Good morning!
Corrective buying continues in corn and soybean futures… Corn futures are up 1 to 3 cents and soybean futures are 12 to 13 cents higher, as futures continue to chip away at Friday’s big losses. Winter wheat futures are down 5 to 6 cents, while spring wheat is down 4 cents. The U.S. dollar index is just above unchanged. Crude oil futures are sharply higher.
Crop Progress & Condition Report highlights… Following are highlights from USDA’s crop progress and condition update for the week ended Aug. 22. Find more details.
- Corn: 85% in dough, 41% dented, 4% mature, 60% “good” to “excellent” (G/E)
- Soybeans: 97% blooming, 88% setting pods, 3% dropping leaves, 56% G/E
- Spring wheat: 77% harvested
- Cotton: 97% squaring, 79% setting bolls, 14% bolls open, 71% G/E
Corn, soybean CCI ratings continue to decline… When USDA’s weekly condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn crop dropped 4.8 points to 355.1 points, while the soybean crop declined 2.5 points to 347.1 points. The CCI rating is now 12.2 points below the five-year average for corn and 13.0 points below for soybeans.
Cordonnier maintains U.S. yield projections after rains stabilize U.S. crops… Crop Consultant Dr. Michael Cordonnier maintained his U.S. corn yield estimate of 175.5 bu. per acre and his bias is neutral to lower going forward. “Weekend rains favored North Dakota, Minnesota and parts of central Iowa and there are more rains in the forecast. These rains will help to stop the deterioration of the crop, but they probably came too late to add back any yield to the corn,” he says, adding that they should help stabilize the crop in drier areas. Cordonnier also maintained his soybean yield estimate of 50 bu. per acre and his bias is neutral to slightly lower going forward. He says recent rains “may add a little yield, especially in Iowa and southern Minnesota,” but he adds moisture likely came too late to have a significant impact on yield in the Dakotas where plants are already turning yellow.
Worries about what another La Nina-plagued growing season might mean for South America… The National Oceanic and Atmospheric Association recently upped the odds for a second consecutive La Nina for the South American summer to 70%. That pattern typically results in below-normal rainfall for southern Brazil and northern Argentina, and both regions are still dealing with one of their driest periods in 70 years. Cordonnier says “continued dryness from a resurgent La Nina could be devastating.” Dry weather has also had a major negative impact on the Parana River that is essential for ag exports, drinking water and power generation. “In the context of La Nina reappearing, the lack of rain will not correct itself,” said German Heinzenknecht, a meteorologist at Argentine consultancy Applied Climatology. “At best it could become normal in some areas. But a return to normal rainfall will not correct the flow of the river,” he continued.
Erratic monsoon rains raise concerns about India’s crops… Planting of India’s summer crops is running just 1.6% behind year-ago, reports the country’s ag ministry, but some are concerned about a drop in yields given erratic distribution of rainfall. Some areas have been flooded while others hand seen prolonged dryness. As an example, cotton planting is running 8.3% behind year-ago as the top-producing state of Gujarat has received 47% less rainfall than normal. While the state-run India Meteorological Department still expects the country to receive normal monsoon rains this year, the private forecaster Skymet yesterday said the country could receive below-normal rains this monsoon season. The country defines average rainfall as between 96% and 104% of the 50-year average accumulation of roughly 35 inches for the four-month season. India is the world’s biggest exporter of rice and a major importer of edible oil.
‘Mod Squad’ still holding up infrastructure in the House… The House exited shortly after midnight ET without any deal in place to advance the fiscal blueprint vital to passing President Joe Biden’s legislative agenda. At a caucus meeting Monday evening, House Speaker Nancy Pelosi (D-Calif.) and House Majority Leader Steny Hoyer (D-Md.) made a plea that the party shouldn’t “squander” its majority with intraparty bickering. But no members of the centrist “Mod Squad” bothered to actually attend that meeting to hear it. A Pelosi plan would essentially have folded the budget vote into the roll call vote on the rule — basically, it would deem the budget as passed without having to hold a separate vote. In return for their support, moderates were offered the guarantee of a vote on the bipartisan infrastructure bill by a deadline of Oct. 1. Pelosi has repeated said that the bipartisan infrastructure bill will not pass before the reconciliation bill. Reports note five moderate Democrats are still opposed to a deal, and Pelosi can lose only three. The House will return for a 9 a.m. ET Democratic caucus meeting. At noon ET, leaders are expected to put the rule to a vote on the floor, hoping to have a deal by then.
Some Senate Republicans urge EPA to set 2021, 2022 RVOs below ethanol ‘blend wall’… Compliance costs remain elevated for the Renewable Fuel Standard (RFS) and a group of Senate Republicans contend rising Renewable Identification Numbers (RINs) prices are a factor in rising gasoline prices. In a letter to EPA Administrator Michael Regan, the lawmakers said RIN prices surpassed $2 for the first time since the RFS was established and they also said uncertainty over the yet-to-be-proposed Renewable Volume Obligations (RVOs) for 2021 and 2022 has also played a role. The lawmakers want EPA to “take concrete steps to stabilize the RFS compliance system by setting 2021 and 2022 RVOs below the blend wall,” the letter said. They noted EPA data indicates there are not enough RINs being generated to meet the mandate and there will likely “be an insufficient number of carryover RINs from last year to make up the shortfall.” The lawmakers also brought in the cyberattack on Colonial Pipeline, saying that drove up gasoline prices and underscored the need for a “stable, geographically diverse and secure fuel supply.”
CFAP 2 payouts continue to edge higher… Payments approved under the Coronavirus Food Assistance Program 2 (CFAP 2) moved up to $13.8 billion as of Aug. 22, up from $13.79 billion the prior week. CFAP 1 payments were little changed at $10.6 billion. As for other pandemic assistance efforts, including the Pandemic Livestock Indemnity Program (PLIP) where producers could start applying for aid July 20, no additional payment information has been made available even as USDA said that payments would start to be made “shortly after applications are approved.”
“Biden and the Fed wanted a hot economy. There’s risk of getting burned,” by NYT’s Neil Irwin… He writes: “The good news is that job openings are abundant, wages for people at the lower end of the pay scale are rising quickly, and it appears that the post-pandemic recovery won’t be like the long slog that followed the three previous recessions. But consumer prices have been rising faster than average wages — meaning that, on average, workers are seeing the purchasing power of their paycheck fall. People looking to buy a car or build a house or obtain a wide variety of other products are finding it hard to do so. And while much of that reflects temporary supply disruptions that should abate in coming months, other forces could keep prices rising. These include soaring rents and the delayed effects of higher prices from companies having to pay higher wages.”
Status of U.S./Kenya trade talks still unknown… The status of the trade talks that were launched under the Trump administration remains unknown, based on a readout of a virtual meeting between U.S. Trade Representative Katherine Tai and Kenya’s Ministry of Industrialization, Trade and Enterprise Development Cabinet Secretary Betty Maina. The two discussed “their shared worker-centered values, a resilient pandemic recovery, and strengthening the U.S./Kenya economic and trade relationship,” according to a readout of the meeting issued by the Office of the U.S. Trade Representative. The two also agreed it was important to strengthen the relations between the two countries. But there was no mention made of the trade talks in the brief readout. That contrasts with the recap of the first Tai/Maina meeting April 1 in which USTR noted the status of the talks were discussed.
Cattle contracts breakout to the upside… Live and feeder cattle futures posted bullish breakouts to start the week, with the former finishing just shy of their limit higher. Cash cattle prices climbed nearly $2.20 last week on average, to $125.47, which is a buck under where August live cattle settled yesterday. Monday’s Cold Storage Report could add to positive attitudes. The report showed a marginal 256,000-MT dip in frozen pork stocks during July vs. the usual increase of 23.6 million lbs. for the month. Choice and Select boxed beef values climbed $2.97 and 87 cents, respectively, on Monday.
Pork and cash hog prices slump to kick off week… Lean hog futures saw two-sided trade to start the week, with strong gains in the cattle complex supplying spillover support at times. Product market data was a mixed bag yesterday. The pork cutout value slumped $6.00 to start the week and 365.04 loads changed hands. But yesterday’s Cold Storage Report was mildly encouraging. Frozen pork stocks totaled 443.13 million lbs. at the end of July, a 1.21-million-lb. increase from the month prior. Pork stocks typically don’t change too much during July, with the five-year average being a 1.8- million-lb. drawdown during the month. National average cash hog bids dropped $3.72 to start the week.
Overnight demand news… Japan’s ag ministry is seeking to buy a total of 81.853 MT of food-quality wheat from the U.S. and Canada in a regular tender.
Today’s reports
- 2:00 p.m. Poultry Slaughter — NASS