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3 Big Things Today, November 12, 2021

Wheat Futures Fall Overnight; Rising Input Costs Lead to Higher Food Prices.

1. Wheat Futures Lower Overnight on Profit-Taking

Wheat futures were modestly lower in overnight trading as investors who drove prices to near nine-year highs step back.

Prices in Chicago this week rose to the highest level since 2012 amid increased export taxes in Russia, which may lead global importers to seek U.S. supplies.

Russia also may impose further export restrictions in the first half of 2022.

Investors who were long the market, or had bet on higher prices, may be liquidating their positions and booking profits after the run-up in prices.

Fundamentally, nothing has changed.

Global wheat stockpiles are pegged by the U.S. Department of Agriculture at 275.8 million metric tons in the year that ends on May 31. That’s down from 288 million metric tons a year earlier.

In the U.S., output is now seen at 1.65 billion bushels, down from 1.83 billion last year. Domestic inventories on May 31 are seen at 583 million bushels, down from 845 million a year earlier, the USDA said in its monthly World Agricultural Supply and Demand Estimates (WASDE) report this week.

Corn futures also were lower in overnight trading ahead of the weekend, while soybeans were little changed.

Wheat futures for December delivery fell 2¢ to $8.10½ a bushel overnight on the Chicago Board of Trade, while Kansas City futures dropped 3¼¢ to $8.24¾ a bushel.

Corn futures for December delivery were down 2¢ at $5.67½ a bushel.

Soybean futures for November delivery were unchanged at $12.21½ a bushel. Soymeal gained $1 to $345.50 a short ton, while soy oil lost 0.29¢ to 58.85¢ a pound.

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2. Rising Input Costs Lead to Higher Food Prices Globally

Rising input prices for agricultural producers globally will lead to higher food costs worldwide, the Food and Agricultural Organization said in a report.

Wheat prices likely will rise as worldwide production is expected to decline this year while use is forecast to rise, the FAO said.

Coarse grain production is projected to rise 1.5% in 2021, but consumption is pegged to grow by 1.6%. Global inventories, after three seasons of declines, likely will stay put this year, the organization said.

The FAO sees some improvements in world oil crop supply, though it warned that ending stocks may remain below normal levels.

Meat production is expected to rise 4.2% year-over-year, but the FAO meat-price index rose for 10 straight months through October amid “solid” demand that’s often outpaced supply.

Food prices in August reached a 10-year higher, the group’s food-price index shows, due in part to the uptick in input costs.

“The recent upsurge in agricultural input prices has triggered considerable alarm about rising costs of food production, which in a free market economy will be typically passed onto consumers through higher food prices,” the FAO said.

Higher food prices are a direct result of increases in production costs, which are keeping farm profitability in check. Simply put, farmers aren’t making more money because of the higher input prices, the organization said.

Higher energy, fertilizer, and feed costs are all part of the increased prices producers are paying to grow food products.

“The rapid rise and the current multiyear high in international food prices are being accompanied by an equally rapid rise and a multiyear high in (variable) production costs,” the FAO said in its report. “The near synchronous change in revenues and costs keeps overall farm profitability in check. Secondly, this co-movement between agricultural product prices and agricultural input prices is a general feature that has characterized international markets for the past decades.”

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3. Blizzard Conditions Continue in Parts of South Dakota, Minnesota

Blizzard warnings and winter weather advisories remain in effect in parts of the Northern Plains this morning as snow and strong winds hit the region, according to the National Weather Service.

As much as 3 inches of snow is expected to be on the ground when the storm rolls out about noon local time in parts of the eastern Dakotas and western Minnesota, the NWS said in its report.

Wind gusts from 50 to 55 mph likely will continue this morning. Roads are expected to be slippery.

In the southern Plains, meanwhile, extremely dry weather is settling in, the NWS said.

A red-flag warning has been issued starting this morning and lasting through this evening in parts of western Kansas. Sustained winds are forecast from 25 to 40 mph with gusts of up to 50 mph, the agency said.

“Any fires that start may rapidly grow and spread out of control,” the NWS said.

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