First Thing Today | September 14, 2022
Good morning!
Relatively quiet overnight session... Soybeans and wheat favored the upside in quiet, two-sided trade overnight, while corn faced light selling pressure. As of 6:30 a.m. CT, corn futures are trading around 4 cents lower, soybeans are 2 to 3 cents higher and wheat futures are steady to a penny higher. Front-month crude oil futures are trading just above unchanged, while the U.S. dollar index is around 250 points lower this morning.
U.S. railroads poised to stop shipments of farm products, other key goods starting Thursday... Norfolk Southern Corp. said it plans to halt unit train shipments of bulk commodities on Thursday ahead of a potential U.S. rail worker strike the following day. The railroad also said it would stop accepting autos for transit at its facilities starting this afternoon. Other railways are likely to follow suit, according to one agriculture group. “We are hearing several rail carriers are tentatively planning to wind down shipments,” said Max Fisher, chief economist at the National Grain and Feed Association, which represents most U.S. grain handlers. Railways are no longer shipping ammonia, an important component of about three quarters of all fertilizer, because it would be dangerous if the hazardous material was stranded during a potential rail strike, according to the Association of American Railroads. Railroads have until a minute after midnight on Friday to reach tentative deals with holdout unions representing about 60,000 workers.
White House looks for rail alternatives, will meet with union and rail companies today... With a railroad strike looming, the White House is studying whether other transportation providers can keep goods moving if rail companies and labor unions can’t reach a deal. White House officials want to minimize disruptions for food, energy and public-health-related products in particular. Labor Secretary Marty Walsh plans to meet with union and rail company leaders today.
API calls for action steps on railroad situation... The American Petroleum Institute (API) is urging Congress to step in and avert any work stoppage at U.S. railroads. API told congressional transportation panel leaders the oil and gas industry was already receiving notices from railroads that shipments were going to be curtailed, a situation the group warned would have “profound impacts on the ability of our industry to deliver critical energy supplies to the market.” The group urged lawmakers take one of four actions: (1) Extend the cooling off period to provide time for further negotiations, (2) Implement the recommendations of the Presidential Emergency Board, (3) Develop Congressional contract recommendations, or (4) Move the parties into binding arbitration.
Canadian crop production update later this morning... Analysts polled by Reuters expect Statistics Canada to estimate Canadian all-wheat production at 34.5 MMT, which would be down slightly from its August forecast of 34.6 MMT. The Canadian canola crop is expected to be estimated at 19.9 MMT, up from the 19.5 MMT forecast last month.
Ukraine’s grain exports picking up... Ukraine exported 1.5 MMT of grain in the first 13 days of this month, according to the country’s ag ministry, as shipments continue to build following the deal to restart exports on Aug. 1. But the pace was still 34% less than the same period last year. Since July 1, Ukraine has exported 5.8 MMT of grain, including 3.4 MMT of corn, 1.83 MMT of wheat and 525,000 MT of barley. The 2022-23 year-to-date export pace was 46.8% behind the same period last year.
France cuts wheat export forecast... France’s ag ministry lowered its forecast for 2022-23 French wheat exports outside the EU by 300,000 MT to 10.0 MMT, though that would still be up 13.8% from 2021-22. The export forecast within the 27-member bloc was increased by 110,000 MT to 7.13 MMT.
UK inflation falls for first time in nearly a year... Britain’s annual consumer price inflation slowed to 9.9% from July’s 40-year high of 10.1%, first decline since September 2021. However, economists warned inflation was likely to peak at around 11% in October when a new household energy tariff cap begins. The Bank of England had been expected to again raise interest rates on Thursday, but it delayed the decision by a week following the death of Queen Elizabeth.
Do I have your permitting permission?... Senate Majority Leader Chuck Schumer (D-N.Y.) said yesterday he won’t change his plan to attach the energy-permitting measures to the continuing resolution (CR), the stopgap spending measure to keep the government funded into fiscal year 2023, which starts Oct. 1. “I’m going to add it to the CR, and it will pass,” Schumer said yesterday. That’s despite more than a few Democrats saying they disliked the linkage, even though most of them did not say they would vote against the CR. It looks like Democrats will need some Republicans vote in the Senate and the House. The CR will not be a “clean bill” as some riders will be attached, including further aid for Ukraine. And some senators say the only way to avoid layoffs at the Food and Drug Administration (FDA) is to attach user fee legislation to a government funding bill. Sen. Patty Murray (D-Wash.), chair of the Senate panel that oversees the fees that industry pays to FDA, said Tuesday time was running out to reauthorize the fees before the current agreement expires Sept. 30 — which would force the FDA to potentially lay off thousands of employees.
Federal deficit widens in August... The federal government’s deficit widened to $220 billion in August over the previous year, largely due to calendar differences. But through the first 11 months of the fiscal year, the deficit has shrunk by almost $1.8 trillion, or 65%. Tax collections have hit record levels and government spending has declined.
Huge taxpayer pot of money pouring out of USDA... The latest cascade of money is $2.8 billion in funding for an initial set of 70 projects to develop markets for climate-smart commodities. But that’s not all. USDA Secretary Tom Vilsack is increasing the total funding for the initiative to $3.5 billion from the $1 billion that was originally planned. That leaves another $700 million for smaller projects.
OPEC signals cuts ahead... The Organization of the Petroleum Exporting Countries (OPEC) said Tuesday the supply of oil has gotten disconnected from demand, a possible sign it is planning to cut output to prop up prices. The group last week cut its oil production levels by 100,000 barrels a day, but prices have continued to fall. Meanwhile, the International Energy Agency (IEA) lowered global crude oil demand by 100,000 barrels per day (bpd) in 2022 to 2 million bpd. IEA cut its forecast for Chinese oil demand by 400,000 bpd this year. China’s stop-start Covid-19 lockdowns are weighing on global demand for crude.
Update on this week’s China pork sales... China will sell 15,000 MT of frozen pork stocks from state reserves on Sept. 17. We reported the second batch of pork sales yesterday, though no date or tonnage were provided at that time. Last week China sold 37,000 MT of state-owned pork stocks.
Beef price drop spurs retailer buying... Choice boxed beef prices fell $2.28 to the lowest level since May 11, while Select was $2.18 lower yesterday. The sharp drop in wholesale beef prices spurred strong retailer buying, as packers moved 172 loads of product on the day. While there’s plenty of retailer demand under the market, packers likely will attempt to lower cash prices again this week, especially if live cattle futures face followthrough selling from Tuesday’s losses.
Discount in October hog futures almost gone... October lean hog futures rallied $3.875 on Tuesday to $95.75. Meanwhile, the CME lean hog index is down another 62 cents to $97.67 (as of Sept. 12). With the October contract firming amid the falling cash index, there are indications traders expect the cash market to post a short-term bottom soon. But it’s unlikely the lead contract would move premium unless the cash index starts to firm.
Overnight demand news... Taiwan purchased 65,000 MT of Brazilian corn.
See ‘Policy Updates’ for late-breaking morning news updates... For updates to items in “First Thing Today” or any late-breaking morning news stories, check “Policy Updates” on www.profarmer.com.
Today’s reports
- 8:30 a.m. Weekly Ethanol Production — EIA
- 11:00 a.m. Cotton and Wool Outlook: September 2022 — ERS
- 11:00 a.m. Oil Crops Outlook: September 2022 — ERS
- 2:00 p.m. Feed Outlook: September 2022 — ERS
- 2:00 p.m. Rice Outlook: September 2022 — ERS
- 2:00 p.m. Wheat Outlook: September 2022 — ERS
- 2:00 p.m. Broiler Hatchery — NASS
- 2:00 p.m. Livestock Historical Track Records — NASS
- 2:00 p.m. Turkey Hatchery — NASS
