First Thing Today | Sept. 16, 2021

Good morning!

Corn and soybeans enjoy light followthrough buying overnight… Corn is currently up 2 cents and soybeans have climbed 4 to 5 cents. Winter wheat futures have seen a mix of light buying and selling after yesterday’s strong finish, with most contracts currently down 1 to 2 cents. Spring wheat futures are choppy to a penny higher. The U.S. dollar index is firmer. Crude oil futures are down slightly after a big push to the upside on Wednesday.

Expectations for today’s Weekly Export Sales Report… The report is for the week ending Sept. 9.

Strategie Grains calling for tighter global wheat supplies… The consultancy Strategie Grains lowered its EU soft wheat crop estimate for 2021 by 2.4 MMT to 129.1 MMT, which would still be a 10.3-MMT increase from last year’s crop that was clipped by adverse weather. “These quantitative setbacks — which stem either from excessive rains (in western EU countries) or lack of rain (north and central countries) — are exacerbated by the damage to grain quality for this season’s spring barley and milling wheat,” Strategie said. It lowered its 2021-22 EU soft wheat export forecast to 31.0 MMT, a 1.7-MMT cut from its forecast last month. The cut to EU wheat production contributed to a 10.9-MMT decline in the consultancy’s global wheat production estimate (including durum) that now stands at 739.4 MMT.

Russia exports more wheat to Algeria… Russia sent a cargo holding more than 30,000 MT of wheat to Algeria last week, and another shipment is currently being loaded, reports the ag safety watchdog Rosselkhoznadzor. Russia recently gained access to Algeria’s market (via a relaxation of bud damage standards) and sent the country 28,500 MT of wheat in June — the first major shipment of Russian wheat to Algeria in five years. France is Algeria’s main supplier.

Lingering dryness in Brazil expected to limit rebound in sugar production… Brazil’s center-south region is expected to produce a sugar crop of 33.06 MMT this season, with drought and frost expected to cut production potential more than 12% to the smallest in a decade, according to the sugar analyst CovrigAnalytics. It expects a limited rebound in production in 2022-23 to 34.17 MMT as excessive dryness lingers. Claudiu Covrig, a sugar analyst with S&P Global Platts, expects cane-based ethanol production to climb slightly to 24.32 billion liters in 2022-23.

Business Roundtable sounds alarm on debt ceiling; Yellen calls McConnell… Leaders of the country’s major companies on Wednesday issued a plea for congressional leaders to come to an agreement quickly to raise the nation’s debt limit. “Failure to lift the U.S. federal debt limit to meet U.S. obligations would produce an otherwise avoidable crisis and pose unacceptable risk to the nation’s economic growth, job creation and financial markets,” Josh Bolten, president and CEO of the Business Roundtable, and Doug McMillon, Walmart’s chief executive and the chair of the business lobby, wrote in a letter to Senate Majority Leader Chuck Schumer (D-N.Y.), House Speaker Nancy Pelosi (D-Calif.), Senate Minority Leader Mitch McConnell (R-Ky.) and House Minority Leader Kevin McCarthy (R-Calif.). Meanwhile, Treasury Secretary Janet Yellen called McConnell on Wednesday and told him Congress should move as quickly as possible to raise the debt limit. She warned that brinkmanship on the debt limit wasn’t productive as the U.S. economy continues to emerge from the Covid-19 pandemic. McConnnell again said Democrats have control of the White House and Congress, so this is a problem for them.

Why the $3.5 trillion human infrastructure package could be $5 trillion-plus… Some provisions will arbitrarily lapse before the end of the 10-year budget window to reduce the bill’s size, even though lawmakers hope to extend those policies at a later date. The White House expects the budget bill will “move forward” before Biden heads to Scotland in November for the U.N. climate summit, White House press secretary Jen Psaki said yesterday.

POET pledges its ethanol will reduce emissions at least 70% vs. gasoline by 2030…  POET, the U.S.’s largest biofuel producer, pledged to reach net-zero carbon emissions at its bioprocessing facilities by 2050. The company also said it would “ensure that its renewable, plant-based bioethanol reduces greenhouse gas (GHG) emissions by at least 70% compared to gasoline by 2030.” It referenced a study showing bioethanol currently reduces carbon emissions by 46% relative to gasoline. Poet operates 33 facilities across eight states and has the capacity to produce 3 billion gallons of ethanol, 14 billion lbs. of distillers dried grains and 975 million lbs. of corn each year.

Europe’s energy crunch deepens… European governments are preparing to intervene to keep homes warm and factories running as winter approaches. The French gov’t is planning to spend about 580 million euros to help poor households cope with soaring bills. Power prices have surged to records this month following extended nuclear outages and a period of calm weather that reduced wind generation. In the U.K., winter blackouts are possible after a fire struck a cable shipping electricity from France, that may last until March. And the crunch forced a major fertilizer maker to shut down two U.K. plants in a sign that a record rally in gas and power prices is threatening to slow the region’s economic recovery. Meanwhile, Russia said quick approval of Nord Stream 2 would balance gas prices in Europe, increasing concerns Moscow is using supplies as leverage to get pipeline project up and running.

Pandemic has driven a lengthy surge in transportation costs… That puts pressure on many businesses already confronting higher wages and raw-material prices, the Wall Street Journal reports. Everything from iron ore, steel, parts and finished products has to move as raw materials are processed in global manufacturing. The cost of shipping containers across the ocean is higher, truck drivers are in short supply, and gasoline is more expensive than many expected earlier this year. Spot container shipping rates from Asia to the U.S. West Coast were five times higher last week compared with the same time last year, according to the Freightos Baltic Index. Those rates are more than 14 times higher than during the same time in 2019. Some CEOs are saying they expect elevated freight costs stretching into 2023.

One of two Canadian railroads bidding for Kansas City Southern drops out… Canadian Pacific was the winner to acquire Kansas City Southern after a merger agreement with Canadian National was terminated.

Brazil reportedly kept exporting beef to China after suspension took effect… Brazil suspended exports of beef to China on Sept. 4 after confirmation of two atypical cases of bovine spongiform encephalopathy, but Reuters’ sources indicated meat that was already at Brazilian ports continued to be exported as late as Sept. 9. That helps explain Brazilian government data showing an 83% jump in beef exports for the first two weeks of September vs. year-ago levels. The country shipped an average of 10,500 MT of beef per day the first week and 12,400 MT per day the second week. And China has accounted for around 40% of Brazil’s total beef exports. Brazil is pushing for those post-ban shipments to be accepted if they passed sanitary inspection before the export suspension took effect, but Chinese customs authorities say the shipments should have been halted when the suspension took effect. The shipped meat is in limbo.

Steady cash cattle trade picks up… Boxed beef prices continued their dramatic retreat at midweek. Choice dropped another $3.07 yesterday and Select dived $6.73, but movement was impressive at 191 loads. Sliding product prices have given packers little reason to raise cash bids. Cash cattle trade picked up yesterday between $123 and $125—in line with the lower end of last week’s action.

Markets pleased lean hogs were able to rebound from long-term support areas… Traders were encouraged by the October lean hog contract’s ability to bounce off strong, longer-term support in the $80.00 area. Sideways to higher trade near-term could point to a near-term low. While cash prices are sliding, we believe October futures’ stance is too pessimistic. The preliminary CME cash hog index is projected at $95.35 for tomorrow, down $1.42 and extending the index’s retreat from its summer highs. Average hog weights in the Iowa/southern Minnesota market jumped 2.2 lbs. the week ending Sept. 11, with weights up 2.4 lbs. from year-ago levels.

Overnight demand news… Jordan made no purchase in its international tender to buy 120,000 MT of wheat. The country issued a new international tender to buy 120,000 MT of milling wheat from optional origins. South Korea’s largest animal feedmaker Nonghyup Feed Inc. bought an estimated 201,000 MT of animal feed corn and 65,000 MT of feed wheat in an international tender, with both shipments likely from South America or South Africa. South Korea’s Major Feedmill Group bought around 198,000 MT of corn in a private deal late yesterday. South Korea’s state-backed Agro-Fisheries & Food Trade Corp. bought 22,222 MT of rice from the U.S. and 20,000 MT of rice from Thailand in an international tender. Bangladesh’s state grain buyer has received offers in its tender to import 50,000 MT of wheat. The Taiwan Flour Millers’ Association issued an international tender to buy 49,580 MT of grade 1 milling wheat to be sourced from the United States. Japan bought 59,021 MT of food-quality wheat from the U.S., as well as 29,610 MT of the grain from Canada and 30,140 MT from Australia in its regular tender.

Today’s reports

• 7:30 a.m. Weekly Export Sales — FAS
• 7:30 a.m. Extended Weather Outlook — NWS
• 2:00 p.m. Livestock, Dairy, and Poultry Outlook: September 2021 — ERS
• 2:00 p.m. Sugar and Sweeteners Outlook: September 2021 — ERS
• 2:00 p.m. Hop Stocks — NASS