Risk-on is the order of the day for index funds.
Grain futures were sharply higher overnight, with the wheat trade recovering from heavy selling in a short period of time as the risk-on trade comes back in vogue. Yesterday, Pfizer indicated that it expected its current vaccine to hold up to omicron with the World Health Organization, suggesting that vaccines will prevent against a severe health crisis. The consensus is building that the strain is less impactful than the Delta version and that the existing vaccines will prevent hospital overruns. The omicron variant is coming with a mild headache, fatigue, and a low mortality rate.
Yesterday United Airlines made history flying a 737 Max plane from Chicago to Reagan national in DC with one of its engines running solely on biofuel. United CEO Kirby declared the flight as historic and called on Congress to pass the BBB bill, which includes a provision for renewable jet fuel called the Clean Fuel Tax Credit. One concern is that replacing 15% of jet fuel usage would deplete US grease, lard, and veg oil supplies.
Saudi Arabia’s SAGO is tendering for 535,000 MTs of world wheat for May through July 2022. We are seeking 12.5% protein wheat that meets milling needs. French Milling wheat is rebounding sharply overnight, up $7 at $294/MT.
South American weather is starting to raise eyebrows with dry conditions across S Brazil and Argentina yesterday and in the coming days. Rainfall continues to be in N Brazil where amounts range from .10-1.25”. Most of Argentina is dry with weather maps showing that trend to continue. The La Niña pattern seems to be establishing itself and looks to persist into December. On Saturday, the only chance of rain in Argentina in the next 10 days is a small system moves through Buenos Aires, producing rain potential of .25-1.25”.
Cattle futures recovered sharply yesterday with a firm outlook anticipated today. On Wednesday, cash cattle markets remained largely untraded, but a few lite sales developed $2-$3 lower than last week’s 140 tops. Boxed beef continues to decline with the choice often dollar 46 and select down $2.32. The cattle/corn spread is holding above $1400/head or $240 higher than last year. The CME feeder index is at $162, but it is still at the lower end of the expected range. The Feeder index should find support under $155 and, given current margins, could easily trade up to $165-170 area. January feeders are at $166.00.