Evening Report | Oct. 6, 2021
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Cotton producers: Increase 2021-crop sales… Cotton futures have exploded to the third highest level ever on the continuation chart. While momentum is definitely on bulls’ side, the price surge must be rewarded. We advise cotton hedgers and cash-only marketers to sell another 10% of 2021-crop production to get to 85% priced.
Livestock producers: Extend corn-for-feed, soymeal coverage… The corn market is showing signs of an early harvest low and seasonals point the market higher during October. Meanwhile, soymeal futures have fallen to what we consider a value level. We advise livestock producers to cover all corn-for-feed needs and remaining soybean meal needs in the cash market through October.
Beef exports topped the $1 billion mark for the first time in August, despite shipping challenge… The U.S. exported 132,577 MT of beef during August, which represented a 21% year-over-year gain and was the second largest volume of the year, with the value of shipments 55% higher to a record $1.04 billion, according to USDA data analyzed by the U.S. Meat Export Federation (USMEF). Eight months into the year, the U.S. has exported 955,407 MT of beef worth $6.62 billion, a gain of 18% and 34%, respectively, compared with last year. Exports are running 6% ahead of the 2018 annual record in terms of volume and 20% in value.
“The August export results would be impressive under any circumstances, but achieving these totals despite all the Covid-related obstacles at home and overseas is truly remarkable,” said USMEF President and CEO Dan Halstrom.
U.S. beef exports to China topped 20,000 MT in August for the first time, and the value of that meat totaled $182.2 million, with USMEF pointing out that both the volume and value were more than five times the year-ago totals. “Beef exports to China have climbed steadily since early 2020, when market access barriers were greatly reduced under the U.S.-China Phase One Economic and Trade Agreement,” USMEF says. It adds that combined exports to China/Hong Kong so far this year shot 139% from year-ago to 154,353 MT, valued at $1.28 billion, up 148% from last year. Shipments of beef to Japan also hit their highest level for the year, with the country bringing in more chilled U.S. beef in response to strong retail demand and to limit shipping delays.
U.S. pork exports totaled 225,822 MT in August, up 4% from a year ago, and value increased 20% to $633.9 million, USMEF reports, as record shipments to Mexico and strong growth in several other markets helped offset the expected slowdown in muscle cut exports to China. Eight months into the year, U.S. pork exports are running 1.5% ahead of last year at just over 2 MMT. The value of that meat is up 10% from year-ago at $5.62 billion. Halstrom commented that the “trendlines for U.S. pork are also very encouraging,” and noted that a few years ago it would have been an achievement to reach $6 billion in pork export value in a full year. This year, exports should hit that total with a full quarter to spare.
The U.S. exported a record 80,779 MT of pork to Mexico during August, which represented a 47% surge from year-ago and topped the December 2016 record. USMEF details, “exports are on a record pace, with January-August shipments 4% higher in volume and 12% higher in value when compared to 2017, the peak year for pork exports to Mexico.” USMEF also commented that Chinese demand for U.S. pork variety meat remains “extremely strong.”
Private payroll growth tops expectations for September… Private payrolls rose a stronger-than-expected 568,000 during September, 143,000 payrolls higher than analysts anticipated on average, according to the ADP employment report. That’s an encouraging signal ahead of Friday’s Labor Department Employment Report for September. Private payrolls improved from the 340,000 jobs added during August. That tally represented a 34,000 downward revision from August. The biggest driver of the month-to-month increase in private payrolls was from the leisure and hospitality services industries. The goods-producing sector also posted strong gains. Today’s update represented the ninth straight month of if growth in private payrolls.
IMF trims 2021 world GDP forecast… The International Monetary Fund expects global economic growth in 2021 to fall slightly below its July forecast of 6%, IMF Chief Kristalina Georgieva said on Tuesday, citing risks associated with debt, inflation and divergent economic trends in the wake of the Covid-19 pandemic. Georgieva said the global economy was bouncing back but the pandemic continued to limit the recovery, with the main obstacle posed by the “Great Vaccination Divide” that has left too many countries with too little access to Covid-19 vaccines.
Warnings of a stock market downturn continue to surface amid fears of inflation, slowing growth and rising interest rates… According to a new survey by Allianz Life, 54% of American investors are worried that a big market crash is on the horizon. More than two-thirds of the 1,005 respondents also said they were protecting their money from losses by keeping some of it out of the market as strategists sound the alarm over the current investing environment. U.S. Treasury 30-year yields climbed to the highest level since June as rising energy prices stoke concern inflation will accelerate.
Biden slashes his social/climate change spending bill by more than $1 trillion... The White House and Democratic leaders said that they would propose spending $2.3 trillion or less on social programs over a decade. That’s substantially less than their original $3.5 trillion plan, which could mean jettisoning some initiatives entirely. Reports note Democratic leaders will probably need to narrow their plans for free community college, child tax credits and universal pre-kindergarten so they are offered only to lower- and middle-income Americans, according to party members involved in the negotiations. The White House is also debating whether to try to keep as many programs as possible, by cutting their duration or reach, or to jettison some initiatives entirely to keep others largely intact, according to people familiar with the discussions. In private meetings, Biden has floated $2 trillion as a figure, including in a call late Monday with progressive House lawmakers.
A White House fact sheet issued before the Michigan speech included a list of statistics on the number of state residents who would be helped by Biden’s plans to subsidize childcare, provide universal prekindergarten, build affordable housing, invest in child nutrition and more. But it notably did not mention a paid leave program for workers that was a cornerstone of Biden’s initial economic plans, and the president did not mention paid leave in his speech.
In a letter to her Democratic colleagues in the House this week, Speaker Nancy Pelosi (D-Calif.) outlined three categories a final package should address to support children and jobs: health care, including both expanding Medicaid and improving Medicare benefits, family care and the climate.
Administration officials say the reduced cost of spending and tax cuts in the bill means Democrats will have an easier time settling on the revenue increases — including tax hikes on high earners and corporations — to cover the price tag.
USDA unveils a new insurance policy for farmers who sell locally… USDA is offering a new insurance option for agricultural producers with small farms who sell locally. The related press release says: “The Micro Farm policy simplifies record keeping and covers post-production costs like washing and value-added products. It is offered through Whole-Farm Revenue Protection and is available to producers who have a farm operation that earns an average allowable revenue of $100,000 or less, or for carryover insureds, an average allowable revenue of $125,000 or less.” Ag Secretary Tom Vilsack’s USDA has been very much focused on so-called leveling of the playing field for small and mid-size producers.
European Commission considers ‘toolbox’ for member states to respond to energy price spikes... The European Commission (EC) will publish a “toolbox” next week outlining member states’ options for responding to surging energy costs, the top EC energy official told Reuters. Policy options detailed in the measure will reportedly include consumer subsidies and energy tax relief measures like those some EU member states have already adopted. The toolbox will also “consider steps that can be taken at the EU level to make us better prepared for similar situations in the future,” European Energy Commissioner Kadri Simson told the outlet.
Simson also discussed concerns that Russia is limiting the supply of natural gas to the EU as leverage to secure regulatory approval for the Nord Stream 2 pipeline. "We are looking into this claim, together with Executive Vice President [Margrethe] Vestager, who is responsible for competition rules, because it is of course a very serious matter,” she said, and noted, “our initial assessment suggests that Russia is fulfilling its long-term contracts.”
Meanwhile, Simson reiterated her view that an accelerated transition to renewable energy will help insulate the EU from future energy price volatility. "Ultimately, the solution is the same, whether it's about prices, security of supply or climate: scaling up local, affordable, renewable energy is the way forward," she said.
Some palm oil used in Indonesian test flight… Indonesia conduced its first test flight using jet fuel partially from palm oil, according to the country’s economic minister. The plane made a roughly 62-mile trip from the capital of Jakarta to a neighboring city. The bio jet fuel used on the test flight contained just 2.4% of palm oil, but the country has a mandate for this to be increased to 5% by 2025. “Indonesia, as the largest producer, of course needs to innovate the use of palm oil, including in the development of biodiesel, bio jet fuel and also continuing the D100 program,” economic minister Airlangga Hartarto told a virtual conference. The country is working to expand the use of vegetable oil for energy use in order to lower its fuel imports. While biodiesel emits less carbon than traditional jet fuel, environmentalists are concerned about deforestation stemming from palm oil production.
