First Thing Today | October 15, 2021

Good morning!

Followthrough buying overnight… Corn, soybean and winter wheat futures extended Thursday’s corrective gains overnight, while HRS futures posted new contract highs for the sixth time in the last eight trading sessions. As of 6:30 a.m. CT, corn futures are 6 to 7 cents higher, soybeans are 8 to 9 cents higher, winter wheat contracts are mostly 9 to 12 cents higher and spring wheat is 6 to 7 cents higher. Front-month crude oil futures are trading at their highest level in seven years. The U.S. dollar index is near unchanged this morning.

Corn use in feed rations rises in China… Chinese corn prices have dropped around 15% from record levels in March and are virtually on par with wheat prices for the first time in a year. That has prompted some feed makers and livestock/poultry producers, especially in the key Shandong feeding region, to start using more corn in feed rations. Wheat use in feed rations reportedly already has been halved in some areas of the country.

China to restart wheat auctions next week… China plans to auction 1 MMT of wheat from state-owned reserves on Oct. 20. These will be the first sales of state reserves since May. While corn is starting to regain some of the share in feed rations it lost to wheat over the past year, some feed makers and livestock/poultry producers are waiting to see how the wheat auctions affect prices of both grains before making a switch away from wheat as feed.

Weekly export sales out this morning… For the week ended Oct. 7, traders expect:

Russia again raises its wheat export tax… The tax on Russian wheat exports will rise to $287.60 per MT for the week of Oct. 20-26. That will be up $3.70 (1.3%) per MT from the level for the current week. While the export tax continues to rise, exporters are expected to keep shipping wheat ahead of a planned export quota that will go in place on Feb. 15.

Smaller NOPA crush expected for September… Traders expect the National Oilseed Processors Association (NOPA) to report soybean crush for September at 155.1 million bu., based on a Reuters survey, which would be down 2.4% from August and 4.0% under September 2020. Soyoil stocks at the end of September are expected to total 1.663 billion lbs., down 0.3% from August. NOPA will release the data at 11 a.m. CT.

No move yet to 24/7 operations at the Port of Los Angeles... Executive Director Gene Seroka says he doesn’t know how quickly the busiest U.S. gateway for container shipping can extend its hours, adding “we’re not going to create artificial deadlines” on a move the White House hopes will ease supply-chain strains. Jammed up inland transport networks and warehouses are adding to broader logistics woes for retailers ahead of the holidays. Port officials are talking with terminal operators and big importers about how to roll out the extended hours, which haven’t gained much traction in a pilot at the neighboring port of Long Beach. The backlog off the port complex now extends to 60 container ships, with 25 more set to arrive in coming days.

DP World chief sees supply chain issues persisting for two years... Global supply chains could be plugged for up to two years as the world has become so reliant on China for manufacturing, Sultan bin Sulayem, chair of DP World, told the Financial Times. “I don’t believe you will see an easing in the problem of supply chains for the next two years — it’s the ripple effect,” he said. “Delays today are not just the problem of what is not delivered, the problem is also the other products that can’t be delivered. They are in a queue now.” DP World operates some 81 marine and inland terminals throughout emerging markets and developed countries. Bin Sulayem predicted companies could move some operations into developed countries, seeking to take advantage of a more-educated workforce as manufacturing becomes more automated.

Strikes pose the latest supply-chain threat… Just over 10,000 workers at Deere & Company plants in the U.S. went on strike Thursday after more than 90% of the UAW rejected the company’s latest contract offer. Several strikes occurred before Deere workers walked out. Dissatisfaction over working conditions amid soaring demand for labor have also led to strikes at Kellogg and Mondelez International’s Nabisco among others. Fear of catching Covid-19, the scarcity of childcare, and more workers quitting or retiring have contributed to the tight labor market, giving workers more leverage.

Still quiet on the RFS front... There have been few rumblings in recent weeks surrounding the potential announcement of proposed levels for the Renewable Fuel Standard (RFS) program from EPA. Expectations in September were that the release of the proposed levels was imminent, including Sen. Chuck Grassley (R-Iowa) telling reporters the week of Sept. 20 it would be released that Friday. However, no such announcement was made and after Grassley made the comments, two additional meetings were scheduled at the Office of Management and Budget on the proposed levels where they have been under review since Aug. 26.

PBOC official: No need to shift monetary policy… Chinese policymakers must walk a tightrope between supporting the economy amid weak domestic demand and any measures that could further stoke surging producer prices. But an official with the People’s Bank of China (PBOC) says the central bank will maintain “normal monetary policy” that’s “flexible, targeted and appropriate,” contending inflation is under control and saying there will be plenty of liquidity in China’s banking system. Amid the country’s energy crisis, PBOC will provide reasonable credit support to coal-fired power plants and projects. The official also says the spillover effect of Evergrande's debt problems on China’s banking system is “controllable and individual financial institutions' risk exposures are not big.”

Cattle futures looking for an upside breakout… December live cattle closed above the 40-day moving average for the first time since Sept. 1 on Thursday. A close above last week’s high at $130.60 is needed to confirm an upside breakout from the month-long consolidation range. While technicals are starting to strengthen, traders are still waiting on the wholesale beef market to find a bottom. Choice boxed beef prices firmed 30 cents and Select rose $1.98 on solid movement of 143 loads yesterday, the first hint that maybe wholesale prices have reached a value level for retailers.

Pessimistic attitudes persist in hog futures… The CME lean hog index will be quoted at $88.82 today, down another 91 cents and the lowest price since March 11. December lean hogs, which took over lead-month status with the October contract’s expiration on Thursday, closed yesterday at an $11.495 discount to the index. That’s a far greater discount than the $4.20 five-year average decline in the cash index from now until Dec. 14 when the December contract will exit the board.

Overnight demand news… Japan received no offers in a tender to purchase 80,000 MT of feed wheat and 100,000 MT of feed barley.

Today’s reports

• 7:30 a.m. Weekly Export Sales — FAS
• 11:00 a.m. Monthly Crush — NOPA
• 11:00 a.m. Feed Grains: Yearbook Tables — ERS
• 2:00 p.m. Peanut Prices — NASS
• 2:00 p.m. Turkey Hatchery — NASS
• 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