First Thing Today: December 1, 2021
Grain, soy markets rebound overnight... Corn, soybean and wheat futures saw a round of corrective buying overnight after Tuesday’s sharp losses. But futures have backed off their overnight highs and are trading near midrange early this morning. As of 6:30 a.m. CT, corn is trading mostly 4 to 5 cents higher, soybeans are 7 to 9 cents higher and winter wheat futures are mostly 5 to 7 cents higher and spring wheat is mostly 11 to 12 cents higher. Front-month crude oil futures are around $3 higher and the U.S. dollar index is holding near unchanged this morning.
Beige Book likely to highlight inflationary pressures... The Fed today will issue the Beige Book report, the anecdotal recap of the U.S. economy from its 12 districts that is released two weeks prior to the next Federal Open Market Committee meeting. Given Fed Chair Jerome Powell’s comments yesterday about retiring the word “transitory” when talking about inflation, we expect the report to continue to highlight price pressures on the U.S. economy. And the possible quickening of the tapering pace Powell mentioned on Tuesday may also mean the Fed could increase rates much earlier than anticipated, especially if inflationary pressures persist. After Powell’s remarks Tuesday, financial markets estimated a 50-50 chance the Fed will raise U.S. interest rates as early as May 2022. Powell and Treasury Secretary Janet Yellen speak in front House panel today.
OECD: Inflation the greatest global economic concern... The Paris-based Organization for Economic Cooperation and Development (OECD) think tank forecasts rising global inflation in 2022, including predicting U.S. annual inflation at 4.4% and Euro zone inflation at 2.7%. Both of those figures are above OECD’s September forecasts. OECD says inflation is the main risk to the global economic outlook. It expects global GDP of 5.6% this year (down 0.1 point from its previous forecast) and 4.5% next year (unchanged). Its first forecast for 2023 calls for 3.2% global economic growth.
Statutory deadline on RFS levels passes without EPA action... EPA is required by law to finalize the annual Renewable Volume Obligations (RVOs) under the Renewable Fuel Standard (RFS) by Nov. 30 for the biofuel levels the following year. That date arrived and passed without any action, as expected. The proposed levels for 2021 and 2022 are still showing as being under review at the Office of Management and Budget (OMB) where they have been since Aug. 26. It is not yet clear when the agency will release the RFS plan, with EPA Administrator Michael Regan indicating in November it would be out “sooner rather than later.” But EPA is also working on its plans relative to determining RFS levels for 2023 and beyond, releasing a timeline earlier this year that it would come forth with a proposal outlining that plan by the end of this year. However, that has not yet been forwarded to OMB for review.
Big jumps expected in soy crush, corn-for-ethanol figures... USDA this afternoon is expected to report October soybean crush totaled 195.3 million bu., according to a Bloomberg survey. That would be up sharply from the 164.1 million bu. of soybeans crushed in September but below the all-time high for any month of 196.6 million bu. in October 2020. The Bloomberg survey expects corn-for-ethanol use to total 468.0 million bu. in October, which would be up sharply from 407.5 million bu. in September and 434.2 million bu. last year.
Ukraine’s 2021-22 grain exports top 25 MMT... Ukraine exported 5.8 MMT of grain in November, including nearly 2.2 MMT of wheat. Through the first five months of 2021-22, Ukraine shipped 25.3 MMT of grain, including 14.5 MMT of wheat, 5.5 MMT of corn and 4.9 MMT of barley. Grain shipments are running nearly 20% ahead of last year’s pace. Ukraine’s ag ministry says the country could export 61.5 MMT of grain this year, including 24.5 MMT of wheat, 30.9 MMT of corn and 5.2 MMT of barley.
Lower sugar supplies as India boosts ethanol production... The world's sugar supply is expected to tighten in 2021-22 due to higher use of sugarcane in ethanol production in India and a smaller crop in Brazil, broker StoneX said on Tuesday. The season will see demand surpassing production for the third consecutive year, with StoneX projecting a supply deficit of 1.8 MMT, 1 MMT more than it estimated in October. India is seen producing a record amount of sugarcane after positive weather, but the country's ethanol blending program will take the equivalent of 3 MMT of sugar out of the market, StoneX said. Sugarcane production in Brazil's center-south region is seen at 31.3 MMT, 12% less than last year.
China’s smaller factory activity contracts a little in November... China’s Caixin/Markit purchasing managers index (PMI), which gauges mostly smaller privately owned factories, fell to 49.9 in November, down from 50.6 the previous month and just below the 50-mark that separates growth from contraction. New orders fell slightly following two months of expansion, while both export sales and employment shrank for the fourth month in a row and buying levels declined further. Meanwhile, supplier performance deteriorated again due to low stock levels at vendors and logistical delays. Factory activity is expected to pick up in the months ahead amid hopes of a recovery in supply chains, though there is uncertainty over the impacts of the new Omicron variant of Covid.
USDA reports slight reduction in CFAP 2 payouts... Payments approved under the Coronavirus Food Assistance Program 2 (CFAP 2) are reported at $19.03 billion as of Nov. 28, down slightly from $19.06 billion in the prior weekly update. There were slight reductions in both original CFAP 2 payments and the top-up payments. Original CFAP 2 payments are at $14.22 billion ($14.24 billion previously) while top-up payments are at $4.81 billion (4.82 billion previously). There were also slight reductions reported in CFAP 1 payments, with total payments standing at $11.77 billion ($11.78 billion previously), reflecting original CFAP 1 payouts now at $10.58 billion ($10.59 billion) and while top-up payments remained at $11.19 billion. There was no explanation given for the reductions in payments, but one possibility could be the issuance of the remaining 10% of 2019 and 2020 Wildfire and Hurricanes Indemnity Program Plus (WHIP+) payments that were issued by USDA around Nov. 8.
DOE seeks feedback on sites to store spent nuclear fuel... The Department of Energy (DOE) issued a request for information (RFI) in the Federal Register today seeking feedback on a “consent-based siting process” to find communities willing to host a temporary storage facility for the nation’s spent nuclear fuel. The department emphasized that nuclear energy is a key to the Biden administration’s zero carbon emissions efforts. The interim spent fuel storage siting effort was called for and funded under the Fiscal Year (FY) 2021 omnibus spending bill. The department said the effort will “inform development of a consent-based siting process, overall strategy for an integrated waste management system, and possibly a funding opportunity.” DOE is using the term “interim” in the notice as a facility that “would need to operate until the fuel can be moved to final disposal,” and the duration would depend on several steps including “the need to identify, license, and construct a facility, plus the time needed to move the spent nuclear fuel.” DOE noted that any final decisions on such facilities will be subject to congressional appropriations. Responses are due by March 4, 2022.
USTR publishes notice on monitoring Turkey DST situation... The Office of the US Trade Representative (USTR) announced Nov. 22 a deal on Turkey’s transitional approach to its Digital Services Tax (DST), taxes imposed on multinational firms based on their digital activities in a particular jurisdiction. USTR today published a notice in the Federal Register formally setting in place its monitoring effort on the matter and formalizing the termination of the Section 301 investigation into Turkey’s DST. The termination of the Section 301 investigation was effective Nov. 28. “In coordination with Treasury, USTR will monitor implementation of the removal of Turkey's DST” as called for in the first pillar of the Organization for Economic Cooperation and Development (OECD)/G20 agreement on DSTs where the U.S. and 134 other countries agreed to remove existing DSTs and other relevant similar measures.
Early cash cattle trade at steady prices... Some feedlots with hedged cattle sold them at $138 in the Southern Plains and Iowa on Tuesday. The initial cash trade was at virtually steady prices with last week’s average but down about $2 from the top end. Other feedlots passed on the steady bids for now in hopes of higher prices later this week, though packers may not need to buy many cattle after recent aggressive purchases and a fresh supply of contracted cattle available for December.
Price drop sparks heavy pork movement... The pork cutout value fell $1.01 on Tuesday, as losses in hams, loins and picnics more than offset firmer prices for butts, bellies and ribs. More importantly, the lower price spurred strong movement of 440.14 loads. Packers have moved more than 775 loads of pork the first two days this week, which signals strong retailer demand.
Overnight demand news... Tunisia issued an international tender to buy up to 175,000 MT of soft wheat and up to 92,000 MT of durum.
Today’s reports
- 10:00 a.m. Highlights From the December 2021 Farm Income Forecast — ERS
- 2:00 p.m. Broiler Hatchery — NASS
- 2:00 p.m. Cotton System — NASS
- 2:00 p.m. Fats & Oils — NASS
- 2:00 p.m. Grain Crushings — NASS
