First Thing Today: Wheat leads overnight price recovery

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Good morning!

Wheat leads overnight price recovery... As of 6:30 a.m. CT, HRS wheat futures are mostly 11 to 12 cents higher, HRW wheat is 9 to 12 cents higher, SRW wheat is 5 to 6 cents higher and soybeans are around 6 cents higher. Corn futures are trading on either side of unchanged. Front-month crude oil futures are more than $3 higher and the U.S. dollar index is around 125 points higher this morning.

Omicron concerns ease but aren’t gone... Global stock markets were mixed in overnight trade, with Asian shares mostly lower and European shares mostly higher. The U.S. stock indexes are pointed to solidly higher openings this morning after suffering sharp losses Friday. The marketplace is a little less spooked about the new Omicron strain of Covid than it was Friday, but by no means can trader and investors attitudes be termed upbeat to start the trading week. Reports now say the Omicron strain may be milder than the previous ones, and that vaccines are likely to work on the new variant but may need tweaking. Still, right now there are more questions than answers on the matter and that’s likely to keep market participants on edge for at least the near term.

The week ahead in Washington... Congress returns from its Thanksgiving recess with some key items on the docket, including fiscal year (FY) 2022 spending. Dec. 3 is when the current stopgap measure funding the government expires. Most expect another continuing resolution, but the length of this is still being debated. Some Democrats have mentioned Dec. 17 but that apparently lacks GOP support. A little less pressing issue for the moment is the debt ceiling. Dec. 15 is the date that Treasury Secretary Janet Yellen says is the deadline for dealing with the debt ceiling to avoid default on the nation’s debt. Private forecasts have a longer deadline. The Senate will not take up the social spending/climate change bill dubbed Build Back Better (BBB) until the second week of December, at the earliest. Many see just before Christmas as the deadline for considering the $1.75 trillion measure. Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen will testify before two congressional panels on Tuesday and Wednesday. This will be the first time lawmakers hear from and question Powell since President Joe Biden announced his renomination to lead the Fed. The almost laughable EPA delay in announcing RFS details is facing a Nov. 30 “deadline,” which it has missed several times in the past.

Brazilian soybean planting almost complete... Brazilian farmers had planted 90% of their intended soybean area as of last Thursday, according to consultancy AgRural. Rio Grande do Sul is the focus, where dry conditions have been seen this month. AgRural also says dryness in parts of Santa Catarina, Paraná and southern Mato Grosso do Sul will be watched moving forward. The firm says 93% of Brazil’s full-season corn crop has been planted.  

U.S. export supply chains are choking on empty containers... Hundreds of thousands of boxes are filling marine terminals and truck yards across Southern California, the Wall Street Journal reports, tying up crucial cargo-handling space and adding to the gridlock that has gripped American distribution networks. The empties are a sign of the fractured state of supply chains, as shippers scramble to find scarce sea containers for goods even as storage sites are overflowing with boxes. The containers are in the wrong places for exporters on both sides of the Pacific, however. Shipping lines are prioritizing recovery of the empty containers and stacks are growing higher as operators from terminals to truckers cope with constrained capacity to manage them. Ocean operators typically send “sweeper” vessels to haul away excess empties, but few ships are available for that duty these days.

Labor negotiations could be the new supply-chain concern... U.S. shippers struggling with supply-chain issues on the West Coast face new concerns in the coming year as dockworkers and marine terminals gird for talks on a new labor contract. The private companies that operate port facilities from Washington state to Southern California are due to begin negotiations next year on a multiyear agreement with the union representing 22,400 dockworkers to replace the contract that expires in July 2022, raising the potential for new turmoil over bargaining that has been highly contentious in previous years. The talks with the International Longshore and Warehouse Union, which happen about every six years, led to severe labor disruptions and shipping delays during the last cycle in 2014 and 2015. The sides are already showing they are bracing for a battle. The employer group asked this month to extend the existing contract into 2023 because of the ongoing supply-chain congestion. The International Longshore and Warehouse Union quickly rejected that idea.

WTO postpones MC12 indefinitely... The upheaval caused by the Omicron variant of Covid has resulted in the 12th Ministerial for the WTO (MC12) being postponed indefinitely, the trade body announced Friday. New travel restrictions around the globe were a factor for the meeting that had been set to run Nov. 30-Dec. 3. Director-General Ngozi Okonjo-Iweala said the travel constraints meant that many ministers and senior delegates could not have participated in face-to-face negotiations at the Conference. This would render participation on an equal basis impossible, she said. The situation will further push back any decision at the trade body on the issue of Covid vaccines, with poorer countries pushing to gain access to the vaccines. However, expectations for any major breakthroughs at the MC12 session were minimal at best given wide disparities over several issues, including agriculture. It is not clear that the lack of the MC12 session will really alter the WTO climate at this stage.

China on Saturday sent 27 warplanes close to Taiwan... The aircraft mission was the most since October after a U.S. lawmaker defied Beijing’s demand that it abandon a trip to the island. The aircraft, including J-16 fighter jets, entered Taiwan’s southwest Air Defense Identification Zone, according to the Ministry of National Defense. Taiwan has complained of repeated missions by China's air force near the democratically governed island, and last month, China's military sent a record number of warplanes into the air around the country. These latest Chinese military activities are considered "gray zone" warfare by Taiwan, designed to wear out Taiwan's forces by making them repeatedly scramble and to test their responses.

Potential lock out at Canada beef processing plant... Cargill issued a lockout notice to workers at one of Canada’s largest meat-packing plants last week after unionized workers at the High River facility voted overwhelmingly against the company’s latest contract offer, putting them in a position to strike as early as Dec. 6. The plant accounts for roughly 40% of Canada’s beef processing capacity, processing about 4,500 head of cattle daily.

Attitudes in cattle market still bullish... Cattle traders shook off bearish outside market factors in last Friday’s abbreviated post-holiday session as futures rebounded from sharp early losses to end higher. As trade gets back to normal, focus will be on the cash market, which has been surging amid strong packer demand and a tightening supply of market-ready animals.

Cash hog index continues to fall... Lean hog futures were unable to shake the sharp outside market pressure last Friday as the CME lean hog index continues to weaken. The cash index is down another 93 cents today to $71.63. December lean hog futures finished last Friday $1.57 above where the cash index is quoted today, while the February contract held a $9.395 premium. Those premiums could lead to followthrough selling in hog futures today, though outside market concerns have eased.

Weekend demand news... Egypt tendered to purchase an unspecified amount of wheat from multiple origins, with results expected later this morning. Jordan tendered to buy 120,000 MT of optional origin milling wheat. Bangladesh tendered to buy 50,000 MT of optional origin milling wheat.

Today’s reports

 

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