First Thing Today | Sept. 22, 2021
Gains overnight… Corn futures enjoyed light buying overnight, with most contracts up 3 cents. Soybean futures are 2 to 3 cents higher, with the November contract holding above the 200-day moving average after seeing trade below that key support level the past two days. Winter wheat futures are 7 to 8 cents higher, retracing yesterday’s losses. Spring wheat futures are choppy. Crude oil futures are firmer and the greenback is holding near unchanged.
Chances for some significant rain in the U.S. Southern Plains next week… World Weather Inc. says the weather models suggests a weather disturbance is likely to produce meaningful rain across a large portion of Texas and possibly Oklahoma Monday through Wednesday of next week. While moisture would be welcome for winter wheat producers, the forecaster warns, “there is some potential for enough rain to cause fiber quality issues in open boll cotton crops in the Rolling Plains of West Texas.”
Hurricane Ida made a thin input supply situation worse… Global supplies of the raw ingredients needed to make farm herbicides have been thin due to pandemic-related worker and shipping issues, Marc-Andre Fortin, director of North American crop protection with Farmers Business Network, told Reuters. Imports of glyphosate containers shipped into the Port of New Orleans were down 71.0% from the same period a year earlier, herbicide container imports were down 1.2%, and potash imports into New Orleans dropped 14.8%, according to Panjiva, the supply chain research unit of S&P Global Market Intelligence. And that was before Hurricane Ida upended shipping and damaged factories in the U.S. Gulf. Bayer’s glyphosate plant in Luling, Louisiana has been closed since Aug. 28 and it’s expected to be several more weeks before power is restored. That facility provides all the active ingredient for Bayer’s Roundup ag herbicides in the U.S. CF Industries and Incitec Pivot Ltd. have also shuttered fertilizer plants due to the hurricane. As a result, input prices are rising and reports of supply shortages are on the rise.
Fed focus is on taper timing amid mixed economic signals... The two-day meeting of the Federal Open Market Committee (FOMC) concludes this afternoon with attention mostly on the timing of the expected tapering of the Central Bank’s bond purchases that have been taking place at $120 billion per month. It’s not yet clear there will be a definitive agreement or a unified view on when to begin tapering. Expectations have been for a start to the taper later this year, something Fed Chairman Jerome Powell has alluded to without offering any specific timeline. Fed officials will also release their updated economic projections, including the infamous dot plot showing when Fed officials see the need to increase the target range for the Fed funds rate. Powell’s post-meeting presser will likely include some attention on the Evergrande situation and whether the Fed expects it to have a global impact.
Argentine bean sales percentage continues to run ahead of year-ago… Argentina’s ag ministry reports producers sold 650,200 MT of soybeans over the past week, pushing total sales to 30.0 MMT, or 69.6% of the crop, as estimated by the Buenos Aires grains exchange. Last year at this time, 31.6 MMT of the 49 MMT crop had been harvested at this point in the season, or 64.5% of the crop. The ministry reports corn sales have climbed to 40.4 MMT, which is 3.6 MMT ahead of the 2019-20 season at this point. That represents 80% of the crop that the exchange estimates at 50.5 MMT for 2020-21.
Big jump in rice production expected to push India’s summer grain crop to a record… Indian farmers are expected to produce a record-setting 150.5 MMT summer grain crop this marketing year, a nearly 1 MMT boost from last season’s 149.6 MMT crop, according to the Indian government. Rice is expected to make up the lion’s share of the expected production total at 107.0 MMT, a 2.5% jump from last year’s crop. India is expected to account for up to 45% of global rice exports in 2021. The country’s corn crop is expected to hold steady at 21.2 MMT, but soybean output is expected to edge down to 12.7 MMT. The country’s total oilseed production is likely to drop from 24.0 MMT last season to 23.4 MMT.
How a House ag hearing on blueberries turned into a black eye for Democrats… It’s hard to hide $28 billion, but House Ag Democrats, led by Rep. David Scott (D-Ga.), attempted to do so at a hearing. They dodged repeated inquiries from panel Republications at a session was called to consider unrelated measures like designating July National Blueberry month. Republicans quickly confronted Scott for ignoring more pressing issues, demanding info of the conservation provisions included in the $3.6 trillion budget reconciliation measure. Important issues are not being dealt with, said Rep. Dusty Johnson (R-S.D.), who said the panel should be working on topics such as mandatory price reporting for livestock because the current rules for the reporting system are set to expire at the end of the month. Responding to repeated questions for details on the “missing” $28 billion in conservation, Scott simply said they would be available “at the appropriate time.”
CR with debt suspension bill clears House but expected to be defeated in Senate… The stopgap funding bill, or continuing resolution (CR), passed on a 220-211 party-line vote. The bill would provide $28.6 billion to help state and local governments recover from natural disasters, including $10 billion to cover agricultural losses from 2020 and 2021 weather events, nearly $6 billion for Army Corps of Engineers flood control projects, $5 billion for housing and economic development projects and $2.6 billion for highway repairs, among other items. The measure would separately put more cash into the Federal Emergency Management's disaster relief fund on Oct. 1. As of Aug. 31, the agency estimated an end-of-September balance of $36.4 billion; the CR would increase that figure to more than $55 billion. The combined bill would suspend the statutory debt limit through Dec. 16, 2022—beyond the midterm elections. Senate Republicans are expected to defeat the measure. Senate Minority Leader Mitch McConnell (R-Ky.) has argued for months that Democrats should go at it alone this year since they are using the partisan budget reconciliation process to enact their fiscal priorities without GOP input.
Moody’s Analytics warned Congress against exacerbating uncertainty on a debt limit suspension… If a bill isn’t enacted before the Treasury Department runs out of cash and borrowing room “the resulting chaos in global financial markets will be difficult to bear… The U.S. and global economies, which still have a long way to go to recover from the recession caused by the pandemic, will descend back into recession,” Moody's Chief Economist Mark Zandi and Assistant Director Bernard Yaros wrote. Wrightson ICAP, a private investment advisory firm, said this week the drop-dead deadline was likely Oct. 25 or 26.
Jayapal warns Pelosi… Rep. Pramila Jayapal (D-Wash.), chairwoman of the Congressional Progressive Caucus, said following a two-hour meeting with House Speaker Nancy Pelosi (D-Calif.) that roughly half of her 95-member group is prepared to vote against the $1 trillion bipartisan infrastructure proposal (BIF) if the Speaker sticks to her plan to vote on it by Monday without a complete reconciliation bill. “Our vote for the BIF has to happen in tandem with or after the reconciliation vote,” Jayapal said, predicting that no vote will ultimately take place. “I don’t think the Speaker is going to bring up a bill that is going to fail.”
Biden’s DOJ: Ag market consolidation has hit ‘tipping point’… Consolidation in agricultural markets is fueling higher prices for consumers and lower prices paid to farmers, according to the U.S. Justice Department’s (DOJ) No. 3 official, who promised aggressive antitrust enforcement in the industry. Large buyers of agricultural products hold too much power and are creating supply bottlenecks between farmers and consumers, Associate Attorney General Vanita Gupta told a virtual meeting of the National Farmers Union Tuesday. “Consolidation in agricultural markets has reached a tipping point, making it harder for small family farms and growers to survive,” Gupta said. “Farmers are being forced to bargain with large processors when they buy and sell goods, squeezing your profits while Americans pay more at the grocery store.”
Johnson hints trade deal with U.S. unlikely by 2024… U.K. Prime Minister Boris Johnson signaled he doesn’t expect to secure the free-trade deal he seeks with the U.S. before the next U.K. general election due in 2024. Speaking ahead of his meeting with President Joe Biden in Washington Tuesday, Johnson declined to comment when asked by Sky News if an agreement could be struck before the election.
Russia and China agree to supply terms, which could simplify beef trade… Russia’s ag safety watchdog announced China and Russia have agreed on supply terms for Russian beef, which could help simplify trade between the countries. Currently, Russia supplies just a small amount of beef to China, with only two Russian producers currently allowed to ship their product to Beijing.
Beef prices renew their slide… Boxed beef prices climbed Monday, giving the market hope prices were stabilizing after a protracted decline. But such ideas were dashed Tuesday, with Choice diving $4.29 and Select falling $2.74. Movement did pick up to an impressive 175 loads, however. On the cash cattle market front, there has only been a light test in Nebraska from $124 to $126.50, steady to higher compared with last week’s $124 trade for the state. Traders are also looking ahead to USDA’s monthly Cattle on Feed Report that will likely show yet another year-over-year decline in placements.
Strong pork movement Tuesday on modest price pullback… Lean hog futures have moved sideways in recent days, raising concerns about whether the market will be able to sustain its fledgling rebound. The pork cutout value edged 13 cents lower yesterday after strong gains at midday, but movement impressed at 466.14 loads. The CME lean hog index continues to slip, with the index estimated down 48 cents to $93.56. But futures have priced in a much more severe drop, with the October contract still more than $9 under the index. Cash hog prices continue to slide.
Overnight demand news… Morocco’s state grains office received no offers in a tender to import around 363,000 MT of U.S. origins soft wheat as part of its reduced-tariff import quota tender. An importer group in the Philippines tendered to buy an estimated 224,000 MT of animal feed wheat. Pakistan issued an international tender to buy and import 640,000 MT of wheat. Bangladesh’s state grains buyer issued an international tender to buy 50,000 MT of rice. Jordan made no purchase in its tender to buy 120,000 MT of wheat. Egypt’s state grain buyer tendered to buy 30,000 MT of soyoil.
Today’s reports
- 9:30 a.m. Weekly Ethanol Production — EIA
- 2:00 p.m. Chickens and Eggs — NASS
- 2:00 p.m. Broiler Hatchery — NASS
- 1:00 p.m. FOMC meeting concludes — Fed
