First Thing Today | Sept. 21, 2021

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Good morning!

Grains lower, soybeans trying to rebound… Corn futures faced followthrough pressure overnight with most contracts down 3 to 4 cents but above Monday’s lows. Soybean futures have rebounded 1 to 4 cents after an early test of yesterday’s lows uncovered support. November beans remain below the 200-day moving average after dropping below that average for the first time in 13 months yesterday. Winter wheat futures are fractionally to 2 cents lower, while spring wheat futures are narrowly mixed. The U.S. dollar index is slightly lower. Crude oil futures are posting modest gains. Many in the marketplace now believe the big Chinese property developer, Evergrande, which is in serious financial trouble, will get a bailout from the Chinese government.

Crop Progress & Condition Report highlights… Following are highlights from USDA’s crop progress and condition update for the week ended Sept. 19.

  • Corn: 93% dented, 57% mature, 10% harvested, 59% “good” to “excellent” (G/E)
  • Soybeans: 58% dropping leaves, 6% harvested, 58% G/E
  • Cotton: 48% bolls open, 9% harvested, 64% G/E
  • Winter wheat: 21% planted, 3% emerged

Corn, soybean CCI ratings rise… When USDA's weekly condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn and soybean crops both improved 3.4 points to 357.2 points and 349.9 points, respectively. The CCI rating is 8.5 points below the five-year average for corn and 8.4 points below for soybeans. Find details here.

Cordonnier warns his U.S. corn and soybean yield forecasts may fall… Crop Consultant Dr. Michael Cordonnier continues to estimate the U.S. corn crop will yield an average of 176 bu. per acre and his bias is neutral to slightly lower going forward. The northwest Corn Belt saw some rain over the past week, but much of the central and eastern Belt was warm and dry, accelerating the maturity of both corn and soybeans, “which is not the best way to maximize yields,” Cordonnier points out. He says, “I think the dry weather took the ‘top end’ off the corn yields and I might trim my U.S. corn yield in the coming weeks.” On soybeans, he also left his yield estimate at 50.3 bu. per acre, but again, his bias is neutral to slightly lower going forward as he says warm, dry weather in the central and eastern Corn Belt is pushing soybean maturity. He says that means “there is less time to complete filling the last pods at the top of the plant.” He warned he may trim his soybean yield estimate slightly.

Gulf terminals slowly coming back online… On Monday, more than 60 bulk vessels were lined up along the lower Mississippi River waiting to dock and load with grain once terminals reopen, according to an industry vessel lineup report and Refinitiv Eikon shipping data. Cargill Inc., Louis Dreyfus Co. and Archer Daniels Midland Co. all reopened some grain export terminals last week and a Destrehan, Louisiana facility owned by Bunge Ltd. has been “running intermittently.” But other terminals are still closed for repair. Yesterday’s export inspections report for the week ending Sept. 16 showed notable improvement in both corn and soybean shipments compared with the prior week’s negligible showing, but inspections for both commodities were well under year-ago levels.

Congestion mounting at California ports… Newly arriving vessels are adding to a record-breaking flotilla waiting to unload cargo off the ports of Los Angeles and Long Beach has surpassed 70 vessels in recent days, according to the Marine Exchange of Southern California. Before the pandemic, it was unusual for more than one ship to wait for a berth. The growth of the queue shows that shipping lines and cargo owners are effectively boxed in, with no real alternatives to the inbound supply chains that carry thousands of containers a day through the ports of Los Angeles and Long Beach and into distribution networks deep into the U.S. Container lines have diverted ships to West Coast ports including Seattle and Oakland, only to see backups quickly form at those smaller facilities. Shipping goods to the East Coast takes more time and is more expensive.

U.S. parcel shipping rates are going up faster than they have in nearly a decade… FedEx is hiking its prices an average of 5.9% next year across most of its services, the Wall Street Journal reports, the first time in eight years that the carrier or rival United Parcel Service has strayed from their lock-step annual increases of 4.9%. The hefty increase signals that FedEx has strong confidence that the red-hot demand for package shipping driven by e-commerce will extend into next year, and that the parcel carriers will continue to have leverage on contracts. Online sellers have already had to cope with price increases during the pandemic, including double-digit increases the parcel carriers imposed last year after lockdowns drove big volumes of home deliveries. FedEx and UPS also have added surcharges and other fees for items like large packages throughout the pandemic that have further increased shipping costs.

Kazakhstan boosts grain crop forecast, but also trims export outlook… Kazakhstan expects this year’s grain crop to total 16 MMT, which represents a 700,000-MT boost from its forecast last month, according to senior government officials. They also trimmed their export forecast to a range of 6.0 MMT to 6.5 MMT, which compares to their previous forecast for exports of 6.5 MMT to 7.0 MMT. Agriculture Minister Yerbol Karashokeyev said, “In the new season, the main [export] supplies of Kazakh grain and flour will be directed at the traditional markets—Central Asia, Iran and Afghanistan.” Karashokeyev added that the higher quality of the crop could boost exports of high-protein wheat to China.  

Inflation will continue to rise over the next two years… A revised projection from the Organization for Economic Co-operation and Development (OECD) shows it expects price increases to be significantly higher in 2021 and in 2022 than it had previously forecast for most G20 countries. Laurence Boone, OECD chief economist, said managing inflation would be “a very difficult balancing act” for policymakers. “The speed of the recovery has increased inflationary pressures, quickly pushing up prices to where we expected them to be before the pandemic,” said the OECD in its outlook. “Policymakers in advanced economies should monitor these developments without delay.”

House Dems will link short-term government spending bill with debt limit suspension… House Dems will combine a short-term government spending bill through Dec. 3 with a suspension of the debt limit a package to hit the floor this week, Speaker Nancy Pelosi (D-Calif.) announced Monday. In a joint statement with Senate Majority Leader Chuck Schumer (D-N.Y.), Pelosi said they will suspend the debt limit until the end of 2022. President Joe Biden backed the plan. Despite repeated warnings that GOP senators will not go along with the linkage, Pelosi is daring Senate Minority Leader Mitch McConnell (R-Ky.) to sink the package and risk a government shutdown on Oct. 1. The Treasury Department, as if on cue, warned that it will soon run out of cash on hand and will have to rely on incoming receipts to pay its obligations, now at $28.4 trillion. Assuming the measure goes down to defeat in the Senate (there are enough votes in the House), Congress will need to pass a “clean” CR some time before October. Democrats could amend their reconciliation instructions to pass a debt limit increase without Republican support, but that appears unlikely.

Update on $1 trillion traditional infrastructure measure… House Democrats won’t be able to pass the bipartisan Senate-passe infrastructure bill until reconciliation is done, and that will take weeks if not months. Pelosi’s deal with Representative Josh Gottheimer (D-N.J.) to vote on infrastructure by Sept. 27 is more an Etch-A-Sketch promise. As for House Republicans voting for the infrastructure bill, House Minority Leader Kevin McCarthy (R-Calif.) said last night: “Before, there were some that were really looking at it [the bipartisan infrastructure bill]. Then after the Democrat mods collapsed, a lot of them said they weren't going to [vote for it] because it's viewed as one bill now. And so, they don't want to add another [$]5 trillion.”

Still little change in CFAP 2, CFAP 1 data… Payouts approved under the Coronavirus Food Assistance Program 1 and 2 (CFAP 1, CFAP 2) were little changed according to data as of Sept. 19. CFAP 1 data shows payments totaling $10.6 billion while those under CFAP 2 were shown at $13.81 billion. Signup for CFAP 2 or modifications to previous applications for CFAP 2 will close Oct. 12.

U.S. to lift travel restrictions for fully vaccinated foreigners… The Biden administration is targeting early November for foreign travel to resume for the first time in more than a year.

Cattle hold up well in the fact of economic jitters… Live and especially feeder cattle futures held up well in the face of fears about the Chinese economy, which fueled risk-off trade to start the week. Stock market weakness often pulls down the cattle complex, but live cattle had already fallen rather dramatically since late-August, which may have tempered selling. Some of the gains in feeder cattle can also be attributed to a pullback in corn futures. USDA reports cattle traded at an average price of $123.88 last week, which is a 91-cent pullback from the week prior. Product market weakness has made it tough for the cash market to catch a bid. But after 15 consecutive days of decline, Choice beef climbed $1.19 on Monday, with Select rising $1.00. Movement was light, however, at 84 loads.

Softer cash hog and pork prices to kick off the week… Future posted moderate losses Monday, both the product and cash markets sliding. The pork cutout value dropped $2.52 to start the week, with hams dropping $11.47. Movement was also fairly light at around 317 loads. Cash hog bids dropped $2.16 to start the week. The CME lean hog index remains more than $9 above the October lean hog futures contract, reminding futures have likely overdone it to the downside.

Overnight demand news… Japan’s ag ministry is seeking a total of 113,067 MT of food-quality wheat from the U.S. and Canada in a regular tender. Turkey provisionally purchased around 260,000 MT of animal feed barley from optional origins in a tender.

Today’s reports

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