Evening Report: Inflated Thanksgiving?

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Happy Thanksgiving from Pro Farmer... Markets and government offices are closed on Thursday for Thanksgiving. As a result, there will be no Pro Farmer market updates. On Friday, markets are open for an abbreviated trading schedule from 8:30 a.m. CT to 12:05 for grains and 12:15 for livestock. Due to the shortened schedule, we will only send out two reports – “First Thing Today” Friday morning around 8:00 CT and “After the Bell” highlighting the day’s price action after the closes.

Happy Thanksgiving from your Pro Farmer editorial staff.

Some grocers limiting Thanksgiving purchases... Two major grocery chains in the Southeast are limiting the number of Thanksgiving staples customers can buy, the Wall Street Journal reports, in a reminder to consumers that supply-chain snarls are still roiling retailers as the holiday season unfolds. Publix Super Markets limited its customers to no more than two individual items from a menu of Thanksgiving ingredients. Winn-Dixie restricted shoppers to one turkey apiece while encouraging customers to “only purchase what they need.” That’s a contrast with a holiday typically marked by abundance, and it suggests there are still strains in food supply chains from farms to processing plants. For supermarkets, Thanksgiving is the first big test of the holiday season for their ability to fill shelves and staff stores.

U.S. consumer spending increases as inflation builds... U.S. consumer spending increased more than expected in October, despite high inflation, boosting the economic outlook for the fourth quarter. The Commerce Department reported consumer spending, which accounts for more than two-thirds of U.S. economic activity, jumped 1.3% last month after rising 0.6% in September. Spending was partially boosted by higher prices as demand continues to outpace supply. Economists polled by Reuters expected consumer spending to advance 1.0%.

The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, increased 0.4% after gaining 0.2% in September. The so-called core PCE accelerated 4.1% from year-ago, up from a 3.7% year-on-year advance in September. The core PCE is the Federal Reserve's preferred inflation measure.

U.S. Q3 GDP slightly better than initial estimate but still down sharply from earlier this year... The U.S. economy grew 2.1% in the third quarter, according to the second reading of the data, up from an initial of 2.0%. But growth during July through September was still well below the solid gains of 6.3% in the first quarter and 6.7% in the second quarter this year. The 0.1-point uptick from the initial data reflected a slightly better performance for consumer spending, which grew at a still-lackluster 1.7% rate in the third quarter, compared to a 12% surge in for April to June.

Economists expect the economy could grow at the strongest pace this year in the current quarter, with some forecasting GDP could surge to an 8% rate in the fourth quarter. For the whole year, economists expect the economy will grow by around 5.5%, which would be the best showing since 1984 and a big improvement from last year when the economy shrank 3.4%.

Consumer sentiment falls in November, but not as low as initial indication... The University of Michigan’s consumer sentiment index fell to 67.4 in November. While that was up from an initial reading of 66.8, it was down 6% from 71.7 in October. A gauge of consumer’s views of current conditions fell to 73.6 from 77.9 in October, while an indicator of expectations dropped to 63.5 in November from 67.9 in the previous month. Household inflation expectations for the next five years came in at 3%, above the pre-pandemic level of 2.3%. Expectations for one-year inflation rose to 4.9%, the highest level since summer 2008, up from 4.8% in October.

Dramatic drop in U.S. trade deficit in goods during October... The U.S. trade deficit fell to $82.9 billion in October, down $14.1 billion from September and well below expectations it would be around $94.5 billion. Exports of U.S. goods in October totaled $157.4 billion, $15.3 billion more than for September. Imports of goods during October were $240.3 billion, $1.1 billion more than September. Broader trade data including services will be released next week.

U.S. jobless claims plunge to the lowest level since 1969... New filings for unemployment totaled 199,000 for the week ended Nov. 20. That’s a number not seen since Nov. 15, 1969, when claims totaled 197,000. The report easily beat estimates of 260,000 jobless claims.

FOMC minutes: ‘Various’ policymakers see need for more flexibility on tapering, rate hike... Some Federal Reserve policymakers said they would be open to speeding up the tapering of the bond-buying program if high inflation persisted and move more quickly to raise interest rates, minutes of the U.S. central bank's Nov. 2-3 policy meeting showed. Officials stressed a “patient” approach regarding incoming data, but they also said they would “not hesitate to take appropriate actions to address inflation pressures that posed risks to its longer-run price stability and employment objectives.”

Fed policymakers unanimously decided to begin reducing the central bank's $120 billion in monthly purchases of Treasuries and mortgage-backed securities by $15 billion per month. The original pace would see the asset purchases eliminated by next June. But there have been a growing number of calls by some policymakers to accelerate that timeline in the face of continued high inflation readings and stronger job gains since the meeting in order to give the Fed greater flexibility to raise interest rates earlier next year if needed.

San Francisco Fed President Mary Daly, one of the central bank's most cautious policymakers, said earlier on Wednesday she is open to a quicker wind-down of the bond-buying program if jobs and inflation data remain steady and that she could see the Federal Open Market Committee raising rates once or twice next year.

Cropland values surge 15% in Midwest, Plains... Relatively high commodity prices and low interest rates fueled a 15% surge farmland values in the Midwest and Plains in the third quarter, according to surveys of ag bankers by four regional Federal Reserve banks. “Alongside prospects for further strength in commodity markets, the outlook for farm finances and agricultural land values through the end of 2021 remained strong,” said a summary of the surveys.

“The value of unirrigated cropland increased by an average of about 15% across all participating districts,” said the report written by Kansas City Fed economists. It was the largest gain since 2013. The biggest increases were in Iowa, up 28%; Minnesota, up 26%; and South Dakota, up 23%, versus values in the third quarter 2020.

China blocking public access to shipping location data, citing national security concerns... The number of Automatic Identification System (AIS) signals from ships in Chinese waters dropped dramatically. AIS was initially developed to help avoid collisions between vessels and support rescue efforts in the event of a disaster. But it also become a valuable tool to enhance supply-chain visibility and for governments to track activity in overseas ports.

“The intelligence extracted from this data endangers China’s economic security and the harm cannot be ignored,” warned a Chinese state media report on Nov. 1 on AIS stations in the coastal province of Guangdong.

Foreign intelligence agencies, companies and think-tanks use the system to keep tabs on China’s military vessels and analyze economic activity by surveying cargo traffic. The decline in AIS data is one of the first victims of China’s new data protection regime, which restricts transfers of sensitive information overseas. Companies wanting to send important data abroad need to undergo a security assessment with the country’s data watchdog.