Good morning!
Grains lower to start the week... Corn, soybeans and wheat pulled back from the strong gains late last week during the overnight session, led lower by sharp losses in the wheat market. As of 6:30 a.m. CT, corn futures are trading 1 to 2 cents lower, soybeans are 1 to 3 cents lower, SRW wheat is 9 to 10 cents lower, HRW wheat is 16 to 17 cents lower and HRS wheat is 10 to 13 cents lower. Front-month crude oil futures are around 70 cents higher and the U.S. dollar index is trading just above unchanged.
Wetter pattern to persist across major U.S. crop areas... U.S. weather is projected to be wet enough to slow the planting pace across much of the Midwest, Delta and Plains, along with some areas of the Southeast this week, according to World Weather Inc. West-central and southwestern areas of the Plains will receive only erratic rainfall, leaving some locations quite dry. Rains are expected to continue across southern Brazil, though intensity should decline from torrential downpours over the past week. Safrinha corn areas in south-central Brazil are expected to remain hot and dry this week, though forecasts signal rains over Mato Grosso do Sul, Parana and Sao Paulo late next week. Frosts and freezes are likely in the western Commonwealth of Independent States this week, including some areas of Russia, though there is not much concern over production cuts.
The week ahead in Washington... New farm bill activity accelerated last week with the release of the most important sections of both House and Senate proposals. House Ag Chair Glenn “GT” Thompson (R-Pa.) and staff this week will issue several papers explaining the reasoning behind some of the farm bill proposals which attracted immediate opposition from Democrats. Senate Ag Chair Debbie Stabenow (D-Mich.) released what some say is a more detailed summary of her bill via a 94-page document. Thompson will be meeting this week in separate sessions with Stabenow and Senate Ag panel ranking member John Boozman (R-Ark.), who is working on a Senate farm bill alternative that features many of the same ideas contained in the House GOP farm bill proposals. It is unclear when Boozman will release his and his GOP colleagues’ ideas. House lawmakers are gearing up for another vote to potentially remove the current House Speaker, Mike Johnson (R-La.), prompted by Rep. Marjorie Taylor Greene (R-Ga.) citing growing frustration with him. USDA’s Supply & Demand Report on Friday will feature updates to old-crop usage forecasts and the first official look at the 2024-25 balance sheets.
Rising climate volatility fueling demand for weather derivatives... Companies and investors are increasingly recognizing the significance of meteorological risks and are turning to a specialized area of Wall Street to mitigate them. The escalating unpredictability of climate patterns is driving the need for weather derivatives, which offer protection against weather-related financial losses. According to CME, the average trading volumes for such derivatives listed products surged by over 260% in 2023, indicating a growing demand. The market for these derivatives could potentially be valued as high as $25 billion based on notional value, showcasing the substantial scale of this niche yet crucial sector in finance.
Forex markets remain focused on yen, yuan... The Japanese yen slid 0.5% in Asian trading on Monday, wiping out its advance during the previous session. On Friday, the yen spiked to a level not seen in three weeks, as soft U.S. jobs data triggered a selloff in the U.S. dollar and prompted traders to bring forward rate-cut bets for the Federal Reserve. The yen still remains the worst performing major currency so far this year with a loss of more than 8% against the dollar. Meanwhile, China’s yuan spiked to a six-week high against the dollar overnight, the first trading day after the long Labor Day holiday, as the central bank set a stronger midpoint fixing to track offshore movements.
EU urging China to keep agriculture out of escalating trade disputes... The European Union has launched investigations into Chinese suppliers allegedly violating foreign subsidies regulations, aiming to address distortions favoring third-country companies in the bloc. The Financial Times reports EU Agriculture Commissioner Janusz Wojciechowski stressed the importance of safeguarding agriculture as a strategic sector, separate from other trade disputes. While the EU runs a surplus in agrifood trade with China, there are worries that disputes in other sectors could lead to retaliation affecting ag exports. EU ag lobby group Copa Cogeca highlighted the risk of retaliation, citing Australia’s experience with Chinese sanctions on ag exports amid political disputes. EU officials have told the Financial Times preliminary duties on electric vehicles (EVs) could be imposed in May, while permanent tariffs that need the support of a majority of member states could follow in November. Researchers at the Rhodium Group said the duties on Chinese EVs to the EU could range from 15% to 30%.
Euro zone business activity grows at fastest pace in almost a year... Euro zone business activity expanded at its fastest pace in almost a year last month as a resurgence in the bloc’s services industry more than offset a deeper downturn in manufacturing. HCOB’s composite euro zone purchasing managers index (PMI) compiled by S&P Global increased to 51.7 in April, surpassing the preliminary estimate of 51.4 and the highest ready since 52.8 in May 2023. Meanwhile, the euro zone producer price index declined 7.8% annually in March.
Canada toughens import requirements on U.S. breeding cattle due to H5N1... The Canadian Food Inspection Agency (CFIA) toughened import requirements on U.S. breeding cattle due to the H5N1 virus, the agency said late Friday. Import measures for cattle from the U.S. will now include negative H5N1 test results for lactating dairy cattle, testing of milk at the retail level to look for viral fragments of the virus and voluntary testing of cows that do not have clinical signs of the virus, CFIA said.
Bullish cash cattle expectations... Cash cattle prices firmed last week as packers showed more interest in buying cattle than initially expected. As a result, traders start this week with expectations of firmer cash prices again, though recent hefty purchases by packers, deeply negative cutting margins and the fresh availability of contracted supplies could limit their willingness to raise cash bids.
Hog premiums narrow... The CME lean hog index is up 4 cents to $90.96 as of May 2. May lean hog futures, which expire May 14 and are cash settled on May 16, finished Friday $1.465 above today’s cash quote, while the premium in June hogs tightened to $7.99.
Weekend demand news... Algeria purchased an unknown quantity of corn but made no buys of soymeal in a tender for up to 160,000 MT of corn and 70,000 MT of soymeal. Taiwan tendered to buy up to 65,000 MT of corn from the U.S., Brazil, Argentina or South Africa.
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
- 10:00 a.m. Export Inspections — AMS
- 2:00 p.m. Milk cows and production by State and region (Annual) — ERS
- 2:00 p.m. U.S. Agricultural Trade Data Update — ERS
- 2:00 p.m. Dairy Products — NASS
- 3:00 p.m. Crop Progress — NASS