Good morning!
Grain futures mixed overnight; USDA S&D report on deck… As of 6:00 a.m. CST, March corn futures were up 3 1/4 cents, January soybeans down 1 cent and hit another five-week low, and March SRW and HRW wheat futures up 1 3/4 to 2 1/2 cents. USDA’s December supply and demand report comes out this morning at 11:00 a.m. CST. Grain futures trading could become more volatile after the data is released. Analysts surveyed by Bloomberg, on average, look for the agency to lower its estimate of U.S. corn ending stocks by 8.2 million bushels from its November figure, to 2.146 billion bushels. The analysts look for USDA to peg U.S. soybean ending stocks up 16 million bushels, to 306.1 million bushels. And analysts, on average, look for USDA to show U.S. wheat stocks down 7.2 million bushels at 893.8 million bushels. The key outside markets early this morning see the U.S. dollar index slightly down. Nymex crude oil prices are up a bit and trading around $59.00 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently 4.16 percent.
Atmospheric river feeding winter storms, high winds into central United States… The National Weather Service today said a weather pattern that supports heavy rain across coastal Pacific Northwest will transition to cold and snowy weather for the northern-tier states. This will be in stark contrast with dry and milder-than-normal conditions across the Southwest. In the short-term, Arctic air in the wake of an offshore low-pressure center will cause temperatures to crash into the teens this morning as far south as North Carolina, which will challenge some low temperature records across the interior Mid-Atlantic to southern New England. Meanwhile, a prolonged atmospheric river event continues over the Pacific Northwest, with radar and surface observations highlighting steady heavy rainfall in the region. The potent trans-Pacific jet stream will continue to transport sub-tropical moisture from the Pacific and dump the moisture as heavy rain closer to the coast, and more than a foot of new snow for the northern Rockies in northwestern Wyoming. Parts of the Pacific Northwest, northern Rockies, and northern Plains can also expect very gusty winds through the next couple of days as the same Pacific jet develops a strong clipper system in the Canadian Rockies. The system will eject eastward into the Northern Plains and upper Midwest late today, a swath of moderate to locally heavy snow is expected to develop along the northern flank of the low center. Snowfall amounts of 4 to 8 inches can still be expected from northeastern corner of North Dakota through the central Great Lakes. By Wednesday morning, the maturing clipper migrates into the lower Great Lakes, spreading wintry weather towards the Interior Northeast. The snow will be tapering off across the northern Plains on Wednesday behind the storm but snow will be expanding through the lower Great Lakes and into interior Northwest as the
storm center approaches.
Fed’s FOMC meeting begins today… The Federal Reserve’s Open Market Committee (FOMC) begins its monetary policy meeting this morning, with the meeting ending Wednesday afternoon with an FOMC statement and then a press conference from Fed Chair Jerome Powell. Markets are pricing in a 90% chance of a 0.25% U.S. interest rate cut at from the Fed this week. However, market expectations are now growing that the FOMC statement and Fed Chairman Powell’s comments at his press conference may lean more hawkish on U.S. monetary policy—namely due to worries about sticky inflation. News Monday that U.S. producer inflation reports for October and November that were expected to be released later this week have now been delayed until January threw more uncertainty into the present U.S. inflation situation.
Trump threatens tariffs on Canadian fertilizer, Indian rice… President Trump on Monday signaled he could impose new tariffs on agricultural products, including Canadian fertilizer and Indian rice. Trump spoke Monday at a White House event to announce new aid for farmers, some of whom said cheaper imports are making it difficult for their products to compete in the marketplace. Trump said he would “take care” of alleged dumping of Indian rice into the U.S. and suggested targeting fertilizer imported from Canada to boost domestic production, Bloomberg reported. Some farmers have blamed imports for falling U.S. rice prices, saying countries such as India, Vietnam and Thailand are undercutting the U.S. rice crops. “They shouldn’t be dumping,” Trump said. “I mean, I heard that, I heard that from others. You can’t do that.” Trump similarly suggested he could target fertilizer imported from Canada to boost domestic production. “A lot of it does come in from Canada, and so we’ll end up putting very severe tariffs on that, if we have to, because that’s the way you want to bolster here,” Trump said. “And we can do it here. We can all do that here.”
Trump threatens additional tariffs on Mexico imports amid water rights dispute… President Trump has threatened to impose an additional 5% tariff on imports from Mexico if the country does not release water that the Trump administration says must be allowed to flow under a treaty, escalating a fight with a major trading partner. “I have authorized documentation to impose a 5% tariff on Mexico if this water isn’t released, IMMEDIATELY,” Trump posted Monday on social media. “The longer Mexico takes to release the water, the more our farmers are hurt. Mexico has an obligation to FIX THIS NOW.” The U.S needs Mexico to release 200,000 acre-feet of water before December 31, and the rest must come soon after, Trump added, setting a deadline for the country to comply, Bloomberg reported. At issue are tensions over water supplies for farmers in south Texas. The Trump administration is ramping up pressure on Mexican authorities over their obligations under a 1944 treaty. The U.S. State Department said last month that officials from the two countries had met to discuss steps Mexico could take to “reduce shortfalls in water deliveries and ensure compliance.”
Malaysian palm oil futures prices slip again… Malaysian palm oil futures fell for a second session on Tuesday, trading below MYR 4,100 per MT and hitting their lowest in near two weeks. Sentiment remained pressured by declines in rival soyoil in both Dalian and Chicago markets. Additional weakness stemmed from expectations of rising inventories, with Reuters projecting Malaysian stockpiles could reach a 6-1/2-year high by end-November. On the export side, cargo surveyor Intertek noted a 19.7% month-on-month drop in November shipments. Caution also grew ahead of China’s CPI and PPI releases, as persistent deflation risks cloud demand prospects. Still, a weaker ringgit limited losses, alongside concerns of potential supply disruptions due to flooding in key producing regions. In top buyer India, refiners reportedly cancelled around 70,000 MT of crude soyoil for December–January delivery amid high global prices and a weaker rupee, shifting preference toward palm oil. Seasonal buying ahead of Lunar New Year and Ramadan also lent support.
Cattle futures see modest downside price corrections… February live cattle on Monday fell 47 1/2 cents to $226.675 but hit a four-week high early on. January feeder cattle lost $3.40 to $335.65. The live and feeder cattle futures markets on Monday saw some pausing and modest downside price corrections to start the trading week, following last week’s strong gains that firmly suggest near-term market bottoms are in place. The much-improved near-term technical postures for cattle futures markets will likely continue to invite the chart-based speculators to the buy sides. USDA at midday Monday reported the average cash cattle trade for last week at $221.21, which is up $9.68 from the prior week’s average of $211.53.
Four-week-high close for lean hog futures… February lean hogs on Monday rose 12 1/2 cents to $82.40 and closed at a four-week high close. Hog futures prices paused Monday following recent good gains. Traders are thinking the cash hog market has put in a seasonal bottom. Also, lean hog futures prices are starting to trend up on the daily bar chart. The Philippines has temporarily banned imports of pig and pork products from Spain and Taiwan following outbreaks of African swine fever in both locations, according to Manila’s agriculture ministry. Lean hog futures traders will continue to closely monitor this situation and its implications for better U.S. pork exports. The latest CME lean hog index is down 2 cents to $81.81. Today’s projected cash index price is up 3 cents at $81.84. Monday’s national direct 5-day rolling average cash hog price quote is $70.42.