First Thing Today | December 3, 2021
Soybeans continued to push higher overnight... Soybean futures extended their corrective gains from the two previous days overnight, which helped support corn. Wheat futures held in a tight range in two-sided trade. As of 6:30 a.m. CT, soybeans are 10 to 11 cents higher, corn futures are 3 to 4 cents higher, SRW wheat is narrowly mixed, while HRW and HRS wheat futures are mostly 1 to 3 cents lower. Front-month crude oil futures are up around $1.90, while the U.S. dollar index is anchored near unchanged this morning.
No gov’t shutdown; House and Senate clear stopgap spending measure... Both chambers of Congress on Thursday relatively quickly approved a continuing resolution (CR) for fiscal year (FY) 2022, funding agencies and departments at FY 2021 levels through Feb. 18. Of note, the temporary measure would not waive statutory pay-as-you-go rules that could lead to deep spending cuts starting in January — including cutting farm subsidies and wiping out dozens of smaller programs. Republicans and Democrats couldn’t agree on that in part because there’s a chance Congress will have to deal with the pay-as-you-go issue again once the budget reconciliation bill passes. Others say lawmakers expect to include the waiver in another bill before the end of the year. It can’t be included in a reconciliation bill due to Senate budget rules, but another vehicle that’s still available is the FY 2022 defense authorization measure.
RFS proposals still at OMB for review... The Office of Management and Budget (OMB) review of proposed levels EPA forwarded Aug. 26 has not yet been concluded. However, once that review is completed, a quick announcement by EPA is certainly expected. Reuters reported in August EPA would set 2021 RFS levels at 18.6 billion gallons of biofuel and reduce 2020 to 17.1 billion gallons, the latter reflecting the downturn in gasoline demand due to the pandemic. If the proposed marks eventually released by EPA are close to those levels, it raises questions about why it has taken the agency so long to act. EPA Administrator Michael Regan said in November that some will be “disappointed” in what the agency proposes, something which many interpreted as a signal to biofuel backers relative to reduced mandates. But those backers have been pressing the administration to hold to the campaign promises from President Joe Biden that he would support the biofuel industry. Some speculate that the administration may be trying to time the RFS announcement with announcement of other aid for the biofuel sector, including the promised $700 million in pandemic aid USDA has said since June was coming for the industry. And the administration could also tout the biofuel support included in the Build Back Better (BBB) package as another salve for the industry.
Other decisions still awaited on the biofuels front. Those include decisions on small refinery exemptions (SREs) for 2019 and 2020, and the proposed plan from EPA on how it intends to set biofuel levels for 2023 and beyond without the levels mandated by the 2007 energy law. That plan has not yet been sent forward to OMB for their review. So even when the 2021 and 2022 RFS levels are announced, they will still need to be finalized and other decisions for the sector will still be pending.
Virtual hearing with stakeholders today on EPA’s plans to extend RFS compliance deadlines... EPA in November proposed to extend the RFS compliance reporting deadline and the associated attest engagement reporting deadline for the 2019 compliance year for small refineries only and to extend deadlines for all parties relative to the 2020 and 2021 compliance years. Plus, the agency has proposed tying future compliance and attest engagement reporting deadlines to when those levels are finalized for a given compliance year. Comments on EPA’s plan are due by Jan. 3.
Canadian crop production data out later this morning... Statistics Canada is expected to peg the Canadian all-wheat crop at 21.2 MMT and canola production at 12.8 MMT, according to a Reuters survey. In September, StatsCan estimated the wheat crop at 21.7 MMT and canola at 12.9 MMT.
Strong jobs growth expected for November... Economists expect the Labor Department to report non-farm payrolls increased 573,000 in November, up from the initial figure of 531,000 payrolls added in October. The unemployment rate is expected to tick down to 4.5%.
Yellen joins Powell in ditching ‘transitory’ inflation mantra... Treasury Secretary Janet Yellen on Thursday said she believed it was time to retire the term “transitory” to characterize inflation as temporary and suggested that the Omicron variant of Covid could prolong the problem of rising prices. She said that over the summer it appeared that the pandemic was subsiding and the economy would soon normalize. The spread of new variants, she said, has changed that calculus. “Now the new variant, the Omicron variant, the pandemic could be with us for quite some time and hopefully not completely stifling economic activity but affecting our behavior in ways that contribute to inflation,” Yellen said. She said Fed Chair Jerome Powell’s suggestion this week that the Fed would consider speeding up its plan to withdraw financial support from the economy “makes sense… What we don’t want to have develop is a wage-price spiral, in which inflation becomes its own self-reinforcing kind of phenomenon that would become chronic in the U.S. economy, something endemic,” Yellen said.
Wages are increasing in the U.S., but not so much elsewhere... U.S. workers are getting their largest pay bumps in three decades. But for employees in some large Asia-Pacific economies such as Australia and Japan, it is the opposite experience. Many are struggling to negotiate a wage increase — if they can get one — that covers higher consumer prices. The situation has implications for how quickly central banks tighten monetary policy in response to price pressures, the Wall Street Journal reports. Meanwhile, wage pressure in the U.S. likely continued into November. The share of small-business owners raising compensation held at a record high, according to the National Federation of Independent Business.
Americans hoarding cash due to fatigue, uncertainty; little chance the trend will reverse soon... Over the past two years, households have stashed away close to $1.6 trillion in “excess savings,” or resources they otherwise wouldn’t have been able to save before the Covid-19 crisis, according to the Federal Reserve Bank of New York. The funds are well beyond the three to six months of emergency savings generally recommended by financial advisers. While the savings rate has dropped back to 2019 levels after four consecutive quarters of record highs, financial advisers, money managers and economists say Americans are too nervous about potential worst-case scenarios to dip into their funds.
Workers at Canadian beef plant to vote on Cargill offer ahead of strike date… Workers at Cargill Inc's beef-processing plant in High River, Alberta, will vote on a new company offer backed by union negotiators, just days before a potential strike. The plant processes up to 4,500 head of cattle per day, or 35% of Canada's beef-processing capacity. United Food and Commercial Workers (UFCW) Union Local 401 has said the plant's roughly 2,000 workers will strike on Monday unless a deal is in place. The vote started Thursday and will run through Saturday. Union members had voted down a previous deal between Cargill and the union.
Beef prices firm and movement was strong again... Wholesale beef prices rose $1.80 for Choice boxes and 28 cents for Select, while movement totaled 174 loads at the higher prices. After a slow start to the week, beef movement has been strong the past three days, signaling the price drop into the low-$270 range spurred increased retailer demand.
Cash hog index up for a second day in a row... The CME lean hog index is up 59 cents today after rising 23 cents on Thursday. While it’s premature to say a seasonal low is in place, recent price action in December lean hog futures sure suggests traders are leaning that way, as the front-month contract is trading premium to the cash index.
Overnight demand news... Japan purchased another 25,510 MT of Australian wheat from its weekly tender.
Today’s reports
- 2:00 p.m. Dairy Products — NASS
- 2:00 p.m. Peanut Prices — NASS
