First Thing Today: Quiet overnight trade in grain, soy futures

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Good morning!

Quiet trade overnight... Corn, soybean and wheat futures posted two-sided trade in a quiet overnight session but are mostly weaker this morning. As of 6:30 a.m. CT, corn futures are steady to a penny lower, soybeans are around 2 cents lower and wheat futures are steady to 4 cents lower, led by winter wheat contracts. The U.S. dollar index is around 100 points lower this morning, while front-month crude oil futures are modestly higher.

Attache sees bigger Argy corn crop, exports than USDA... The ag attache in Argentina projects the country’s 2021-22 corn crop at a record 54.5 MMT, 1.5 MMT greater than USDA’s October forecast on expectations planted acreage will be 300,000 hectares more than USDA has in its current balance sheet. It expects the country’s corn exports to reach 40 MMT, 2 MMT higher than USDA’s forecast. The post forecasts Argentina’s wheat crop at a record 20 MMT with exports of 13.5 MMT, both matching USDA.

Consultant keeps South American crop estimates unchanged... South American Crop Consultant Dr. Michael Cordonnier continues to project Brazil’s 2021-22 soybean crop at a record 144 MMT, though he has a neutral to higher bias as the crop is off to a better-than-average start. Soil moisture is favorable “nearly everywhere in Brazil” and the planting pace is rapid. He kept his Brazilian corn crop estimate at 118 MMT, which would also be a record. While the full-season corn crop is off to a strong start, that will account for only one-quarter of the country’s total production, with the safrinha crop likely to be about  three-quarters of output. Cordonnier calls the weather pattern in Argentina “worrisome” with drier-than-normal conditions associated with La Nina already in place. He left his Argentine crop estimates at 51 MMT for soybeans and 53 MMT for corn, but he has a neutral to lower bias for both crops amid the dryness concerns.

Crop Progress & Condition Report highlights… Following are highlights from USDA’s crop progress and condition update for the week ended Oct. 24.

  • Corn: 66% harvested (53% on average)
  • Soybeans: 73% harvested (70%)
  • Cotton: 91% bolls open, 35% harvested (41%)
  • Winter wheat: 80% planted (80%), 55% emerged (59%), 46% “good” to “excellent”

HRW CCI rating below average, SRW crop slightly above normal... When USDA’s initial crop condition ratings of the season are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the HRW crop starts with a 332.9 rating, 21.2 points higher than last year but 8.5 points below the five-year average. The SRW crop begins with a 365.2 rating, 1.1 points higher than last year and 4.4 points above the five-year average. Click here for details.

Supply chain woes causing economic impacts... Supply-chain problems that have left containers piled up in warehouses and dozens of ships waiting offshore to be unloaded are starting to have broader economic ramifications. New economic indicators from the U.S. and Germany released Monday suggest that economic growth could slow due to the supply-chain bottlenecks and higher prices that have characterized the past few months. An index of national economic activity produced by the Federal Reserve Bank of Chicago found the economy grew at a slower-than-average pace in September, due to a decline in production-related sectors such as manufacturing. A separate report by the Dallas Fed found that Texas factory output slowed in October from September because of supply constraints and a labor shortage. And a measure of German business sentiment fell for the fourth straight month as firms grapple with disruptions in shipping and higher energy prices.

USDA now reporting top-up payments under CFAP 1... Issuance of top-up payments under the Coronavirus Food Assistance Program 1 (CFAP 1) program boosted total payouts to $11.79 billion as of Oct. 24. The total for original CFAP 1 payments was little changed at $10.6 billion, but USDA is now reporting that $1.19 billion in top-up payments to cattle producers have been made. That puts total CFAP 1 payouts for livestock at $6.25 billion, with non-specialty crop payments at $2.66 billion, dairy at $1.81 billion, specialty crops at $943.96 million and $120.20 million for aqua nursery floral. Payments authorized under CFAP 2 totaled $18.76 billion as of Oct. 24, including $13.94 billion for original CFAP 2 payments and $4.82 billion in top-up payments for acreage-based commodities, up slightly from the prior week’s total. A total of 912,375 applications have been approved. There were increases noted for sales commodities, which now total $2.9 billion and eggs/broilers that total $66.83 million.

China studying mechanism to stabilize coal prices long-term... China’s National Development and Reform Commission (NDRC) is looking into the costs and profitability of the coal sector in an effort to work out a mechanism to guide prices to move within a reasonable range. The state planner is also considering including coal in a "prohibiting exorbitant profits" category amid the recent energy crunch that caused a surge in prices. The new mechanism would be based on a benchmark price plus a floating range, after taking into account costs, reasonable margins and market changes. The government has indicated that 500-570 yuan per metric ton is a reasonable range for long-term thermal coal contracts.

China issues action plan for carbon emission goal... China will take action to reduce waste, promote renewable fuels and reform its electricity network as part of its plan to bring carbon emissions to a peak before 2030, China's cabinet said. The new action plan repeats China's targets to bring wind and solar capacity to 1,200 gigawatts by the end of the decade, to build more hydropower and nuclear plants and further develop natural gas resources. The plan was published just five days before talks get under way in Glasgow on the global battle against climate change. China is set to announce its updated “nationally determined contributions” before the meeting begins.

China to auction cotton reserves... The auction on Wednesday will be for 30,007 MT of state-owned cotton reserves.

Wholesale beef market shows more signs of a low... Boxed beef prices were weaker Monday morning, but they bounced back to finish $1.22 higher in Choice and 8 cents higher in Select for the day. Packers also moved 136 loads of product on the day. While we doubt the wholesale beef market is going to shoot sharply higher, recent price action suggests a low has been established as retailers appear to be buying for late-fall features. That may help build recent strength in the cash market and encourage followthrough buying in cattle futures.

Pork cutout price decline continues... The pork cutout value dropped $3.69 on Monday as losses in hams, picnics, butts and loins more than offset firmer prices for bellies and ribs. At $94.58, the cutout value is the lowest since March 4. The falling cutout value is keeping pressure on the cash hog market, despite strong packer cutting margins, which were estimated at $51.70 per head by HedgersEdge.com on Monday and will be even stronger today.

Overnight demand news... Exporters reported no sales or tenders.

Today’s reports

  • No reports
 

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