Good morning!
Holding pattern leading up to USDA reports… Corn futures are narrowly mixed after holding to a narrow range overnight. Soybean futures faced pressure overnight and are currently down 3 to 5 cents. Nearby winter wheat futures are a penny higher, with spring wheat up 1 to 7 cents. The greenback is marginally higher. Crude oil futures are slightly lower.
USDA’s WASDE and Crop Production Report out at 11:00 a.m. CT… USDA will release its first corn and soybean crop estimates at 11:00 a.m. CT. The data will be based primarily on farmer surveys and satellite imagery. Field samples from USDA won’t come into play until September. The data is also expected to remind of the thin supply cushion for both crops. USDA will also update its wheat crop forecasts, with adjustments to its spring and durum wheat crop forecasts likely to get a fair amount of attention. The wide range of trade guesses on global wheat carryover for 2021-22 speaks to production and demand uncertainty. Most expect USDA’s cotton crop estimate to climb from July. More here.
China trims soybean import projection for 2020-21… China lowered its soybean import projection for 2020-21 by 1.84 MMT to 98.6 MMT, noting sliding crush margins in recent months and delayed purchases of the oilseed, in its monthly China Agriculture Supply and Demand Estimates (CASDE) report. A collapse in hog production margins have also curbed soymeal use, with the country also working to use more wheat in feed. China’s soybean import forecast for 2021-22 held steady at 102 MMT. Also of note, the report calls for China to import 22 MMT of corn in 2020-21 and 20 MMT in 2021-22, amid a 4.3% jump in production. China’s cotton imports are also expected to slide from 2.8 MMT in 2020-21 to 2.5 MMT in 2021-22.
Expectations for today’s Weekly Export Sales Report… The report is for the week ending Aug. 5.
| 2020-21 (MT) | 2021-22 (MT) |
Corn | -100,000-200,000 | 400,000-900,000 |
Soybeans | -100,000-100,000 | 500,000-900,000 |
Wheat | NA | 250,000-550,000 |
Soymeal | 50,000-250,000 | 25,000-125,000 |
Soyoil | -10,000-10,000 | 0 |
Russian ag ministry calling for an 81 MMT wheat crop, well above private sector forecasts… Russia’s 2021 grain harvest will total 127.4 MMT, including 81 MMT of wheat, Dmitry Patrushev, the country’s ag minister, told reporters. “Work is proceeding normally, and despite difficult weather conditions in a number of regions, especially in the Volga region and the center of the country, our key grain-producing regions have shown impressive results this year.” Private analysts within the country peg the country’s wheat crop under 80 MMT. USDA in July forecast Russia’s crop at 85 MMT.
Strategie Grains cuts soft wheat crop forecast for the EU… The consultancy Strategie Grains trimmed its soft wheat crop estimate for the EU by 1.5 MMT, with production now projected at 131.5 MMT for 2021-22. Crop prospects for top-producing areas like France have faded. That would still be a 10.7% jump from last season’s 118.8 MMT crop. The firm also cut its barley production forecast by 2 MMT to 53 MMT and it shaved 400,000 off its durum wheat crop estimate that now stands at 7.4 MMT. On the other hand, it raised its EU corn production forecast by 600,000 MT to 66.3 MMT.
Attaché a big more optimistic about Indian cotton exports than USDA… A U.S. ag attaché in India projects the country’s 2021-22 cotton crop will total 29 million (480 lb.) bales. That’s in line with USDA’s latest projection for the country and up 700,000 bales from its 2020-21 crop estimate. Planting of the crop is underway after intense rains slowed efforts in central and southern areas of the country for two weeks. The post expects India to export 6.2 million bales of the fiber, topping USDA’s 6.0 million-bale forecast. That would be near in line with the post’s 6.3 MMT export forecast, which also tops USDA’s outlook by 200,000 bales. The attaché explains its larger 2021-22 forecast “is premised on India retaining a large exportable surplus.” The post notes its cotton prices remain competitive, thanks in part to various government export incentive schemes.
Low water levels on Parana River could get worse before it gets better… Three years of drought for southern Brazil have raised costs and caused headaches for shippers who rely on the Parana River that originates in Brazil and is an essential for channel for transporting grains and oilseeds in Argentina. Isaac Hankes, a weather analyst at Refinitiv, says the “once-in-a-hundred-years event” will likely repeat. He expects wetter weather during the October to November rainy season, but after that “our best indications right now are that we could see a similar pattern to last year,” Hankes said. Over the past year, the Parana River Basin has only received 50% to 75% of normal rainfall. Hankes reports, “We would need something like 130% of normal rainfall between now and February to replenish river levels. Anything less than 100% would be bad news for the river basin, and between now and February we expect maybe 80% of normal rainfall.” Ships sailing out of Rosario are already loading with up to 25% less cargo than normal due to shallow water.
Vilsack to look at impact of drought in Minnesota and the upper Midwest in trip Friday… Speaking to reporters, USDA Secretary Tom Vilsack called the conditions there “quite severe.”
Economists generally expect inflation to moderate by year-end… Economists surveyed by the Wall Street Journal expect higher inflation to persist for a while, but estimated on average that annual inflation, measured by the CPI, would gradually decline to 4.1% in December. The Fed remains focused on when it will start to remove its accommodative monetary policy. Comments by Fed officials still signal there is not yet a unified view on that, though some are pushing action sooner rather than later.
Work underway on human infrastructure measure… Senate committees are working on the details of what will be included in the actual reconciliation bill, which could be considered as soon as mid-September. Senate Majority Leader Chuck Schumer (D-N.Y.) said members of the relevant panels will continue to meet weekly over the next month to get the reconciliation bill ready by Sept. 15. Senate must have all 50 Democrats vote for the $3.5 trillion human infrastructure/reconciliation measure because no Republican will do so. This includes the two independent senators who caucus with the Democrats. Senate Democrats to watch include moderates Joe Manchin (W.Va.) and Kyrsten Sinema (Ariz.), both of whom are concerned about the massive price tag. House members will return early from recess to consider the budget resolution framework just approved by the Senate. Then it will finish its recess. It will not receive the actual $3.5 trillion bill until the fall.
Delta variant denting oil demand… U.S. oil demand dropped around 8% last week after steadily rising over the last month, the EIA said in its Weekly Petroleum Status report. Oil consumption fell to 19.5 million barrels per day from 21.2 million bpd the week prior. Consumption of gasoline saw a 4% drop to 9.4 million bpd, while jet fuel demand fell from 19% to 1.3 million bpd. Meanwhile, the OPEC oil cartel said the new Delta Covid variant will likely dent global crude oil demand growth in 2021 and 2022. The International Energy Agency today also cut world oil demand growth in 2021 — by 100,000 bpd to 5.3 million bpd.
Bring on the robots… There aren’t enough farmworkers now and the situation will get worse in the years and decades ahead. Agriculture jobs are projected to grow just 1% from 2019 to 2029, slower than other occupations, according to the U.S. Bureau of Labor Statistics.
WH Group’s profits for 1H of 2021 slip, company concerned about inflation… China’s major pork processor, WH Group, reports its profits slipped 2% the first half of 2021 to $539 million, citing higher costs in its fresh pork business. But revenue at its U.S.-based Smithfield grew 6.8% to 13.3 billion thanks to increases sales in the U.S. and Europe. In a statement, the company said, “In 2021, negative impacts from ASF and COVID-19 on us are retreating but global inflation has imposed new challenges.”
JBS SA’s Q2 profits up nearly a third from year-ago… JBS SA, the world’s biggest meat company, reported a net income of 4.382 billion reais ($839.22 million) for the second quarter, topping Q2 of 2020 by nearly 30%. The Brazil-based company reports strong sales in the U.S. drove the gains. The company was able to partially offset the effect of higher feed costs by increasing prices in select markets.
Cash cattle trade begins at steady prices… Choice boxed beef values surged $5.48 yesterday and Select shot $3.38 higher; 110 loads changed hands. This marked the 15th day in a row of higher beef prices. Packer profit margins have soared roughly $150 over the past week to $747 a head, reports HedgersEdge.com. Cash cattle trade got started in Iowa yesterday at $126, with Kansas seeing active trade at $121. Light Texas action ranged from $120 to $121 and Nebraska saw some animals move at $123. Last week, trade ranged from $121 to $126, with the western Corn Belt leading gains.
Product market strength helped lean hog futures to stabilize midweek… October lean hog futures were bolstered by some short-covering after dropping to four-week lows earlier this week, with soaring beef prices lending futures some support. The pork cutout value climbed $1.56 yesterday, with strong gains in hams helping to lift the cutout. Movement was decent at 319.85 loads. Cash hog bids edged 41 cents higher yesterday. Average hog weights in the Iowa/southern Minnesota/South Dakota market climbed 1.8 lbs. to 278.4 lbs. the week ending July 7, which is still 2 lbs. lighter than year-ago. The head count also climbed to kick off August. Analysts will turn their attention to USDA’s weekly export sales report.
Overnight demand news… Importers in the Philippines are believed to have rejected all offers in their tender to buy 120,000 MT of animal feed wheat and 120,000 MT of feed barley. Jordan is thought to have made no purchase in its tenders for 120,000 MT of wheat and 120,000 MT of barley. But the country did issue a new tender to buy 120,000 MT of wheat. North Cyprus issued an international tender to buy 30,000 MT of animal feed barley and 5,000 MT of corn. South Korea bought around 22,222 MT of rice from the U.S. South Korea’s Major Feedmill Group bought around 207,000 MT of corn in an international tender. Thailand is thought to have rejected all offers in its international tender to buy up to 139,500 MT of animal feed wheat due to high prices.
Today’s reports
- 7:30 a.m. Weekly Export Sales — FAS
- 11:00 a.m. WASDE — ERS
- 11:00 a.m. Cotton Ginnings — NASS
- 11:00 a.m. Crop Production — NASS
- 11:15 a.m. Cotton: World Markets and Trade — FAS
- 11:15 a.m. Grains: World Markets and Trade — FAS
- 11:15 a.m. Oilseeds: World Markets and Trade — FAS
- 11:15 a.m. World Agricultural Production — FAS