Good morning!
Grain and soy futures rising ahead of long holiday weekend… Corn futures favored the upside overnight and futures are currently up 1 to 6 cents. Soybeans have rallied 11 to 18 cents, with old-crop leading gains. SRW wheat futures are 2 to 3 cents higher, HRW wheat is narrowly mixed to higher and spring wheat has shot 9 to 10 cents higher, retracing much of yesterday’s losses. Crude oil futures and are slightly lower, while the greenback is holding near unchanged. Price trends can be reversed or accelerated right around the Fourth of July period.
Normal hours today, markets closed Monday… Grain and livestock markets will trade normal hours today ahead of the extended weekend. All markets and government offices are closed July 5 in observance of Independence Day. There will be no Pro Farmer updates Monday. Grain and livestock markets will reopen at 8:30 a.m. CT on July 6. Have a happy and safe holiday weekend.
June jobs report out today… The Labor Department will release its Employment Report for June at 7:30 a.m. CT. Non-farm payrolls are expected to climb 706,000 compared to a rise of 559,000 in May. The unemployment rate is expected to dip to 5.6% from 5.8% in May.
The United Arab Emirates blocked an OPEC+ deal… The standoff could lead oil-producing countries to refrain from increasing output at all while others predicted a phased increase. Meanwhile, rising gas prices and shortages due to high demand will make it the most expensive time to fill up the tank since 2014. Oil prices topped the $75 per barrel mark for the first time in seven years as drivers are paying a national average of over $3 per gallon. Adding to the cost is the increase is demand; AAA says more than 47.4 million Americans will hit the highway this holiday weekend compared to 34.2 million last year.
First hurricane of the season, Elsa, could hit Florida... Tropical Storm Elsa could become the first hurricane of the 2021 Atlantic season as it heads toward the Caribbean, with Florida in its projected path. The westward-moving storm is expected to unleash heavy rain and strong winds in the Caribbean starting today, Accuweather.com said.
Light demand at Chinese corn auction... China’s state grains stockpiler Sinograin sold 28,298 MT of the 155,516 MT of imported corn from the U.S. and Ukraine it put up for auction today. That represented just 18.2% of the total. Previous auctions resulted in far stronger demand. The country is working to cool commodity price inflation.
Attaché expects Chinese imports of corn to slow notably in 2021-22… Chase Mcgrath, a USDA attaché in Beijing, expects China to import 28 MMT of corn in 2020-21, which is 2 MMT higher than USDA’s official estimate. Mcgrath says strong import demand has been fueled by high prices and restocking efforts. China’s average corn price in May was up 37% from year-ago. There have been reports of traders holding onto their stocks, but others say such speculation is being used as a government scapegoat to hide the real driver of high prices — either a true shortage or depleted stocks. Looking ahead to 2021-22, he forecasts China will import 20 MMT of corn, 6 MMT under USDA’s official forecast. Mcgrath expects demand to soften “as corn imported during the current marketing year enters commercial channels, stock building moderates, and the expansion of domestic corn area results in greater production.” He also comments that corn’s previous price advantage has narrowed amid a rise in global grain prices and shipping costs. Also of note, China expects live hog inventory to reach 2017 levels (pre-African swine fever) this month, but Mcgrath believes pork production will likely remain below pre-ASF levels, noting renewed ASF outbreaks in late 2020 and the first quarter of 2021.
French wheat crop ratings hold steady… France’s farm office maintained its 79% good or excellent rating for its soft wheat crop. Analysts comment that the country could use a warm, dry spell to accelerate development. But otherwise, crop concerns are limited. The forecast calls for some showers next week leading up to a hot, dry spell midmonth.
Minor dip in Russian grain export tax… Russia has set its grain export taxes for July 7-13 at $41.20 per metric ton, down a dime from the week prior but up more than $13 from the start of the month. The ag ministry sets the duty on a weekly basis using an undisclosed formula.
IMF: Fed likely needs to raise rates as soon as late 2022… The Federal Reserve probably will need to begin raising interest rates in late 2022 or early 2023 as increased government spending keeps inflation above its long-run average target, according to the International Monetary Fund (IMF). The U.S. central bank likely will begin to scale back asset purchases in the first half of 2022, staff from the Washington-based fund said in a statement yesterday.
Fed officials see time approaching to pare bond-buying… Federal Reserve Bank of Philadelphia President Patrick Harker said Thursday he thought it would be appropriate for the central bank to begin tapering its asset purchases this year. The Fed has been buying $120 billion a month in bonds to help the economy weather the pandemic. As the economy has started to pick up, officials have said they will begin discussing the process for slowing those purchases. Harker’s comments come after Dallas Fed President Robert Kaplan said he wanted to see tapering begin “sooner rather than later.”
CBO sees a near-record $3 trillion budget deficit... The U.S. will see a $3 trillion budget deficit this year, close to the 2020 record, while the economy will expand notably more than previously forecast, the Congressional Budget Office (CBO) said as it incorporated the impact of Biden’s Covid-19 relief. The deficit is seen narrowing to $1.15 trillion in 2022, the nonpartisan arm of the legislature said in a 10-year economic and budget projections report. The federal debt will grow to 103% of the economy at the end of 2021 before dipping slightly between 2023 and 2025, CBO said. The forecasts don’t include the potential economic effects from proposed legislation, such as the bipartisan infrastructure plan or human infrastructure effort.
House approves $715 billion transportation and water infrastructure package... The House voted 221-201 to pass a $715-billion transportation and water infrastructure measure that Democrats plan to use to negotiate a larger deal with the Senate and the Biden administration. The measure passed mostly along party lines and centered on mitigating climate change by reducing fossil fuels and directing more people to mass transit, electric cars, and other modes of transportation. GOP lawmakers took issue with the bill’s lack of changes to permitting processes and its climate-change measures, which they said were overreaching. They also criticized Democrats for not raising revenue to cover the cost of the bill. The bill sets surface transportation spending levels for the next five years after a current authorization expires on Sept. 30.
J&J says its vaccine can neutralize Delta variant… Johnson & Johnson said its single-dose vaccine can neutralize the Delta variant of the virus, boosting hopes that the highly transmissible mutation won’t derail the economic reopening. The variant is expected to become the dominant strain in the United States. Earlier this week, Moderna said its vaccine produced antibodies against the strain.
USDA to review “Product of USA label”… Yesterday, the Federal Trade Commission (FTC) voted to strengthen its “Made in the USA” standard. Ag Secretary Tom Vilsack said USDA will initiate a “top to bottom review” of the voluntary “Product of USA” label that will help it determine what the label means to consumer. Under current “Product of the USA” rules, beef that comes from many countries, but particularly from Canada and Mexico, is considered a product of the U.S. if it has been processed within the country. Both the National Cattlemen’s Beef Association and the U.S. Cattlemen’s Association, who have had opposing views on labeling, praised the decision to review the label.
ASF exercise... Iowa’s Department of Agriculture held a daylong exercise on Wednesday to test its response plan in case of an outbreak of ASF at a livestock show. Perhaps this is where an errant rumor on Thursday came about that ASF had been found in the United States.
Beef prices still falling… Choice and Select boxed beef values fell $3.64 and $2.34, respectively, on Thursday, with prices still searching for value levels. Choice dropped nearly $20 over the past week, while Select dropped just roughly $9. Some additional cash cattle trade occurred yesterday from $120 to $125.50, with the Iowa market leading gains. This week’s action has been steady to down slightly from action last week.
Rising July hog futures and falling cash prices narrow contract’s discount to the cash… Lean hogs ended yesterday under heavy pressure, with August settling $2.95 lower, just off its daily limit. The reversal came after the market hit a new high for the week. Ideas the market put in a high last month has made it difficult for it to find lasting buying. The close back below the 100-day moving average for August futures is a discouraging signal. The pork cutout value edged 6 cents higher on Thursday and it’s now up nearly $4 for the week. Movement has been light, however. Cash hog bids dropped a national average of $4.37 on Thursday. The rise in July hogs and drop in the CME lean hog index has narrowed the gap between the two to less than $5.
Overnight demand news… Bangladesh’s state grains buyer issued another international tender to buy 50,000 MT of milling wheat.
Today’s reports
- 7:30 a.m. Monthly employment summary — Labor
- 1:00 p.m. Weekly Red Meat Production Report — AMS
- 2:00 p.m. Peanut Prices — NASS
- 2:00 p.m. Dairy Products — NASS
- 2:30 p.m. Commitment of Traders Report — CFTC