First Thing Today | Oct. 8, 2021
Grain and soy futures strengthen overnight… Soybeans rallied overnight, with most contracts currently up 9 to 11 cents. Corn futures also favored the upside and most contracts currently up 2 cents. Winter and spring wheat futures are up 2 to 4 cents, with the HRW market leading gains. The U.S. dollar index is marginally lower and crude oil futures are heading toward a test of Wednesday’s multi-year high.
Strong rebound in jobs growth expected for September… U.S. job growth likely rebounded last month as schools reopened and the leisure and hospitality businesses stepped up hiring. Economists estimate that employers created 500,000 jobs in September, more than double the number added in August. The jobless rate is forecast to have declined to 5.1% from 5.2% a month earlier.
Onslaught of late-season rains for northern China raises quality concerns… The northern Chinese provinces of Shandong, Hebei and Shanxi along with Henan and Liaoning in the northeast have been hit with heavy late-season rains, submerging fields and delaying harvest. While a bumper crop is still expected, the rain has raised concerns about the quality of the crop, especially given the country’s power shortages that will limit producers’ ability to dry crops. Meng Jinhui, senior analyst with Shengda Futures, told Reuters a few million metric tons will likely be of poor quality due to the rain.
Planting of France’s winter cereal crops is underway… The French farm office reports 4% of the winter soft wheat crop had been seeded as of Oct. 4, a point behind last year at this time. Winter barley planting is running four points ahead of last year’s pace at 9%. Meanwhile, today’s update shows just 7% of the country’s corn crop had been harvested vs. 47% last year at this time.
Ukraine’s grain harvest is now 70% complete… Farmers have harvested 49.4 MMT of grain, the country’s ag ministry reported. That tally includes 32.3 MMT of wheat, 9.6 MMT of barley and 4.2 MMT of corn. The ministry expects this year’s grain crop to hit record-high 80.6 MMT, a 24% jump from 2020.
Senate passed a short-term extension of the debt limit on Thursday by a 50-48 party line vote… The bill raises the borrowing limit by $480 billion, the amount the Treasury Department says is needed to meet the country’s cash needs until Dec. 3. Eleven Senate Republicans, including Minority Leader Mitch McConnell (R-Ky.), joined all Senate Democrats to break a GOP filibuster of the measure. Senate Majority Leader Chuck Schumer (D-N.Y.) went to the floor and criticized Republicans for provoking the crisis. But centrist Senator Joe Manchin (D-W.Va.) criticized the tone of Schumer’s remarks, shaking his head repeatedly during the Schumer tirade. This came after Sen. Bernie Sanders (I-Vt.) held a press conference on Wednesday to bash centrist Senators Manchin and Kyrsten Sinema (D-Ariz.). Meanwhile, progressives (liberals) are threatening to primary Sinema in 2024. House Majority Leader Steny Hoyer (D-Md.) announced the House would return to Washington on Tuesday to take up the measure.
China building new gas- and coal-fired power plants, but will hike prices to boost renewable usage… China is currently building several huge gas-fired power plants and still plans to build 247 gigawatts of new coal power — nearly six times Germany’s entire coal capacity — according to the U.S. Climate Envoy John Kerry. Meanwhile, to encourage the use of renewable energy, the Chinese government has ordered electric utilities to charge customers up to five times as much when power is scarce and generated mainly by coal.
A natural-gas shortage is setting off a scramble ahead of winter… Buyers in Europe, Asia and Latin America are competing for limited supplies, racing to fill tanks and caverns with the fuel before cold weather hits the Northern Hemisphere, the WSJ reports. Natural gas stocks are very low around the world, and prices in most places have never been higher after surging to new records in Europe and Asia this week. Demand has jumped as economies have bounced back from pandemic shutdowns, and the squeeze has caught traders, shipowners and energy executives off guard. Tight supplies from Russia and strong demand in China and Latin America have made European economies particularly vulnerable.
Brazil working on project to boost domestic fertilizer production… Brazilian President Jair Bolsonaro said Brazil plans to present a project next month aimed at boosting the country’s production of fertilizer and utilizing raw materials available in Brazil so as to lessen its reliance on imports. Earlier on Thursday, Bolsonaro had told an event he expects a shortage of fertilizers next year due to the energy crisis given Chinese cutbacks in production due to the energy prices. Brazil imported $8.71 billion worth of fertilizers in 2020, according to the United Nations COMTRADE database.
IMF says $75 is the per MT price carbon would have to reach to meet the ambitions of the Paris agreement… Others believe it should be almost double that. The current global average is $3. For some heavy emitters covered by the European Union’s emissions-trading system, it is already above €60 ($69). In China’s new program, by contrast, it is a pittance. America has no federal program at this time. The U.N.’s COP26 climate summit runs from Oct. 31 to Nov. 12 in Glasgow. Of more than 4,200 firms in the G20 club of big economies that have disclosed their climate ambitions, only a fifth have committed to so-called science-based targets that would keep the world on track to meet the Paris agreement’s goal. And, only about one-fifth of global emissions is covered by a price on carbon.
Wall Street Journal reports U.S. troops have been secretly training military forces in Taiwan… The deployment is a sign of concern within the Pentagon about Taiwan’s tactical capabilities considering Beijing’s years-long military buildup and recent threatening moves against the island. China told America to cut military ties with Taiwan after the Wall Street Journal report. Taiwan’s president, Tsai Ing-wen, said her country seeks to avoid war, “but,” she added, “will do whatever it takes to defend its freedom.”
CIA plans to create a new China Mission Center… The agency is meant to better position U.S. intelligence to study China and analyze its activities. Announcing the expansion on Thursday, CIA Director Bill Burns said the spy agency would be at “the forefront” of “facing our toughest geopolitical test in a new era of great power rivalry.”
Texas dryland, ranchland continue to mark double-digit gains… Texas dryland cropland and ranchland continued to post double-digit annual gains through the third quarter of 2021, according to the Federal Reserve Bank of Dallas. The bank pegs the value of Texas dryland cropland at $2,328 an acre and the value of ranchland at $2,866 an acre for increases of 11.6% and 17.4%, respectively. In addition, the bank’s quarterly survey lists an annual gain of 6.4% for irrigated cropland with a statewide value of $2,506. Nearly all of the survey respondents expect values to continue to rise.
USDA working on a waiver system for pork processing line speeds… USDA is working on a proposal for a waiver system for hog plants that had been forced to slow line speeds by a federal court decision, Ag Secretary Tom Vilsack said during a congressional hearing yesterday. The 2019 Trump administration rule allowed pork plants to run slaughter lines without speed limits so long as they prevented fecal contamination and bacteria was limited. At the time of the decision, six facilities had been operating at faster line speeds and five of those facilities had been doing so for more than 20 years under a pilot program. The result of the decision was a 2.5% drop in national slaughter capacity, costing producers $38.2 million via lower spot market prices, according to analysis by Iowa State University Economist Dr. Dermot Hayes. Stakeholders were disappointed Biden’s USDA did not appeal the ruling.
Select beef trying to stabilize… Nearby feeder cattle futures registered strong gains Thursday, with the front two contracts ending with gains around $3.50. Live cattle also finished with solid daily gains. August beef export data gave the market a lift, as did another day of gains for Select beef. It has climbed three of this week’s four days. But Choice beef remains under pressure and dropped another $1.32 yesterday. Movement was solid at 185 loads, however. Cash cattle action so far this week has ranged from $122 to $124, steady with trade the week prior.
Cash hog bids finally edge higher… Lean hog futures edged out modest gains on Thursday, with traders encouraged that the December contract found support at the 100-day moving average after dipping below that level yesterday. Futures seem to be stabilizing after early week profit-taking following the H&P Report-inspired price surge. Cash hog bids climbed 17 cents yesterday, a break from the recent steady march to the downside. The pork cutout value slipped 60 cents, with hams dropping nearly $10.
Overnight demand news… Turkey has bought an initial 150,000 MT of animal feed barley from optional origins in a tender seeking 310,000 MT of the grain. An importer group in the Philippines is thought to have purchased around 56,000 MT of feed wheat from Australia. Japan’s ag ministry bought 60,525 MT of food-quality wheat from the U.S., as well as 24,410 MT of the grain from Canada and 46,028 MT from Australia. Jordan made no purchase in its tender for 120,000 MT of feed barley. Tunisia bought an undisclosed amount of durum wheat in an international tender in which it was seeking 100,000 MT of the grain.
Today’s reports
- 7:30 a.m. Monthly employment summary — Labor
- 1:00 p.m. Weekly Red Meat Production Report — AMS
- 2:00 p.m. Peanut Prices — NASS
- 2:30 p.m. Commitments of Traders Report — CFTC
