Good morning!
Money flow key moving forward… A wetter, cooler forecast and sharp gains in the U.S. dollar index sparked fund-driven long liquidation in a number of commodities, resulting in limit-lower trade and closes on Thursday for several markets. Limits for corn expand to 60 cents today; limits for soybeans remain expanded to $1.50, with expanded limits of $45 for soymeal and 550 points for soyoil also remaining in place. The risk of massive liquidation continues, but we could also see an influx of buying. Of note, there has been talk of corn bargain buying by Asian importers on Friday after yesterday’s limit dive. Today, corn futures have rebounded 14 to 18 cents, with futures finding support at the 200-day moving average. Soybeans have retraced 50 to 60 cents of yesterday’s big losses. Winter and spring wheat futures are 12 to 17 cents higher. The greenback hit a new two-month high overnight, but it has since pared gains to trade slightly higher. Crude oil futures are slightly lower.
Biden signed a bill making Juneteenth a national holiday immediately… Most federal employees have today off. While federal government offices are closed, markets have opted to remain open. The Securities Industry and Financial Markets Association that makes recommendations for U.S. bond markets said that Juneteenth would be incorporated in its holiday schedule in coming years. U.S. stock markets and commodity markets will also be open for trading and on regulator trading hours.
China remains an aggressive importer of grains and pork, unfazed by high prices… Trade data shows China imported 3.16 MMT of corn during May, a 395% surge from year-ago, pushing its year-to-date purchases to 11.73 MMT, a dramatic 323% above last year at this time. The country’s imports of other feed grains have also soared the first five months of the year. Wheat imports of 790,000 MT during May were 3% under year-ago, but its total imports of the grain now stand at 4.61 MMT, up 89% from year-ago. China’s barley imports shot 116% higher to 1.11 MMT during May, with overall imports of 4.65 MMT for 2021 up 139% from year-ago. Its sorghum imports also jumped 125% during May to 620,000 MT. That pushes its total imports of the grain to 3.69 MMT, up 237% from year-ago. The fact these purchases came as prices were registering multi-year highs speaks to Chinese feed needs. Also of note, China imported 370,000 MT of pork during May, a 2.2% dip from last year’s strong showing. Five months into the year, its pork imports are up 14% from year-ago at 1.96 MMT.
Argentine corn yields continue to impress… Argentine corn yields continue to come in higher than expected, the Buenos Aires Grains Exchange said yesterday, after surprisingly good yields prompted the exchange to raise its crop forecast last week to 48 MMT. The exchange maintained that crop estimate this week and reported harvest was around 42% complete. The Buenos Aires exchange continues to forecast farmers will plant 6.5 million hectares (16.1 million acres) to wheat in 2021-22, reporting harvest surged more than 20 points over the past week amid drier weather to 57% complete.
French wheat ratings hold strong… The French farm office continues to estimate 81% of the country’s soft wheat crop is in good to excellent condition, a full 25 percentage points above last year at this time. As a whole, temperatures in the mid- to upper 80s for much of the country earlier in the week benefited crops after a cool spring, with midweek storms replenishing soil moisture. Crop development is still around a week behind the normal growth pace for this time of year, despite the warmup.
Russian wheat export duty climbs, up $10 from the start of June… Russia set its export tax for wheat at $38.10 per metric ton for June 23-29. That’s a $4.80 jump from the week prior and a $10 jump since the start of the month. The formula-based duty set each week replaced a set duty of 50 euros ($61) that had been in place during the spring. While tariffs are down notably from the set duties, the week-by-week changes is making it difficult for exporters to plan ahead and participate in tenders.
Reuters: Refiners more than $1.6 billion short on RIN credits… “U.S. merchant refiners have amassed up to a $1.6-billion shortfall in the credits they will need to comply with U.S. biofuel laws, according to a Reuters review of corporate disclosures, an apparent bet that the Biden administration could let them off the hook or that credit prices will fall,” the newswire writes. The liability includes companies like PBF Energy Inc., CVR Energy Inc. Par Pacific Holdings and Delta Airlines. In recent weeks, there has been increasing speculation the Biden administration may ease refiners’ Renewable Fuel Standard blending obligations, with pressure mounting from lawmakers from the president’s home state of Delaware.
China pushing tougher controls on fertilizer, grants farmers subsidies to help… China is urging regions to “strengthen” supplies of fertilizer during the summer given record-setting prices and tight stocks of the chemicals. Raw material costs are soaring, and the country’s premier has called for curbs on key farm inputs as part of the government’s overall effort to stabilize grain prices and improve food security. The country’s ag ministry has pushed regional authorities to promptly detect regional shortages of fertilizer and to improve coordination of supplies. It also pushed more efficient use of the chemicals and tougher oversight of activities like taking advantage of higher prices. China announced it will grant 20 billion yuan ($3.1 billion) in subsidies to farmers to help them deal with rising fertilizer and diesel prices.
Bipartisan $1-trillion infrastructure package continues to gain momentum... A growing group of lawmakers and the White House are discussing how to finance a roughly $1 trillion infrastructure proposal. Five Republicans, four Democrats, and an independent who caucuses with Democrats added their names to the group of 10 bipartisan senators working on a final deal that would spend $974 billion on traditional projects, including roads, bridges, waterways, and broadband. The price tag would include roughly $579 billion in new spending. The bipartisan group appears to have dropped a proposal to pay for part of the package by indexing the 18.4 cent federal gas tax to inflation, according to Sen. Jon Tester (D-Mont.), who noted lawmakers ditched it because “it falls directly on people under $400,000.” President Joe Biden has pledged not to raise taxes on households earning less than $400,000 and indicated he opposes a new gasoline tax. Meanwhile, Democrats began discussions on a separate package that could cost up to $6 trillion.
Map shows broadband gaps & needs… The Biden administration released a new broadband mapping tool that shows high-speed internet needs in rural areas, as part of its push for $2 trillion legislation to fix America’s infrastructure. But it also shows how North Dakota is considerably better than most other rural states when it comes to broadband. See today’s “Policy Updates” for a discussion on why. The interactive map produced by the White House in partnership with the Commerce Department’s National Telecommunications and Information Administration is “the first of its kind,” Karine Jean-Pierre, White House principal deputy press secretary, told reporters Thursday. Alaska, New Mexico, Idaho, and Mississippi are among the states with the most widespread needs, the map shows.
Boxed beef market retreat continues… Live cattle futures came under heavy pressure on Thursday. Feeder cattle ended split with 2021 contracts down slightly and deferred months higher. Choice boxed beef dropped $2.92 on Thursday and Select fell $2.72. Boxed beef prices have fallen dramatically this week, with retailer buying for July Fourth likely coming to an end. Meanwhile, cash prices are moving in the opposite direction with heat across the Plains and dry pastures to the north stressing livestock. Cash cattle action this week has generally ranged from $122 on the Southern Plains to $124 in the Midwest.
Hogs drop the daily limit for second day in a row… Lean hog futures faced heavy pressure yesterday, and the day concluding with a $4.50 expanded limit close lower for the July and August contracts. Limits will remain at $4.50 for lean hog futures today. Cash hog bids tumbled a national average of $6.17 yesterday following solid gains earlier in the week. But the pork cutout value shot $4.31 higher, propelled by a $34.71 jump in belly prices; movement slowed to 276.19 loads, however. Through Thursday, this week’s kill is estimated to be lagging last week’s tally by 17,000 head.
Overnight demand news… Turkey issued an international tender to buy around 395,000 MT of red milling wheat. South Korea’s Feed Leaders Committee bought around 65,000 MT of animal feed corn to be sourced from global origins. South Korea’s Major Feedmill Group bought an estimated 136,000 MT of animal feed corn, likely from South America. Iran’s Government Trading Corporation bought at least 195,000 MT of milling wheat, likely to be sourced from the Baltic States, Germany or Russia.
Today’s reports (Note: a number of reports, including Commitment of Traders, have been delayed to Monday or Tuesday due to the federal Juneteenth holiday)
- 1:00 p.m. Weekly Red Meat Production Report — AMS
- 2:00 p.m. Coffee: World Markets and Trade — FAS