Good morning!
No overnight trade… Grain and livestock markets will reopen at 8:30 a.m. CT on July 6.
Rain ahead for Northern Plains, Canadian Prairies and U.S. Midwest… Most U.S. crop areas were dry over the weekend with mild to warm temperatures. But a weak high pressure ridge over the western part of North America should allow some rain to fall in the U.S. Northern Plains, Minnesota, Iowa and southern Canadian Prairies this week, reports World Weather Inc., who adds that Iowa and southeastern South Dakota should be among the wettest areas. Welcome rain fell in southwest Alberta, Canada over the weekend, with two more waves of precipitation expected for this spring wheat and canola producing regions. World Weather reports unsettled weather is likely for most of the Midwest, Delta and southeastern states over the next two weeks, providing timely moisture leading up to pollination. Tropical Storm force winds, dangerous storm surge and heavy rainfall likely across Florida as Elsa moves through the region.
The week ahead… The Senate and House are both on break for the Independence Day holiday. Work continues on getting enough votes for the nearly $1 trillion bipartisan infrastructure package, and even harder work for the $1.5 trillion to $2 trillion “human” infrastructure plan, despite far-left Democrats wanting a lot more. Senate committees with jurisdiction are working to translate the bipartisan framework into legislative language. But the bipartisan spending deal is getting some renewed resistance from key Democrats concerned about plans to pay for the $973-billion package. Another highlight this week is Wednesday’s meeting in Mexico City that will include top trade officials from the U.S., Mexico and Canada. Wednesday also brings the minutes of the mid-June FOMC meeting. Analysts will see if they contain any further hints of inflation and the timeline for boosting interest rates. Conab will also update its crop estimates for Brazil on Wednesday. USDA’s next crop update comes July 12.
Consultant lowers U.S. corn and soybean yields on stressful weather for northwest Corn Belt… Crop Consultant Dr. Michael Cordonnier lowered his U.S. corn yield estimate by 2 bu. to 175.5 bu. per acre this week, and his bias is neutral to lower going forward. Incorporating USDA’s June 30 harvested acreage forecast of 84.5 million drops his corn crop estimate to 14.82 billion bushels. He says the yield drop stemmed from “ongoing problems in the northwestern Corn Belt – South Dakota, North Dakota, Minnesota, and northwestern Iowa” and said how much lower his yield estimate goes will depend on July weather. He pointed to the very warm weekend for the region with limited precipitation. Cordonnier also lowered his U.S. soybean yield projection by 0.8 bu., dropping it to 50 bu. per acre for a crop of 4.33 billion once USDA’s harvested acreage forecast of 86.7 million acres is adopted. He points out a third of the U.S. soybean crop was in some level of drought and has been for weeks, with most of those acres located in the northwestern Corn Belt where the growing season is relatively short.
Cordonnier cuts corn crop pegs for Brazil and Paraguay… Cordonnier also lowered his Brazilian corn crop estimate another 2 MMT to 88 MMT and his bias is lower going forward. “The coldest temperatures in 20 years resulted in three consecutive nights last week of freezing temperatures which negatively impacted the safrinha corn in south-central Brazil. The extent of the damage will not be fully known until the corn is harvested, but yields will be very disappointing and there will be poorer quality grain especially for the latest planted corn,” he says. Drought had already lowered yield potential and the frosts made the situation even worse. Also of note, Cordonnier lowered his Paraguay corn crop estimate by 1.2 MMT to 3 MMT, citing drought and freezing temperatures. Paraguay had been exporting corn to Brazil, but there may now not be enough corn to meet those export contracts, he says.
AgRural slices its Brazil safrinha corn crop estimate… After last week’s frosts that hit Parana and Mato Grosso do Sul particularly hard, the consultancy AgRural cut its production estimate for Brazil’s Center-South from 60 MMT to 54.6 MMT, with the firm saying drought also contributed to the cut. Combined with Conab’s estimate for Brazil’s North/Northeast, AgRural now estimates the country’s total corn crop at 85.3 MMT, a substantial drop from last year’s 102.5 MMT crop. The consultancy also reports that 12% of the Center-South’s safrinha corn crop has been harvested, which is roughly half of last year’s 23% complete at this point in the season. Slow soybean harvested resulted in late safrinha corn planting.
Argentine farmers wary of proposed shift in toll collection… Last week Argentina’s government proposed cargo ships pay tolls to the state rather than to the company that dredges the Parana River. The farm industry is upset by the change that they say will increase shipping costs; the government disagrees, saying the shift will decrease logistical costs. Some are also worried the Argentine government may not pay the dredging company on time, slowing dredging. This is just the latest in a series of events where government intervention has riled the Argentine farm sector.
No limit on Ukraine’s grain exports—for now… Ukraine does not plan on imposing restrictions on grain exports in the first two months of the 2021-22 marketing year that started July 1, according to a senior ministry official. Volumes of grain exports would be determined by the farm ministry, traders and domestic consumers by Aug. 30, the official said. In 2020-21, the ministry limited wheat exports to 17.5 MMT, but shipments came nowhere close to hitting the limit. The previous season, the country took no action when the limit was surpassed.
China to auction another 130,000 MT of imported corn and buy 20,000 MT of pork for its reserves… China’s state stockpiler Sinograin announced it will auction 123,954 MT of corn imported from the U.S., as well as 6,3460 MT of corn imported from Ukraine on July 9. Sales at its latest auction were light, but before that the country had sold virtually all of the corn it put up for grabs at these auctions. China also announced it will buy 20,000 MT of frozen pork for its state reserves on July 7.
FAO/OECD do not expect a commodity price supercycle… Prices for most ag commodities should fall slightly in real terms in the decade ahead as production improves to meet rising demand from a growing population, the U.N. Food and Agriculture Organization (FAO) and the Organization for Economic Cooperation and Development (OECD) said in a joint report on their outlook for 2021-2030. During a related presentation, Maximo Torero, FAO’s chief economist, said “the fundamentals don’t say to us that we will be moving to a supercycle of commodity prices.” The report notes China will likely remain a major demand driver for global ag markets, especially for meat, fish and feed grains. But the country’s growth in population and demand is expected to be at a lower pace than in the past decade.
Keystone XL Pipeline developer seeks $15 billion in damages from U.S. government… Energy company TC Energy has said it is seeking $15 billion in damages from the U.S. government over President Joe Biden’s decision to cancel the Keystone XL pipeline project. In a statement on Friday, the Canada-based company said it had filed a notice of intent with the State Department to begin a legacy North American Free Trade Agreement (NAFTA) claim under the United States-Mexico-Canada agreement. The company said it aims to “recover economic damages resulting from the revocation of the Keystone XL Project’s Presidential Permit,” adding that it suffered a loss of more than $15 billion “as a result of the U.S. Government’s breach of its NAFTA obligations.”
U.S. dealing with another ransomware attack… The White House said it was reaching out to victims of a wide-ranging ransomware outbreak that is centered on a Florida-based information technology company and has had an impact on hundreds of businesses worldwide. Biden warned Russian President Vladimir Putin that the U.S. “will respond” if Russia was behind Friday’s mass cyberattack that hit at least 200 companies. “We’re not sure who it is,” Biden told reporters. “The initial thinking was it was not the Russian government,” Biden said. But others note that using criminal groups to achieve Russia’s objectives is standard Russian cyber intelligence tradecraft.
China launches pilot program to insure pigs… China is launching a pilot program working to insure all pigs at different growing stages and all pig farms in some counties over the next three years, according to a government notice released today. The country also plans to establish a comprehensive system to treat livestock animals that die from diseases in the pilot counties. This program comes in the aftermath of African swine fever that devastated the country’s hog sector and is meant to protect against pig farming risks and to foster stable pig production.
Cattle weights slide… Average cattle weights stood at 1,351 lbs. the week ending July 3, which was 4 lbs. lower for the week and 15 lbs. lighter than year-ago. That signals marketings have improved and dryness and heat are taking a toll. Cash hog bids softened after a firmer start last week, which could result in more sideways action for futures. Feeder futures trade is likely to be opposite that of the corn market given concerns about tight feed supplies. Today traders will look to USDA’s boxed beef market update for an update on July 4 clearance.
Bearish technical close for lean hog futures last week… August lean hogs posted a technically bearish weekly low close on Friday, signaling followthrough selling is likely this week. And Friday’s 44-cent dip in the pork cutout value on lackluster movement and a $1.18 drop in average cash hog bids is unlikely inspire buying. But USDA’s weekly red meat production update showed average hog weights are coming down, though they remain above year-ago levels.
Weekend demand news… Egypt’s state grain buyer bought 180,000 MT of wheat from Romania in an international tender, as well as 60,000 MT of wheat from Russia. A group of importers in Thailand issued an international tender to buy up to 230,700 MT of animal feed wheat. Jordan tendered to buy 120,000 MT of wheat. Japan is seeking to buy a total of 108,175 MT of food-quality wheat from the U.S., Canada and Australia in a regular tender. Iran’s state-owned animal feed importer bought an unknown volume of animal feed corn, feed barley and soymeal in an international tender seeking 60,000 MT each of these feed ingredients. South Korea bought 15,660 MT of GMO-free soybeans. The country’s Feed Leaders Committee purchased around 65,000 MT of corn to be sourced from the Black Sea region via a private deal. Turkey tendered to buy 440,000 MT of feed barley.
Today’s reports
- 10:00 a.m. Weekly Export Inspections — AMS
- 10:00 a.m. Livestock and Meat International Trade Data — ERS
- 2:00 p.m. U.S. Agricultural Trade Data Update — ERS
- 2:00 p.m. Peanut Stocks and Processing — NASS
- 3:00 p.m. Crop Progress — NASS