Good morning!
Some buying returns to grain futures… Corn futures are choppy to higher after seeing two-sided action overnight. Soybean futures are down 11 to 15 cents, with new-crop leading losses. November futures appear headed for a test of the May low at $13.25 3/4. Winter wheat futures are up 1 to 2 cents and spring wheat is up 8 cents. The greenback is just below unchanged. Crude oil futures hit another new 2.5-year high overnight. The S&P 500 and Nasdaq stock index futures have scored record highs this week, with very little risk aversion in the marketplace.
Fed may bump up its timeline for higher interest rates… Federal Reserve officials will likely keep interest rates near zero and maintain their monthly purchases of about $120 billion in Treasury and mortgage bonds when they wrap up their two-day meeting today, analysts note. But new forecasts to be released could show that officials anticipate raising rates sooner than they did in March, when most saw the benchmark federal funds rate remaining steady through 2023. With the economy rolling along and inflation jumping amid strong demand and supply-chain shortages, policymakers could push up their forecast for an interest rate hike to 2023 from 2024 at the earliest. Fed Chair Jerome Powell may also hint that the Fed will begin tapering its $120 billion a month in Treasury and mortgage bond purchases — which help hold down long-term interest rates — earlier than expected.
Bloomberg the latest news outlet to signal RFS changes possible... The Biden administration is developing targets for biofuel that are likely to be relatively flat or even lower as it seeks to balance the interests of blue-collar refining workers and advance a clean-energy agenda, Bloomberg reported. The news group said EPA is set to propose renewable fuel requirements within weeks. The volume requirements will dictate how much corn-based ethanol, biodiesel and other renewable fuels oil refiners must blend into their products in 2021 and 2022. The proposal is on track to be issued after the Supreme Court makes what could be a pivotal ruling on the EPA’s ability to exempt refineries from the mandates. EPA is also moving to abandon a plan for incorporating waived quotas that had been adopted under former President Donald Trump. EPA officials also have been asked to consider delaying the deadline for fulfilling 2021 quotas. Meanwhile, it is unclear how the EPA will address a lingering 2017 court ruling that found the agency improperly waived 500 million gallons worth of quotas in 2016.
Poll: Black Sea region expected to export 5% more wheat in 2021-22… Russia, Ukraine and Kazakhstan will likely export 66 MMT of wheat during the 2021-22 marketing year beginning July 1, a 5% rise from the previous season, according to analysts polled by Reuters. The higher export forecast comes despite forecasts for combined wheat production to fall 1% to 124 MMT, and expectations for tougher competition out of the European Union. Russia is expected to remain the world’s biggest wheat exporter, but the floating export tax regime presents challenges for traders. Ukraine’s large crop should help the country to export near a record amount of wheat, though quality could be an issue. Kazakhstan is also expected to produce a strong crop. Those surveyed note demand from some countries is shifting from pricey corn to feed wheat.
Egypt will reportedly allow wheat sellers to provide their own shipping… Egypt’s state grain buyer will allow trading houses participating in its international wheat tenders to also offer prices to provide their own ocean transport for the grain, according to a document seen by Reuters. The change is expected to occur in Egypt’s next international tender. Egypt canceled its tender earlier this week, despite an abundance of offers.
Democrats to discuss next steps for ‘two-track’ infrastructure plan… Democrats will meet today to discuss possible next steps for a massive “two-track” infrastructure plan. Democratic lawmakers said they would negotiate with Republicans on a bill that focuses on traditional transportation. However, if a deal can’t be reached, Democrats would fold those programs into a larger climate bill using budget reconciliation, a strategy that bypasses the filibuster process and allows a simple majority to pass legislation. Senate Majority Leader Chuck Schumer (D-N.Y.) plans to instruct the Senate Budget Committee to include funding for climate provisions, such as incentives to reduce electricity emissions by 80% by 2030, rebates for “clean” vehicles and agricultural industry incentives, according to a Democratic aide. White House officials told House Democrats on Tuesday that they would give the bipartisan talks another week to 10 days to show results, said Rep. John Yarmuth (D-Ky.), chair of the Budget Committee, which would be tasked with starting the process of enacting a Democrats-only bill.
Biden and Putin meet today… President Joe Biden and Russian leader Vladimir Putin kick off what could be more than four hours of meetings this afternoon in Geneva. This comes against the backdrop of recent cyberattacks on JBS and Colonial Pipeline with ties to Russian criminal organizations.
China to release metal reserves in effort to tame commodities, the Wall Street Journal reports... The state stockpiling body, China’s National Food and Strategic Reserves Administration, said today that it plans to release copper, aluminum, zinc and other national reserves in batches in the near future to ensure the supply and price stability of bulk commodities. Speculation that Chinese authorities would make such a move had pushed copper prices to an eight-week low on Tuesday, and investors worry Beijing may soon launch a broader push to temper rising prices.
China’s sow herd nears pre-ASF levels… China’s pig herd surged 23.5% in May compared with the year prior, according to state media citing the country’s ag ministry. The country’s sow herd was up 19.3% from year-ago during May and at 98.4% of levels seen at the close of 2017—before African swine fever (ASF) hit. Xin Guochang, an official with the agricultural ministry’s Animal Husbandry and Veterinary Bureau, told local media “We can now say with complete confidence that the original three-year mission for the restoration of pig production has been completed ahead of schedule.”
China pushes producers to maintain hog production in the face of diving prices… The average hog-to-grain ratio dropped below 6:1 in China, falling below the level where most farmers make money, the National Development and Reform Commission (NDRC) reported. It issued a level-3 warning about an excessive drop in live hog prices and urged pig farmers to keep production capacity at a reasonable level. The state economic planning agency said it will closely monitor pig production and market price trends and “carry out reserve adjustments in a timely manner and promote the smooth operation of the live pig market.” Live hog prices currently average 14.68 yuan ($2.29) per kilogram, a two-year low and a 60% drop from the start of the year, according to Shanghai JC Intelligence. NDRC says the price drop has stemmed from farmers sending heavy pigs to slaughter, a rise in pork imports and weak seasonal demand. Farmers are unlikely to heed government advice, and a shortage of live hogs is likely the second half of the year, according to Pan Chenjun, senior analyst at Rabobank.
Deal to reopen Argentine beef exports reportedly near… With just days remaining before Argentina’s month-long ban on beef exports is set to lapse, a source with the office of President Alberto Fernandez told Reuters differences between policymakers and meat industry officials are “narrowing” and it’s “very possible an agreement will be reached.” The unnamed source detailed, “We are seeking an agreement that would allow the meat export market to reopen while expanding production enough to guarantee domestic supplies as well. We want to cover both.” On Monday, Argentina’s production minister also told local television an agreement was close. Meanwhile, Cabinet Chief Santiago Cafiero told local Radio con Vos that meatpacking firms had made proposals to the government to keep domestic beef prices lower than global ones, but he said their terms still aren’t acceptable.
More higher cash cattle prices as pressure to probe meatpackers grows…. The second day of an Oklahoma City feeder cattle auction featured $4 to $7 higher prices, with some instances of $10 gains for feeder steers. USDA confirmed some additional, fairly active trade between $123 and $124 in Iowa and Nebraska yesterday. Texas also saw some light trade at $122. Cash prices had held virtually steady for months, despite soaring beef values and packer profit margins. At a hearing yesterday, Ag Secretary Tom Vilsack said he supports a proposal by three lawmakers to appoint a special USDA investigator to examine competition in the meatpacking industry. Choice boxed beef values fell $1.04 and Select retreated $5.13 yesterday, extending the market pullback.
Cash hog bids soar… Nearby lean hog futures settled narrowly mixed, with the front month benefitting from its discount to the CME lean hog index. But deferred contracts faced another day of moderate to strong pressure, despite strong morning gains for the pork cutout value and the seasonal tendency for cash hog and pork quotes to remain quite strong through June. The pork cutout value tumbled $6.17 for the day after strong gains in the morning. Movement picked up to 357.06 loads. But the hog and pork complex often soften after July Fourth as demand for pork slips and hog supplies build. That’s likely weighing on deferred contracts. Cash hog bids climbed an average of $5.83 yesterday. Average hog weights dived 2.9 lbs. the week ending June 12 in the key Iowa/southern Minnesota/South Dakota market. Weights are now 5.1 lbs. under year-ago.
Overnight demand news… Egypt canceled its tender to buy an unspecified amount of wheat in a global tender; Russia had the lowest offer, with Ukrainian, French and Romanian supplies also offered. Jordan’s state grains buyer cancelled an international tender to buy 20,000 MT of wheat bran. South Korea’s Korea Feed Association bought an estimated 60,000 MT of corn from South America in a private deal. Japan’s ag ministry says it received no offers in its simultaneous buy and sell auction where it was seeking 80,000 MT of feed wheat and 100,000 MT of feed barley. Iran’s state agency issued an international tender to buy around 60,000 MT of milling wheat.
Today’s reports
- 9:30 a.m. Weekly Ethanol Production — EIA
- 11:00 a.m. Livestock, Dairy, and Poultry Outlook: June 2021 — ERS
- 1:00 p.m. FOMC meeting concludes — Fed
- 2:00 p.m. Sugar and Sweeteners Outlook: June 2021 — ERS
- 2:00 p.m. Potato Stocks — NASS
- 2:00 p.m. Turkey Hatchery — NASS
- 2:00 p.m. Broiler Hatchery — NASS