First Thing Today: Grain, soy futures lower and near their overnight lows this morning

Good morning!

Grain, soybean futures trading near their overnight lows... Two-sided price action was seen in corn and wheat futures overnight, while soybeans were firmer for much of the session. But all three markets have developed a weaker tone this morning and futures are trading near session lows. As of 6:30 a.m. CT, corn is trading 2 to 3 cents lower, soybeans are steady to fractionally lower and wheat futures are mostly 1 to 4 cents lower, with HRW contracts leading declines. Front-month crude oil futures are around $1.50 lower and the U.S. dollar index is holding near unchanged this morning.

Inclement weather, harvest delays push China corn prices higher... Corn prices in China are on the rise as excess rains and winter storms have slowed movement of new-crop supplies into the domestic market. Dalian corn futures have rallied nearly 9% over the past month to their highest since June and cash corn prices in Shandong province have risen a like amount since the start of the month. Wheat prices have also climbed amid strong demand from the feed sector amid the slowed corn sales. Cash wheat prices in Shandong are up 10% over the past two months.  

Weekly Export Sales Report out this morning… For the week ended Nov. 4, traders expect:

Midwest, South hit hardest by inflation... Consumer prices have risen the most in the Midwest and South as inflation surged to a nearly 31-year high. Data from the St. Louis Fed shows the year-over-year change in consumer prices is above-average in those two regions, while the West and Northeast are seeing below-average price changes.

Inflation pulling forward expectations for Fed rate hike... Concerns are rising about problematic consumer and producer price inflation in the U.S. and around the world. That is causing traders to pull forward their expectations for when the Fed will raise rates to combat inflation. Fed funds futures are now signaling a more than 70% chance the Federal Reserve will raise interest rates by next June.

Coal shortage, energy crisis in China is rippling beyond its borders... The impacts are threatening to disrupt supply chains and farming in some countries, the Wall Street Journal reports. India and South Korea are experiencing shortages of urea, which is extracted from coal, since China placed new restrictions on exports. It is widely used in India as a fertilizer and in South Korea to produce urea solution, which is used to reduce diesel emissions in vehicles and factories. Prices of urea solution have soared as much as 10 times on secondhand markets. Logistics-industry experts say the shortage hasn’t had a significant impact on supply chains but that it could if the situation doesn’t improve soon.

Container shipping rates drop, but still highly elevated... The average price for a 40-foot container shipped from Asia to the U.S. West Coast dropped to $13,924, a 26% decline from the previous week, according to the Freightos Baltic Index. But that’s still 261% higher than this time last year.

Russian wheat export tax rises again... Russia’s ag ministry says the sliding export tax on wheat shipments will rise to $77.10 per metric ton for the week of Nov. 17-23. That’s up $7.20 (10.3%) from the current rate. The wheat export tax has surged $49.00 (174%) since the initial level of $28.10 per metric ton at the beginning of June when Russia’s government launched its formula-based duty.

Ukraine winter wheat sowing 94% complete... Ukrainian farmers had seeded 6.2 million hectares to winter wheat as of Nov. 11, according to the country’s ag ministry. That was 94% of the 6.66 million hectares farmers planned to sow to winter wheat this year. Most of the country’s winter wheat crop is in “good” or “satisfactory” condition, though about a third of planted areas need rain to establish crops.

U.S. warning EU allies that Russia may be planning to invade Ukraine... The warnings come as tensions flare over migrants and energy supplies. Washington is closely monitoring a buildup of Russian forces near the Ukrainian border, and Biden administration officials have briefed EU counterparts on their concerns.

Packers buying a lot of cattle again this week... Packers have been active buyers of cash cattle this week and were still attempting to line up more supplies. This week’s average cash price through Thursday was the highest since 2017. But traders may sense the cash market is nearing a short-term top, as live cattle ended slightly weaker Thursday, despite sharply higher cash cattle prices.

Traders expecting cash hog decline to continue... December lean hog futures finished Thursday at $75.375, which was $2.575 below today’s cash index quote. While the huge discount futures once held to the cash index have narrowed, the spread still reflects traders’ expectations the cash market will continue to weaken into at least early December.  

Overnight demand news... Exporters reported no sales or tenders overnight.

Today’s reports

• 7:30 a.m. Weekly Export Sales — FAS
• 11:00 a.m. Oil Crops Outlook: November 2021 — ERS
• 2:00 p.m. Dairy Monthly Tables and Dairy Quarterly Data — ERS
• 2:00 p.m. Feed Outlook: November 2021 — ERS
• 2:00 p.m. Rice Outlook: November 2021 — ERS
• 2:00 p.m. Wheat Outlook: November 2021 — ERS
• 2:00 p.m. Peanut Prices — NASS
• 2:30 p.m. Commitments of Traders Report — CFTC