First Thing Today: Wheat leads followthrough buying overnight
Wheat leads overnight price gains... Corn, soybeans and wheat traded higher overnight on followthrough buying. As of 6:30 a.m. CT, corn futures are 1 to 2 cents higher, soybeans are 4 to 6 cents higher and wheat futures are 7 to 9 cents higher. Front-month crude oil futures topped $83.50 overnight, while the U.S. dollar index is nearly 400 points lower this morning.
Brazil crops off to better-than-average start, dryness an ‘increasing concern’ in Argentina... Weather and crop conditions in Brazil continue to improve. As a result, South American Crop Consultant Dr. Michael Cordonnier increased his subjective crop ratings a point for the Brazilian soybean crop to a 6 out of 10. His Brazilian full-season corn crop rating is also a 6, unchanged from last week. He says the situation in Argentina is not as good, with “dryness becoming an increasing concern.” While it’s still very early in the growing season, Cordonnier lowered his Argentine corn rating to a 4/5 out of 10. He has not yet rated the Argentine soybean crop since less than 1% has been planted. Cordonnier projects Brazil’s 2021-22 production at 144 MMT for soybeans and 118 MMT for corn – both the same as USDA. He projects Argentina’s crops at 51 MMT for soybeans and 53 MMT for corn – both the same as USDA.
Crop Progress & Condition Report highlights… Following are highlights from USDA’s crop progress and condition update for the week ended Oct. 17.
- Corn: 97% mature, 52% harvested (41% on average)
- Soybeans: 95% dropping leaves, 60% harvested (55%)
- Cotton: 86% bolls open, 28% harvested (34%)
- Winter wheat: 70% planted (71%), 44% emerged (47%)
Egypt opens up freight competition on wheat tenders... Egypt's state commodities buyer GASC will suspend a 15% price advantage given to Egyptian state shipping line National Navigation Company (NNC) to transport its wheat purchases. This is an attempt by Egypt to increase competition for shipping and drive down freight costs, but exporters question whether the move will have much impact. Ocean shipping prices have surged, adding extra costs for grain importers. Prices for ocean dry bulk carriers are at 13-year-highs amid shipping congestion at global ports.
Midwest senators press USDA on biofuel aid... Midwest senators are pushing Ag Secretary Tom Vilsack to act on USDA’s pledge to deliver aid for biofuel producers, noting the agency said June 15 that there would be $700 million provided to biofuel producers under USDA’s Pandemic Assistance for Producers effort. USDA said in June it would roll the assistance out within 60 days, but the lawmakers said in a letter to Vilsack, “It is simply unacceptable that it has been over 120 days since your announcement and biofuel producers are still waiting.” The pandemic effects continue to be seen in the biofuel industry, the lawmakers said, noting feedstock costs are up and many plants are still offline or operating at reduced rates. “With President Biden’s plan to decarbonize the transportation and agriculture sectors, we remind you of the important role of biofuel,” the letter stated. The lawmakers, led by Sens. Chuck Grassley (R-Iowa) and Joni Ernst (R-Iowa), noted the aid is “much-needed to ensure biofuel producers are able to survive.”
Groups urge Senate panel to act on USTR ag negotiator nominee... Action on the nomination of Elaine Trevino to be chief ag negotiator at the Office of the U.S. Trade Representative (USTR) was urged by 170 national and state agricultural, food and commodity groups. “Trevino is deeply familiar with the food and agriculture industry through her work in several critical roles,” the groups said in a letter to Senate Finance Committee Chairman Ron Wyden (D-Ore.) and Ranking Member Mike Crapo (R-Idaho). Noting several trade issues facing the sector, such as opening new markets, China, new trade barriers by the European Union and expanding trade issues with Mexico, the groups said Trevino has the “experience and expertise to secure greater market access for U.S. products and ensure enforcement of clear and fair rules with our trade partners so U.S. food and agriculture workers and our industry sectors may fairly compete in the global economy.” The panel has yet to schedule a nomination hearing for Trevino. She is not expected to face much opposition and is expected to eventually win confirmation.
Uptick in CFAP 2 payments... Total payments under the Coronavirus Food Assistance Program 2 (CFAP 2) moved up to $18.7 billion as of Oct. 17, including $13.89 billion in CFAP 2 payments and $4.81 billion in top-up payments that were made for acreage-based commodities. Acreage-based payments account for $11.1 billion of total CFAP 2 payouts, with $3.46 billion for livestock, $2.86 billion for sales commodities, $1.22 billion for dairy, and $66.15 million for eggs/broilers. The payment levels for CFAP 2 could change slightly ahead as the deadline for new or updated applications was Oct. 12. CFAP 1 payments stood at $10.6 billion as of Oct. 17, including $5.06 billion for livestock, $2.66 billion for non-specialty crops, $1.81 billion for dairy, $994.12 million for specialty crops and $120.25 million for aqua nursery flora.
Debt limit hike deadline: Dec. 3... Treasury Secretary Janet Yellen said the debt limit deal enacted by Congress last week will allow the government to keep paying its bills through Dec. 3. In a letter to Capitol Hill leaders, Yellen said the deal “provides only a temporary reprieve” and urged lawmakers to take further action to ensure that the government can continue to borrow money. If Congress doesn’t raise the debt ceiling, the government would have to suspend payments to beneficiaries or delay interest payments, which would constitute a government default. Some private industry analysts pinpoint the debt date a bit later — from mid-December into early January.
Money market funds challenger... Fitch Ratings said that the rapid growth of stablecoins like Tether could potentially rival traditional money market funds for influence in the commercial paper market. Should rapid growth of stablecoins continue, and some 20% of reserves of the tokens go into short-term securities, then they will overtake the holdings of money-market funds within two years. Crypto investors, meanwhile, will be closely watching the launch of the first Bitcoin futures exchange-traded funds. The largest cryptocurrency is trading above $62,000 this morning, close to all-time highs.
Wholesale beef prices slip... Choice boxed beef prices slipped 15 cents, while Select was 81 cents lower on Monday. Movement slowed from the final four days last week, but was eight loads more than last Monday at 115 loads. Traders are likely to remain cautious about pushing futures above last week’s highs without solid signs of a low in the wholesale market given that October live cattle finished Monday $1.61 above last week’s average cash price of $123.84.
Cash hog index continues to fall... The CME lean hog index will be quoted another 71 cents lower at $86.88 today. Given the rise in December lean hogs on Monday, the lead contract is now $8.13 below the cash index. While cutting margins are deep in the black and market-ready hog numbers are under year-ago, packers aren’t having to pay up to get needed supplies.
Overnight demand news… Japan is seeking 81,318 MT of wheat from the U.S. and Canada in its regular weekly tender.
Today’s reports
- 10:00 a.m. Fruit and Tree Nut Data — ERS
- 10:00 a.m. Vegetables and Pulses Data — ERS
- 2:00 p.m. U.S. Bioenergy Statistics — ERS
