Good morning!
Profit-taking moved in overnight… Corn futures are trading low-range and down 4 to 5 cents in most contracts. Soybeans are narrowly mixed. Spring wheat futures have slipped 1 to 4 cents amid some profit-taking. SRW wheat futures are down 5 to 7 cents and HRW wheat futures are 9 cents lower. The U.S. dollar index and crude oil futures are posting modest gains.
Crop progress & Condition Report highlights… Following are highlights from USDA’s crop progress and condition update for the week ended July 11. Find more details here.
- Corn: 26% silking, 3% in dough, 65% “good” to “excellent” (G/E)
- Soybeans: 46% blooming, 10% setting pods, 59% G/E
- Spring wheat: 83% headed, 16% G/E
- Winter wheat: 59% harvested
- Cotton: 55% squaring, 16% setting bolls, 56% G/E
Spring wheat CCI rating plunges again… 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 slipped 0.6 point to 366.8, while the soybean crop was virtually unchanged at 351.9 points. The CCI ratings are 6.3 points and 7.8 points below the five-year average for corn and soybeans, respectively. The spring wheat CCI plunged another 9.8 points over the past week to just 243.9 points. Ratings declined in five of the six HRS states, paced by a 4.0-point decline in top producing North Dakota. The CCI rating is now 115.2 points below the five-year average for this date.
Cordonnier sticks with U.S. yield projections... Crop Consultant Dr. Michael Cordonnier maintained his U.S. corn yield projection of 175.5 bu. per acre, and his bias is neutral to lower going forward. He comments that rains over the past week were “generous” over parts of the central and eastern Corn Belt. He continues, “Rainfall amounts in the more northern locations were a little disappointing, but the timing of the rainfall and cooler temperatures is beneficial for the corn that is entering into pollination across the Corn Belt.” Cordonnier also maintained his soybean yield projection of 50 bu. per acre, and his bias is neutral to lower going forward. He comments recent rains were beneficial, but more are needed, especially in the northwestern Corn Belt. He also comments that with crop ratings well below the long-term average, reaching a trendline yield will be a challenge.
Chinese purchases of soybeans, corn and wheat all up from year-ago through June… China imported 10.72 MMT of soybeans during June, a 1.55 MMT (11.6%) jump from May and just 3.9% under last year’s record 11.16 MMT, according to Chinese customs data. Its June imports also marked the third highest monthly tally on record. For the first half of 2021, China has imported 48.96 MMT of soybeans, up 8.7% from last year at this point. China’s efforts to rebuild its hog herd have fueled strong demand for soymeal, with crushers also thought to be upping purchases due to concerns about supply shortages down the road. China also imported 15.3 MMT of corn the first half of 2021, a 318.5% surge from year-ago. Its wheat imports through June of 5.37 MMT are also up a sharp 60.1% from last year at this point.
French farm office expects higher wheat stocks, exports thanks to production rebound… France’s farm office expects the country to export 10.5 MMT of soft wheat outside of the European Union in 2021-22, a 40% surge from last season’s 7.5 MMT in exports. The farm office also expects the country to export 7.3 MMT of the grain to other EU nations, which would be a 1.3-MMT (22%) jump from 2020-21. France will likely close the season with 3.7 MMT in ending stocks, which would be up 1 MMT from 2020-21, according to FranceAgriMer. The farm ministry expects the 2021-22 crop to come in around 37.1 MMT, a 27% rebound from last season.
Americans increasingly worried about inflation… A New York Fed survey released yesterday found consumers expecting the fastest price rises in years. The Fed’s Consumer Expectations study, which samples a rotating panel of 1,300 households, showed that Americans in June predicted a median 12-month inflation rate of 4.8%, up 0.8 percentage points since May, as costs soared on everything from big-ticket items to groceries. It’s the highest inflation expectation reported since the NY branch of the central bank kicked off the series seven years ago. The government is expected to report today that consumer prices rose again last month after jumping 5% in May.
Economists raise GDP forecasts… Economists surveyed this month by the Wall Street Journal raised their forecasts for U.S. gross domestic product growth, with respondents on average now expecting GDP to advance at a 9.1% annual pace in the second quarter and 6.9% for the full year (measured from the fourth quarter of 2020 to the fourth quarter of 2021). That would be the fastest year of growth since 1983. There are also signs that components of the U.S. economy have peaked. “Passing peak rates of growth is natural as the economy settles into the more moderate phase of expansion,” economists from Morgan Stanley said last week in a note to clients. “There is nothing more sinister going on here. Second half growth will still be quite elevated, for both GDP and inflation.”
Transportation spending bill has a spending offset issue... Senators are working on finishing a $579-billion infrastructure bill and plan to meet today to discuss changes. Sen. Rob Portman (R-Ohio) the deal needs more work. One issue with the pay-fors: the Congressional Budget Office isn’t projecting as much revenue from stepped-up IRS enforcement as the senators had estimated. Portman said it would be difficult to finish the bill text this week.
Efforts to build Democratic consensus on Biden’s economic agenda continue… President Joe Biden met with Senate Budget Committee Chairman Bernie Sanders (I-Vt.) yesterday as Democratic lawmakers sought consensus on legislation designed to carry most of the president’s $4-trillion longer-term economic agenda. Senate Democrats remain divided on the size and scope of the fast-track budget reconciliation bill intended to include social spending and tax increases. Senator Chris Van Hollen (D-Md.), a Budget Committee member, said there is a “decent chance” a lawmaker group that met last night will be able to finalize a deal tonight. He said that everything remained on the table. Democrats said they are trying to come to a deal by Thursday to bring the budget up for potential Senate floor votes next week.
China’s cumulative meat imports running ahead of last year’s strong showing… China imported 743,000 MT of meat in June, a 17% retreat from year-ago levels, Chinese customs data showed. That was also a 5.8% retreat from shipments of 789,000 MT in May. Weak domestic pork prices slowed China’s demand for imports. For the first half of 2021, China has imported 5.08 MMT of meat, topping last year’s 4.75 MMT at this point by 6.9%.
August live cattle futures maintain discount to cash market… Cash cattle traded at an average cash price of $122.16 last week, which was down $1.73 from the week prior. August live cattle are more than $2 under the cash market, signaling traders are not optimistic about this week’s cash prospects given sliding beef prices. Choice beef dropped another $3.59 to start the week but Select firmed $1.36 and movement improved to 123 loads. At Day 1 of an Oklahoma City feeder cattle auction, feeder steers and heifers climbed $3 to $5 compared with two weeks ago, with calves also trading at higher prices.
Cash hog bids dive to start the week… Yesterday’s kill of 457,000 head was light compared to recent tallies and up just 8,000 head from year-ago levels. Packer profit margins remain in the red, giving them little incentive to raise bids. On Monday, cash hog prices dropped $4.12 nationally. The pork cutout value rose $1.29 on Monday, with butts sliding and all other cuts climbing. Movement was light, however, at 279.39 loads.
Overnight demand news… Turkey’s state grain board TMO started buying wheat in an international tender for up to 395,000 MT of wheat. So far, it has bought around 100,000 MT of the grain. Yesterday, TMO provisionally purchased around 440,000 MT of animal feed barley in a tender. Japan is seeking to buy a total of 118,911 MT of food-quality wheat from the U.S. and Canada in a regular tender. A group of importers in the Philippines reportedly rejected all offers and made no purchase in a tender to buy 150,000 MT of feed wheat and 50,000 MT of milling wheat. Taiwan tendered to buy around 55,000 MT of grade 1 milling wheat to be sourced from the U.S.
Today’s reports
- 11:00 a.m. Feed Grains Database — ERS
- 11:00 a.m. Meat Price Spreads — ERS
- 2:00 p.m. Season Average Price Forecasts — ERS
- 2:00 p.m. Wheat Data — ERS