First Thing Today | June 28, 2021

It was a wet weekend for the Midwest, but a dry, warm forecast for the Upper Midwest with heat moving into the Northern Plains keep weather concerns close at hand.

Pro Farmer's First Thing Today
Pro Farmer’s First Thing Today
(Pro Farmer)

Good morning!

Grains and oilseeds rebound to start the week… July corn futures are up 7 cents, while deferred months are 1 to 3 cents higher. Soybeans have rallied 9 to 13 cents. Winter wheat futures are up 9 to 11 cents; spring wheat futures are 5 to 21 cents higher, with the front-month leading gains. The U.S. dollar index is just above unchanged; crude oil futures are facing light pressure.

Wet weekend for the Midwest… Rains fell across the Midwest over the weekend, with the highest accumulation in southern and eastern areas. Flooding occurred from east-central Missouri through central Illinois to central Michigan. Of note, at least an inch of accumulation was recorded in north-central and northeast Iowa where dryness has been building. Some rain did fall in the Dakotas, but accumulation was generally light. World Weather Inc. reports excessive heat is expected to continue in the northwest U.S. and expand across Canada’s prairies into the northwestern U.S. Plains. More seasonal temperatures are likely in the Midwest, Delta and Southeast this week. Rainfall is expected to be limited in the Northern Plains, the Canadian Prairies and the upper Midwest. That’s expected to contrast with wet weather over the next two weeks for the central and southern Plains and into the lower and eastern Midwest, Delta and Southeast. World Weather adds that limited rain and warm temperatures for the Upper Midwest leave the door “wide open for potential greater crop stress later this summer when hotter days and more stable air settles into the region.”

Tight Argentine soymeal scenario going forward… Sources in Argentina are painting a bullish story regarding the country’s soymeal supplies, observing that if prices continue to correct, farmer selling of the oilseed will drop to nearly nothing. Considering the risk of peso devaluation, those sources report the local industry is unwilling to run with negative ownership. That could considerably tighten soymeal availability from August forward, and Brazil’s crush has already been maximized. And in South America, a strike is always a possibility. Consequently, Argentina’s soymeal basis is now above the U.S.’s with Brazil’s basis rising sharply.

Rise in rapeseed production likely for the EU… The consultancy Strategie Grains now estimates the European Union will likely produce a 17 MMT rapeseed crop in 2021-22, a 180,000-MT increase from its May forecast and a 3.3% year-over-year rise. The boost was spurred by a rise in Romanian production. Rapeseed is the EU’s biggest oilseed crop.

China now working to control rising urea prices… China’s state planner today said it would launch an investigation into the urea market following a surge in price for the fertilizer. This is the latest in a long string of Chinese efforts to cool prices for major raw materials. The National Development and Reform Commission (NDRC) said it will “strengthen market supervision and resolutely crack down on hoarding, price hikes and fabricating and disseminating information on price increases” to stabilize both fertilizer prices and those for other ag materials. Urea prices have climbed to record highs amid a drop in production, high energy costs and strong demand for the fertilizer in China and overseas.

The week ahead… President Joe Biden and USDA Secretary Tom Vilsack will visit Wisconsin Tuesday. The topics will likely include the recent bipartisan infrastructure and additional pandemic aid USDA will be providing dairy farmers. The House will take up a surface transportation bill-plus this week. It will consider a $715-billion package combining surface transportation reauthorization with wastewater and drinking water infrastructure legislation, according to the heads of two committees. On Friday, the Bureau of Labor Statistics will release the jobs report for June. For agriculture, the main focal point will be USDA’s June 30 Acreage and Grain Stocks Reports.

Biden walks back infrastructure comments… Biden went off script during a news conference on Thursday and declared he would not approve the compromise bill without the partisan one to follow spending around $3 trillion more on “social” infrastructure and other far-left spending. Senator Susan Collins (R-Maine) said centrist senators and Republicans “never had an inkling that there would be any kind of linkage,” and added “We always knew that there’d be another bill, but not that the success of the infrastructure package was going to be in any way dependent on the other bill.” White House officials went into damage control mode, as top advisers called senators from both parties. But that was not enough for now wary Republicans. On Saturday, Biden conceded that he had misspoken. It may well be House and Senate Democratic leadership who determine the final outcome. Senate Majority leader Chuck Schumer (D-N.Y.) took to the Senate floor to assure far-left Democrats, “These two efforts are tied together. Let me make that clear.” House Speaker Nancy Pelosi (D-Calif.) said last week she wouldn’t bring up the bipartisan infrastructure bill unless the antipoverty package had passed the Senate.

Businesses are clearly spending again… They are boosting orders for equipment, computers and software as preparation for coming demand. Business investment has increased by double digits in the last three quarters as firms become more confident about the future. So far, consumer spending has powered the recovery. But robust business investment is a sign the recovery could be lasting, analysts note. It could also raise worker productivity in the long run.

U.S., Taiwan to resume formal trade and investment discussions… U.S. and Taiwanese officials today will resume discussions on improving trade and investment ties between the two countries via a Trade and Investment Framework Agreement (TIFA), according to a statement released by the American Institute in Taiwan. Taiwan’s Office of Trade Negotiations and the Office of the U.S. Trade Representative will be the primary participants.

More details on coming diary aid announcement… The coming dairy aid includes an idea that payments should be targeted to producers who were impacted by lower Class I prices and the record high price of cheese stimulated by massive government purchases. Vilsack commented on this topic recently when he said, “We are creating a program to help reduce the differential that occurred between Class I and Class III milk pricing because of the disproportionate number of purchases of cheese during the Food Box effort. That distorted the market, and it caused a lot of harm to smaller producers. We’re putting resources in to reimburse those producers for some of the loss they incurred.” Although the likely aid changed several times last week, it ranges from $750 million to $1 billion.

Reports China still struggling with ASF variants… A June 21 article from Caixin reports new, difficult to detect variants of African swine fever (ASF) are still circulating in China, leading to more mass infections on farms and resulting in stopped-up control measures. The variants are characterized by mild symptoms in the early stages but have a longer incubation period, making the virus more difficult to detect before it spreads across farms. There is still no vaccine for the virus.

China plans to stockpile local pork… China’s NDRC announced today that central and local governments will start buying pork for state reserves to support prices. Producer liquidation of herds due to continued ASF outbreaks this winter weighed on prices, and the resulting price drop also fueled panic selling. Plus, feed costs have soared. The situation has sparked talk smaller producers will stop farming, which could lead to shortages down the road. The shift away from backyard farming and to massive hog factories is part of China’s long-term plan. China’s last pork reserve purchases occurred in March 2019. “Since the frozen pork inventory is probably already high due to strong imports in the previous months, I don’t think they’ll buy too much,” said Pan Chenjun, senior analyst at Rabobank. She adds that storage space is limited.

New cattle facility… Cattlemen’s Heritage Beef Company, a newly formed corporation with roots in livestock production, announced plans to build a $325-million federally inspected beef processing facility in Mills County, Iowa, along Interstate 29. The western Iowa facility plans to process around 1,500 head of cattle per day and employ 750 workers once it’s fully operating. Chad Tentinger, project developer and an Iowa cattle producer, said he wants to provide a market for cattle raised by smaller, independent cattle producers. Construction is slated to begin spring 2022.

Cattle on Feed should have limited price impact… Friday’s Cattle on Feed Report wasn’t overly surprising, with the number of cattle on feed as of June 1 up 0.2% from year-ago levels. Cattle placements during May were a bit more friendly than expected at 93.1% of year-ago, which may support deferred live cattle. But the market is likely to quickly turn its attention to the wholesale and cash markets. August live cattle start the week near the lower end of last week’s cash trade that ranged from $122 to $126. Meanwhile, the product market is still working on a low, with Choice dropping $2.86 on Friday and movement light at 93 loads.

Lean hog futures remain oversold… Lean hog futures faced heavy pressure last week, but they stabilized at week’s end. Traders will be watching to see if the market is able to rebound this week. With July lean hogs more than $13 under the CME lean hog index with expiration nearing, futures need to rise quickly and/or cash prices need to drop. We believe futures have overdone it to the downside and the former is more likely. On Friday, cash hog bids climbed a national average of 70 cents. Cash hog bids fell $2.95 on Friday, with the cutout value dropping nearly $11 for the week. Belly and rib prices have led the decline.

Weekend demand news… Egypt’s state grain buyer tendered to buy an unspecified amount of wheat from global suppliers. Jordan’s state grains buyer issued a new international tender to buy 120,000 MT of animal feed barley; it made no purchase in a previous barley tender last week. The Taiwan Flour Millers’ Association bought an estimated 55,000 MT of milling wheat from the United States.

Today’s reports