Good morning!
Wheat firmer, corn and beans weaker to start the week... Wheat futures recouped some of last week’s losses during the overnight session, while corn and soybeans extended their recent declines. As of 6:30 a.m. CT, corn futures are trading mostly a penny lower, soybeans are 8 to 10 cents lower and wheat futures are 5 to 8 cents higher. The U.S. dollar index is modestly lower, while front-month crude oil futures are trading just above unchanged.
Another active week of weather across central U.S.... Frequent rain events are expected across the Corn Belt this week, with some localized flooding possible. Less rainfall is forecast for next week. The Delta will also receive periodic rains this week. Dryness is still a concern for wheat in southern Russia and immediate neighboring areas. Rain in Australia is expected to be supportive of planting – at least in the most important production areas. Rainfall in Brazil and Argentina will be limited over the next 10 days, which will be welcome in southern Brazil.
Sharp monthly declines expected for soy crush, corn ethanol use... USDA is expected to report April soybean crush totaled 175.3 million bu., based on a Bloomberg survey. That would be down 28.4 million bu. (13.9%) from the March all-time record and 11.7 million bu. (6.3%) below April 2023. Corn-for-ethanol use is expected to total 433.0 million bu., which would be down 35.8 million bu. (7.6%) from March but up 18.9 million bu. (4.6%) from year-ago.
China’s vague food security law aims for ‘absolute self-sufficiency’... China’s first food security law aimed at achieving “absolute self-sufficiency” in staple grains went into effect on Saturday, reinforcing efforts by Beijing to lower its reliance on overseas purchases. The law provides a legal framework for existing guidance by the Communist Party for local governments and the agricultural industry to raise food production, although it did not give details on how it will be implemented. It includes protection of farmland from being converted to other uses, protecting germplasm resources and preventing waste. The law holds central and provincial governments accountable for incorporating food security into their economic and development plans, ensuring that food supply remains a top priority. It also stipulates the formation of a national grain emergency plan and a food security monitoring system. The law also said China will “strengthen international food security cooperation and allow international grain trade to play its role,” without providing specific details. Trivium China said, “It doesn’t change the realities on the ground for local officials who were already under significant pressure to deliver on food security. The food security law enshrines existing practices in law but isn’t set to change anything. Food security was already among the top national priorities and can’t go any higher.”
Bigger planted area to boost Aussie wheat crop... Australia’s 2024-25 wheat production should be bigger than last year’s after an increase in planted area, according to Rabobank. The country should harvest 27.4 MMT of wheat from this year’s crop, up 5.7% from 2023-24, as planted area is set to rise by 961,000 hectares to 13.48 million hectares (33.3 million acres). However, Rabobank expects smaller crops for barley and canola. It forecasts production of 10 MMT for barley, down 7.2% from last year, and 5 MMT for canola, down 11.4%. Wheat and canola production would be roughly in line with the five-year average, but barley would be around 2 MMT below average.
Egypt proposes Russian grain hub... An Egyptian company has sent the Russian government a feasibility study for the construction of grain hub in Egypt that could store and process Russian grains, Egyptian trade minister Ahmed Samir told Russian news agency RIA. Samir said the hub could be built in the ports at Said, Damietta or Sokhna.
The week ahead in Washington... The House and Senate return this week to continue work on fiscal year (FY) 2025 appropriations bills. Most of the work will come via congressional hearings for various gov’t departments and agencies. Several Biden Cabinet members are slated to testify, including EPA administrator Michael Regan and Treasury Secretary Janet Yellen. Most of the activity on the new farm bill will be behind the scenes as House Ag Chair Glenn “GT” Thompson (R-Pa.) continues to woo Democrats and even some Republicans to support the Ag Committee-cleared measure. The economic focus will be Friday’s jobs data for May. Key data for agriculture will be this afternoon’s Crop Progress Report from USDA, which will include the first corn crop condition ratings of the season.
IRS issues guidance on 45Z Clean Fuel Production Credit... The IRS on Friday issued new guidance for biofuel producers on how to register for the 45Z Clean Fuel Production Credit. Producers are urged to register by July 15, 2024, to ensure applications are processed by the program start date, Jan. 1, 2025. Biofuel producers must list their primary feedstocks from separate entities or facilities. To qualify, producers must be registered as clean fuel producers at the time of production. Sustainable aviation fuel (SAF) producers must be certified by a third party for supply-chain traceability. Farmers will need to provide detailed data on their farming practices and may enter contracts based on these practices. Of note: The IRS guidance anticipates further clarification on the Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) model. The base credit amount is 20 cents per gallon for transportation fuel produced at a qualified facility. If the facility meets certain prevailing wage and apprenticeship requirements, the credit increases to $1.00 per gallon. For SAF, the base amount is 35 cents per gallon, and it increases to $1.75 per gallon if the facility meets the additional requirements.
China’s private factory activity improves in May... The Caixin/S&P Global manufacturing purchasing managers index (PMI) rose to 51.7 in May from 51.4 the previous month. That marked the seventh straight month of expansion in factory activity and the highest since June 2022. This gauge of smaller and privately owned factories countered the official PMI data released on Friday that showed contraction in larger and state-owned plants.
OPEC+ extends cuts, plans gradual rollback starting in October... OPEC+ decided to extend its oil production cuts. This extension involves maintaining voluntary cuts from key members such as Saudi Arabia and Russia well into next year. However, starting in October, these supply reductions will begin to be rolled back, earlier than some had anticipated. According to the new agreement, eight nations involved in these additional curbs will have added about 750,000 barrels a day to the market by January. The agreement extends roughly 2 million barrels a day of cuts. These cuts will continue in the third quarter and be gradually phased out over the next 12 months.
Mexico elects first female president... Mexico made history by electing the first woman president in the country’s largest election ever. Claudia Sheinbaum, the candidate of the ruling Morena party, won with roughly an estimated 60% of the vote. Sheinbaum is the former mayor of Mexico City and a political protege of the current popular President Andrés Manuel López Obrador.
Despite restrictions, strong demand for U.S. beef in Colombia... Colombia is the only trading partner to impose restrictions on imports of U.S. beef as a result of H5N1 being detected in some lactating dairy cows. Homero Recio, U.S. Meat Export Federation Latin America representative, explains that Colombia currently will not accept beef from any of the nine states impacted by H5N1. However, Recio reports the U.S. industry is doing its best to overcome this trade barrier and meet the needs of Colombian customers by sourcing beef from eligible states. Despite Colombia’s restrictions, the business climate for U.S. red meat remains favorable, with strong demand from the retail and foodservice sectors.
Seasonal slide in cash cattle... Traders will have to wait until later this morning to get the average cash cattle price from last week, though it will be down from the all-time high two weeks ago. With fresh contract supplies available and negative packer cutting margins, cash prices are expected to decline again this week. Seasonally, cash prices typically slide through summer.
Cash hog fundamentals strengthen... The CME lean hog index is up 49 cents to $91.49 as of May 30, the second straight day of gains following a seven-day drop. June lean hog futures finished last Friday $2.86 above today’s cash quote. The pork cutout value firmed $1.30 on Friday, despite losses in bellies and loins, fueled by a $6.07 jump in hams.
Weekend demand news... South Korea purchased 60,000 MT of optional origin feed wheat. Algeria tendered to buy a nominal 50,000 MT of optional origin soft milling wheat.
See ‘Policy Updates’ for late-breaking morning news updates... For updates to items in “First Thing Today” or any late-breaking morning news stories, check “Policy Updates” on www.profarmer.com.
Today’s reports
- 8:00 a.m. Food Expenditure Series — ERS
- 10:00 a.m. Export Inspections — AMS
- 2:00 p.m. Cotton System Consumption and Stocks — NASS
- 2:00 p.m. County Estimates - Poultry — NASS
- 2:00 p.m. Fats and Oils: Oilseed Crushings, Production, Consumption — NASS
- 2:00 p.m. Grain Crushings and Co-Products Production — NASS
- 3:00 p.m. Crop Progress — NASS