Good morning!
Grain futures higher overnight… As of 6:00 a.m. CDT, December corn was up 2 cents. January soybeans were 6 1/2 cents higher. December HRW and SRW wheat futures markets were up 6 1/2 to 7 cents. Grain futures were supported by the news late Sunday that the U.S. Senate is moving closer to agreeing on a deal to reopen the U.S. government. The corn and winter wheat futures markets sputtered late last week. Friday’s technically bearish weekly low closes in December corn and the winter wheat futures markets may still put the bulls on the defensive early this week. A price uptrend on the daily chart for December corn may be rolling over and bulls need to show more power soon to keep it alive. The December winter wheat futures markets late last week saw their price uptrends on the daily charts negated. Soybeans fared better late last week. For soy complex futures traders, the meal market is the one to watch most closely. As goes the meal futures market in the near term, so will likely go soybeans. The key outside markets early this morning see the U.S. dollar index slightly up. Nymex crude oil prices are slightly higher and trading around $60.00 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently 4.1 percent.
Polar air express invading much of United States… The National Weather Service today said a frigid continental polar air mass will continue to stream south through the central and eastern U.S. behind a polar front. Maximum and minimum temperatures between 20-30 degrees below average will tie or break many records across the southeast through tonight. Record-breaking low maximum temperatures are also possible for much of the Florida peninsula on Tuesday as well as the polar air mass continues its southward progression. Freeze watches and warnings are in effect from the Lower Mississippi Valley to the Virginia Tidewater through Tuesday morning. Surface high pressure will dive south across the Plains today, while a compact pressure gradient across the Mississippi Valley, Midwest and Southeast will generate gusty winds and dry conditions. Red flag warnings are in effect today for much of the southern Plains today and Tuesday. A cold air across the Midwest and interior Northeast will generate snowfall for portions of the Great Lakes and Appalachians today, where an additional 4-8" are expected with isolated higher amounts possible by Wednesday morning. Lake-effect snow warnings are in effect downwind of Lake Erie, while winter weather advisories and winter storm warnings dot downwind areas of the Great Lakes, northern Maine and the Central/Southern Appalachians.
U.S. Senate getting close to bill ending government shutdown… The U.S. Senate on Sunday voted 60-40 on a procedural measure to advance a bill to end the federal government shutdown, with a group of moderate Democrats breaking with their party leaders to support the deal. The bill’s passage in the House of Representatives is not guaranteed due to opposition from Democratic leaders. The deal falls short of the goals of House and Senate Democratic leaders, who had demanded an extension of expiring Obamacare subsidies. Democrats secured a pledge from Republicans to vote on a bill to renew the Affordable Care Act tax credits by mid-December. The Senate adjourned until today and has not yet scheduled a vote for final passage. Under the agreement, Congress would pass full-year funding for the departments of Agriculture, Veterans Affairs and Congress itself, while funding other agencies through Jan. 30. The bill would provide pay for furloughed government workers, resume withheld federal payments to states and localities and recall agency employees who were laid off during the shutdown. “It’s not yet clear how quickly the shutdown can end. The Senate will need the consent of all members to end the shutdown quickly. Any one senator can force days of procedural delays. Speaker Mike Johnson plans to give House lawmakers 36 hours’ notice to return to Washington,” reported Bloomberg. Said President Trump: “It looks like we’re getting closer to the shutdown ending,” he told reporters Sunday evening and as reported by Bloomberg.
Markets react to U.S. lawmakers getting closer to reopening government… The Sunday news the U.S. Senate is close to approving a bill to reopen the federal government rallied global stock markets, with U.S. stock indexes set to open solidly higher in New York today. Gold prices surged by around $80 an ounce on notions a restart to U.S. economic reports would make for better chances for a Fed rate cut in December. U.S. Treasury yields have up-ticked modestly, as has the U.S. dollar index. Grain futures prices saw modest gains overnight, as the uncertainty from the dearth of USDA data would end when the USDA data starts flowing again. Crude oil prices did not show much reaction to the news.
Thanksgiving air travel could “slow to a trickle” if federal government shutdown continues… Transportation Secretary Sean Duffy on Sunday warned that U.S. air travel would come to a virtual standstill during the Thanksgiving holiday if the U.S. government shutdown persists, as more air-traffic controllers opt not to work without paychecks. “As we get closer to Thanksgiving travel, I think what’s going to happen is you’re going to have air travel slow to a trickle as everyone wants to travel to see their families,” Duffy told Fox News Sunday and as reported by Bloomberg. “I think we’re going to see air traffic controllers, very few of them coming to work.” The Federal Aviation Administration has ordered airlines to cut flights by 10% by Nov. 14 due to a shortage of air-traffic controllers, who are required to work but won’t be paid until the government reopens. Kevin Hassett, one of President Trump’s key economic advisers, suggested that disruption around Thanksgiving — which includes the Black Friday shopping rush — would set back the U.S. economy. “I think we have to be honest about where this is going — it doesn’t get better, it gets worse, until these air traffic controllers are going to be paid,” Duffy told Fox. He cited FAA plans to call for cutting flights by as much as 20% if the staffing shortages deteriorate further, said the Bloomberg report. More than 10,000 flights in the U.S. were delayed or canceled on Sunday as snowy weather in Chicago added to the stress for airlines coping with a third day of U.S.-government-mandated restrictions on air travel.
Lack of U.S. economic data may prompt Fed to keep rates steady at December FOMC meeting… The U.S. government shutdown has delayed the release of key economic data, including the October consumer price index and jobs reports, which will prolong the debate about whether another rate cut is needed at the Fed’s December meeting. “The absence of official reports will make it difficult for policymakers to assess the trajectory of inflation and the job market, and alternatives to government inflation figures are harder to come by and more limited in scope,” said a Bloomberg report. “The shutdown’s impact on data collection and release will likely give (Fed) policymakers further reason to hold off on a rate cut in December, despite market odds still favoring a reduction, and investors will monitor appearances by Fed officials in the coming week for clues on the Fed’s next move,” said Bloomberg. “Even if the government were to reopen, it’s unlikely the Bureau of Labor Statistics would be able to collect and process data for both the October and November CPI reports ahead of the December FOMC meeting. We think October’s figures would have greenlit a rate cut at the final meeting of the year,” said Bloomberg Economics.
U.S., China continue to ratchet down trade tensions… The U.S. and China have suspended port fees on each other’s ships for one year and paused probes into maritime practices, Bloomberg reports. The Trump administration paused a probe into China’s shipbuilding industry, and Beijing shelved its own investigation and put off special port fees on U.S. vessels. The US will continue to negotiate with China about the issues raised in its investigation, according to the U.S. Trade Representative. “The stand-down in tensions over maritime issues tallies with a rapprochement in the broader confrontation between Washington and Beijing after a summit between the countries’ leaders. While shipping is not among the highest-profile issues, most global trade is carried by sea and the industry is a cornerstone of global commerce,” said Bloomberg.
U.S. appeals court upholds judge’s order for Trump administration to fully fund SNAP… A U.S. appeals court refused to pause a judge’s order requiring the Trump administration to fully fund November food-aid benefits to 42 million eligible Americans. A panel of the U.S. 1st Circuit Court of Appeals late Sunday denied the administration’s request to continue making only partial payments during the U.S. government shutdown, while it challenges a lower court judge’s directive to fund the Supplemental Nutrition Assistance Program, or SNAP, at 100%. The U.S. Department of Agriculture and other U.S. agencies have argued that the government doesn’t have enough money to cover the entire cost of SNAP benefits for November amid the federal funding lapse.
Malaysian palm oil futures trade near steady… Malaysian palm oil futures were little changed around MYR 4,110 per MT Monday, stabilizing after steep losses on Friday. Prices remained near their lowest level in four months, hit last week, as traders assessed monthly data from the Malaysian Palm Oil Board showing that end-October inventories rose 4.44% from the prior month to 2.46 million metric tons, the highest level in 6-1/2 years. Meantime, production jumped 11.02% to 2.04 million tons, the highest since August 2015, while exports surged 18.58% to 1.69 million tons, marking the strongest growth in a year. In China, a key buyer, the most-active soyoil contract on the Dalian exchange rose, while palm oil futures declined, following data showing consumer prices turned positive in October and producer price declines eased. Traders now await export performance estimates for the first 10 days of November.
Cattle futures bulls look to stabilize prices… The live and feeder cattle futures markets Friday saw short-covering reprieves from their recent price downdrafts. However, the bulls are by no means out of the woods yet. Major near-term technical damage has been inflicted in live and feeder cattle futures markets the past three weeks, which is likely to continue to invite confident speculator bears to the short sides of the markets this week. Active cash cattle trading last week saw USDA reporting at midday Friday that steers and heifers fetched an average price of $228.97. That compares to the prior week’s average cash cattle trade at $230.86. Cattle futures market traders have been psychologically damaged by the recent proclamations from the Trump administration to lower beef prices at the meat counter, including importing more beef from Argentina. The potential reopening of the southern U.S. border to Mexican cattle also looms price-bearish for cattle futures. Said Glen Ring, Pro Farmer’s longtime friend and veteran livestock market watcher last week: “What ultimately scares me about the current events is my experience--that when liquidation explodes in the cattle arena, logic flies out the window.” We suspect that the selling purge in the cattle futures markets will run its course soon, likely by the end of this week.
Tepid short covering in hogs, but bulls need to show better strength… The lean hog futures market Friday got a mild short-covering bounce from the steady technical selling pressure that has been in place the past month. December hogs remain trapped in a price downtrend and the chart-based speculator bears will likely be back at it this week. Deteriorating cash hog prices will also favor the hog bears until the cash market bleeding stops. Bulls are hoping lean hog futures’ present discounts to the cash index will work to limit selling interest in hog futures in the near term. The latest CME lean hog index is down another 26 cents to $90.60. Today’s projected cash index price is down another 87 cents to $89.73. The national direct five-day rolling average cash price on Friday was $84.65—down over $3.00 from the prior Friday’s quote. It’s hard to believe Thanksgiving is creeping up so fast. As the holidays approach, retailers will likely ramp up their demand for pork and do more ham features as many consumers may choose to forego more expensive beef cuts and buy hams.