market outlook because of the current rise in pig prices."
Cash cattle prices expected to move even higher... There weren’t a lot of takers on the $2 to $3 higher cash cattle bids earlier this week, according to cash sources, who signaled asking prices on this week’s remaining feedlot supplies are another $2 higher. Based on the surge in December live cattle futures on Wednesday, which produced the highest price for a front-month contract on the continuation chart since mid-2017, traders expect those higher cash expectations to be met.
Pork cutout back above $100... The pork cutout value firmed for a second straight day on Wednesday, rising $6.23, mostly on a $23.61 surge in hams. That pushed the overall cutout value to $100.44, the first time into triple digits since Oct. 18. While the pork product market is showing signs of a short-term low, the cash hog index continues to fall. The CME lean hog index is down another 34 cents today to $78.70, the lowest level since Feb. 22.
Overnight demand news... Results are awaited on Japan’s tender to buy 143,396 MT of wheat from the U.S., Canada and Australia.
Today’s reports
- 7:30 a.m. Weekly Export Sales — FAS
- 2:00 p.m. Dairy Products — NASS
