Grain, soy futures extend Thursday’s pullbacks overnight
Grain, soy futures extend Thursday’s pullbacks overnight... Grain and soy complex futures traded both sides of unchanged overnight but have softened to a weaker tone and session lows this morning amid a rise in Covid concerns (see next item). As of 6:30 a.m. CT, corn futures are trading 4 to 5 cents lower, soybeans are 7 to 8 cents lower and winter wheat futures are 4 to 6 cents lower and spring wheat is mostly 2 to 4 cents lower. Front-month crude oil future are more than $2.50 lower, while the U.S. dollar index is around 400 points higher.
Covid concerns rise... Surging Covid cases in Europe are back on the front burner of the marketplace to close the week. Austria on Monday will become the first country in western Europe to reimpose a full Covid lockdown. Germany warned it may follow suit, as a fourth wave of infections has plunged Europe's largest economy into a national emergency, Health Minister Jens Spahn said.
House to vote on BBB this morning... The Congressional Budget Office (CBO) estimated the Build Back Better (BBB)/social spending package would increase the deficit by a net $160 billion over 10 years, which would be counter to President Joe Biden’s pledge that the legislation would be deficit-neutral. But the White House and House Democratic leaders disputed CBO’s analysis of the potential revenue gains from increased IRS enforcement. House Speaker Nancy Pelosi (D-Calif.) is confident the votes are in place to clear the measure. If so, it would then go to the Senate where it faces significant changes that will likely take into December to unfold. The fate of the Senate bill in large part depends on the vote of centrist Senator Joe Manchin (D-W.Va.). If he approves, and the measure passes the Senate with only Democratic votes, the altered bill would then go back to the House.
Ag provisions in BBB... The measure would provide $82 billion in ag spending, including $27 billion in new conservation funding that would include $5 billion for a five-year program that would give farmers $25 per acre to plant cover crops. It would also provide:
- $14 billion to reduce hazardous fuels in National Forest System lands near developed areas, $4 billion of which could be used in other areas in certain circumstances. More than $3 billion in additional funds would be available for grants to reduce wildfire risks on nonfederal land.
- $9.7 billion for assistance to rural electrical cooperatives to promote resiliency, reliability, and affordability and for carbon capture and storage projects.
- $3.75 billion for competitive grants to promote conservation and tree planting by state, local, and tribal governments and nonprofit organizations.
- $2.88 billion for rural electrification loans, including for energy storage projects, that would be forgiven if certain conditions are met.
- $1.02 billion to pay off all or part of Farm Service Agency loans to economically distressed farmers and ranchers.
It would provide several billion dollars through the Commodity Credit Corporation for environmental quality and stewardship incentives and “such sums as are necessary” for payments to farmers and landowners who adopt cover crop practices during the 2022 through 2026 crop years.
IMF: China’s downside risks to economic growth ‘accumulating’... China must address financial risks in a "clear and coordinated fashion" and temporarily shift its fiscal policy to a neutral stance from the contractionary approach, the International Monetary Fund (IMF) said. “China’s recovery is well advanced, but is unbalanced and momentum is slowing, even as downside risks are accumulating,” IMF said. It blamed the slowdown to China’s rapid withdrawal of policy support, the hit to consumption from Covid-19 outbreaks, recent power outages and a slowdown in real estate investment. IMF also called for a “comprehensive bank restructuring approach” to strengthen China's banking system, as well as efforts to open up markets and reform state-owned enterprises. IMF expects China's economy to grow 8.0% this year and 5.6% next year, though the statement said downside risks to the forecasts were “accumulating.”
China to take measures to ease pressure on small, medium-sized companies... Chinese Premier Li Keqiang said at a meeting with companies that the domestic economy was seeing new downward pressures. Therefore, Beijing will take measures to reduce the pressure of increased commodity prices on downstream small and medium-sized companies, and keep the yuan's exchange rate basically stable, he said, according to Xinhua news. China will also study the adoption of new measures to reduce the burden of taxes and fees on companies.
ECB’s Legarde downplays potential for rate hike in 2022... European Central Bank (ECB) President Christine Legarde reiterated her previous view that “conditions to raise rates are very unlikely to be satisfied next year” and that the ECB would not “rush into premature tightening” of its monetary policy. She also predicted that inflation in the euro zone was likely to rise further until the end of 2021, labeling the situation “unwelcome and painful,” but said that factors causing higher prices were expected to “fade over the medium term, which is the horizon that matters for monetary policy.” While some have warned the rise in inflation could prompt action by global central banks, Legarde stated that tightening monetary policy would not get at the “root causes of inflation because energy prices are set globally and supply bottlenecks cannot be remedied by the ECB’s monetary policy.”
French winter wheat crop in good condition... France’s winter wheat crop was 93% planted as of Nov. 15, according to the weekly update from FranceAgriMer, with durum 56% seeded. The French farm office rated 99% of the French winter wheat crop as being in good or excellent condition.
Biden restores water rules to pre-2015 definition... The Biden administration Thursday released a long-awaited proposal regarding wetlands protections. The proposal partially restores the pre-2015 definition of the Waters of the United States (WOTUS) under the Clean Water Act (pre-Obama changes). It substantially unwinds the Trump administration’s Navigable Waters Protection Rule, which lifted federal jurisdiction over many small streams and other wetlands, and prevents developers from needing a federal permit for work in those waterways.
Feedlot inventory figures out this afternoon... USDA’s Cattle on Feed Report at 2 p.m. CT is expected to show feedlot inventories down 0.2% as of Nov. 1. October placements are expected to come in 2.2% higher than year-ago, while marketings are like to be down 3.7%, according to a Reuters survey. Click here for our pre-report preview.
Cash cattle trade higher again... Cash cattle traded another $2 to $3 higher this week as packers raised cash cattle bids in an effort to fill out aggressive slaughter schedules over the next month amid a tightening supply of market-ready animals. On support from the strong cash market, front-month live cattle futures rallied on Thursday to their highest level since June 2017 on the continuation chart. Until the cash market tops, the downside is limited to corrective selling in futures.
Cash hog index plunges... Hopes the CME lean hog index was stabilizing were dashed as it is down $1.02 to $75.26, the lowest level since Feb. 12. December lean hog futures finished Thursday virtually in line with the cash index, meaning price action in the lead-month contract over the next three weeks is likely to mimic day-to-day movement in the cash market.
Overnight demand news... South Korea purchased 64,000 MT of optional origin corn.
Today’s reports
- 2:00 p.m. Dairy: Supply and Allocation of Milk Fat and Skim Solids by Product — ERS
- 2:00 p.m. Vegetable and Pulses Outlook: November 2021 — ERS
- 2:00 p.m. Cattle on Feed — NASS
- 2:00 p.m. Peanut Prices — NASS
