Good morning!
Relatively quiet trade overnight… Corn futures favored the downside overnight and as of 6:30 a.m. CT are trading 2 to 5 cents lower in all but the deliverable July contract, which was about a nickel higher. Soybeans and wheat are mixed with a slight upside bias this morning. The U.S. dollar index is around 140 points lower this morning, while front-month crude oil futures are around 80 cents higher.
Weekly export sales data out this morning… For the week ended July 1, traders expect:
| 2020-21 (MT) | 2021-22 (MT) |
Corn | (100,000)-350,000 | 100,000-600,000 |
Soybeans | (100,000)-275,000 | 200,000-500,000 |
Wheat | NA | 200,000-450,000 |
Soymeal | 100,000-350,000 | 50,000-250,000 |
Soyoil | 0-15,000 | 0 |
Chinese inflation eased in June… China’s producer price index (PPI) rose 8.8% versus year-ago in June, down slightly from the 9.0% surge the previous month. Factory-gate prices eased following China’s efforts to control commodity prices but remain elevated. China’s consumer price index (CPI) increased 1.1% compared with last year in June, down from 1.3% growth the previous month. Pork prices fell 36.5%, which helped drive consumer food prices down 1.7% versus year-ago.
China cuts RRR to boost economy… The People’s Bank of China (PBOC) will cut the amount of money banks must hold in reserve to free up more money to flow into the economy. Effective July 15, the bank reserve requirement ratio (RRR) will be cut 50 basis points for most banks, which will release around 1 trillion yuan ($154.2 billion) in long-term liquidity into the Chinese economy. This is the first cut to RRR since April 2020. PBOC says it will not resort to “flood-like” stimulus to boost its economy.
Vilsack’s ‘important’ announcement today… USDA Secretary Tom Vilsack is traveling to Omaha, Nebraska/Council Bluffs, Iowa, for what USDA has billed an “important” announcement. Assuming no change of plans (recall the aborted dairy announcement in Wisconsin), the potential “big” news is that $500 million will be available starting in fiscal year (FY) 2022 (which begins Oct. 1) to expand meat processing capacity, most likely via grants to small and medium operations, however they will be defined. Let’s hope there is not loads of red tape involved in participating, like current grants. As for when the funds will be available, waiting until FY 2022 makes sense because one would assume it will take regulations to be proposed and issued for public comment. That takes time. Other announcements from Vilsack may include the much-talked-about Product of the USA label for meat products. If not done right, Canada will not hesitate to retaliate. And perhaps Vilsack will provide needed details on meat industry concentration: putting more teeth (enforcement) in the Packers and Stockyards Act.
The key coming event today will be the latest of Biden’s many executive orders (EO)… President Joe Biden today will sign a sweeping EO designed to promote competition across American industries. Biden is expected to sign his EO today addressing concentration in agribusiness, transportation and other sectors. One element of the order would ask the Justice Department to work with regulatory agencies against foreign-owned shipping alliances and monopolized rail routes that the administration believes have driven up shipping costs nationwide. The American Association of Railroads says the coming competitive switching rule “would roll back the foundational market-driven principle that keeps the industry viable, reduce network fluidity, and ultimately undermine railroads’ ability to serve customers at a time when freight demands have dramatically increased.”
French wheat harvest slowed by cool, wet weather… French farmers have cut just 1% of their soft wheat crop and 15% of the durum crop due to cool, wet weather, according to the French farm office. Last year at this time, 10% of the soft wheat crop and 33% of the durum crop were harvested.
Wholesale beef prices continue to fall… Choice boxed beef fell another $2.93 on Thursday, while Select was $2.02 lower. Packers have been moving a solid amount of beef, but the persistent decline in wholesale values suggests they are having to discount prices to attract retailer demand. Beef demand, especially for the higher-value cuts, typically slows after the July 4 holiday, which weakens the cutout.
Cash hog prices continue to weaken… The average national direct cash hog price fell $1.08 on Thursday amid limited packer interest given negative cutting margins. The CME lean hog index is projected at $109.77, down 36 cents from yesterday and $12.91 below the mid-June peak. July hogs closed Thursday at a 33-cent premium to the cash index, but August hogs are still trading at a $9-plus discount, suggesting traders sense the cash decline will extend.
Overnight demand news… Algeria purchased around 30,000 MT of milling wheat – South American, European or Australian origin. Iran’s state agency bought around 130,000 MT of milling wheat – likely from the Baltic Sea region/Germany and/or Black Sea region. Pakistan issued an international tender to buy 500,000 MT of wheat – 200,000 MT for August shipment and 300,000 MT for September shipment.
Today’s reports
- 7:30 a.m. Weekly Export Sales — FAS
- 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. Commitments of Traders Report — CFTC