First Thing Today: Prices rebound overnight
Price rebound overnight... Corn, soybean and wheat futures rebounded overnight from Tuesday’s losses, with soybeans leading the move higher. As of 6:30 a.m. CT, soybean futures are around 7 cents higher, corn is fractionally to a penny higher and wheat futures are 2 to 3 cents higher. Front-month crude oil futures are around 50 cents lower and the U.S. dollar index is about 100 points lower this morning.
Hoyer: We’re going to get BBB ‘done this week’... House Majority Leader Steny Hoyer (D-Md.) says the Build Back Better (BBB)/social spending measure will be done this week. But the issue of the coming Congressional Budget Office (CBO) score of BBB is still a key issue. In an appearance on MSNBC’s Morning Joe, Rep. Abigail Spanberger (D-Va.) was asked about the fate of BBB in the House. Spanberger said, “There’s a group of individuals, myself included, who wanted to know the full scope of the this bill in terms of what the CBO score is, what the bill is going to cost, before we ultimately take a vote. It’s about ensuring that we as legislators are making responsible, informed decisions. I think for many people that’s not necessarily going to be a deal breaker. There’s so much in this bill that is incredibly value... But... we have to know what it is we will ultimately be passing. We’ve been talking about a bill that’s fully paid for. It’s important that it be fully paid for.” Meanwhile, the American Farm Bureau Federation (AFBF) came out against the BBB, despite the agriculture spending provisions. We’ll have more details on the AFBF opposition to BBB in “Evening Report.”
Vietnam eliminates U.S. wheat import tariff... Vietnam will eliminate a 3% tariff on U.S. wheat imports effective Dec. 30. The Southeast Asia nation was the lone remaining Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) country applying a tariff on U.S. wheat imports but not on those from Canadian and Australian wheat. Vietnam represents a “potential growth market” for the U.S., said Steve Mercer, vice president of communications at U.S. Wheat. The country imported more than 500,000 MT of U.S. hard red spring, soft white, hard red winter and soft red winter wheat valued at $129 million in the 2020-2021 marketing year. Vietnam imports an average of 4 MMT of wheat per year.
Ukraine not planning more wheat export intervention... Ukraine currently has no plans to limit wheat exports beyond the 25.3 MMT quota agreed to with exporters, according to the country’s deputy ag minister, despite an aggressive start to 2021-22 shipments. According to APK-Inform, Ukraine has already exported 12.4 MMT of wheat – nearly half of the 2021-22 export quota.
Canadian wheat acreage to climb sharply amid higher prices... Canada could see the area planted to wheat increase by about 6% in 2022 due to high prices, an agriculture ministry official said on Wednesday. The initial projections also indicate around a 10% rise in durum acreage. If yields return to average levels after this year’s drought, production would rise to around 22 MMT for spring wheat and 5.5 MMT for durum, the official said.
EU proposes import curbs on goods linked to deforestation... The European Union is seeking to ban imports of products from areas at risk of deforestation, in a landmark regulation designed to protect the world’s most vulnerable forests. The draft proposal from the European Commission would target six agricultural products — beef, soybeans, palm oil, coffee, cacao and timber. The regulation would force companies to prove that products they sold into the EU did not contribute to legal and illegal deforestation or forest degradation through agricultural use. The draft law, which will need to be approved by EU governments and the European parliament, comes after more than 100 world leaders promised to end global deforestation by 2030 at the U.N. COP26 summit. The six products account for around 19% of commodity imports into the EU, with the ban designed to reduce the impact of European consumer demand on the world’s forests and indigenous communities.
Trade meetings exclude China... Top U.S. trade and commerce officials are meeting this week with their counterparts in Japan, South Korea and India — but not China — as the Biden administration seeks to build stronger economic ties with friendly nations in Asia. U.S. Trade Representative Katherine Tai and Commerce Secretary Gina Raimondo have a series of meetings to discuss issues from supply-chain resilience to the digital economy to pandemic response. Such efforts reflect President Biden’s pledge to work more closely with allies and friendly nations to better confront challenges stemming from China’s expanding economic influence in the region.
Germany suspended approval of the Nord Stream 2 pipeline... The pipeline is intended to transport natural gas directly to Germany from Russia. The decision sent Europe’s gas prices soaring, with the price of U.K. natural gas futures surging more than 17% on Tuesday, amid concerns that Europe will run short of gas this winter. A German regulator said the owners of the pipeline had failed to file the necessary paperwork. The action means the recently completed pipeline will not begin supplying gas to Germany anytime soon. Reports note the delay will likely push the certification of the Nord Stream 2 pipeline past its scheduled date in January and possibly into late spring, especially when paired with Ukrainian companies’ recent inclusion in the pipeline’s certification process.
President Biden says he’ll decide on the next Fed chair this week... It’s down to either re-appointing Jerome Powell or replacing him with Fed governor Lael Brainard. Powell has public backing from several Democratic and Republican senators, including most Republicans on the Banking Committee and key moderate Democrat Jon Tester of Montana. Still, Senate Banking Committee Chairman Sherrod Brown (D-Ohio) said he has no doubt the Senate would confirm either candidate. However, the Wall Street Journal reports the White House said Biden would make his decision before Thanksgiving, which suggests the announcement might happen next week.
U.S. could default by Dec. 15 if Congress doesn’t lift the debt limit... Treasury Secretary Janet Yellen told congressional leaders on Tuesday that she has “a high degree of confidence” that her department will be able to finance the government through Dec. 15, not Dec. 3 as previously indicated. Some private analysts predict a later timeline. But “there are scenarios,” she wrote, that would leave the government without enough cash beyond that date. Yellen concluded her letter Tuesday with a plea to leaders on Capitol Hill: “To ensure the full faith and credit of the United States, it is critical that Congress raise or suspend the debt limit as soon as possible.” Senate Minority Leader Mitch McConnell (R-Ky.) has said his party won’t help Democrats avert the next debt limit cliff, instead insisting Democrats use the budget reconciliation process to act alone on the debt limit.
Waiting on cash direction, preparing for Cattle on Feed Report... Cash cattle trade has been quiet so far, with only light sales at roughly steady prices compared with week-ago. As traders wait on more active cash trade to develop, they will position themselves for Friday’s Cattle on Feed Report. That combination could keep price action light and relatively choppy the next couple days.
Rough day for pork cutout... The pork cutout value dropped $6.16 on Tuesday, extending the prolonged price slide from the summer high. All pork cuts posted notable declines, led by a $12.08 drop in bellies. While the product market continues to reel, the CME lean hog index showed signs of stabilizing, rising 16 cents today. Without signs of seasonal lows in cash fundamentals, however, it may be a struggle to find active followthrough buying to Tuesday’s strong corrective gains in futures.
Overnight demand news... South Korea purchased 64,000 MT of optional origin corn. Algeria purchased at least 600,000 MT of optional origin milling wheat. Egypt tendered Wednesday afternoon to buy an unspecified amount of wheat from multiple origins, with results expected later today.
Today’s reports
- 9:30 a.m. Weekly Ethanol Production — EIA
- 2:00 p.m. Rural America at a Glance: 2021 Edition — ERS
- 2:00 p.m. Broiler Hatchery — NASS
