Good morning!
Soybeans slump overnight... Soybeans came under heavy pressure overnight as traders noted some beneficial rains across the Corn Belt this week as well as USDA’s forecast for a year-over-year build in ending stocks. Most contracts are currently around 20 cents lower, with the front-month challenging the $10.00 level. Corn futures are posting losses around 3 to 4 cents after higher-than-expected ending stocks data from USDA. While spring wheat is mixed, winter wheat contracts are down 6 to 13 cents, as USDA’s wheat crop pegs topped expectations. The U.S. dollar index is up slightly, while crude oils futures are posting modest losses.
Export sales out today... USDA will release its weekly export sales update for the week ending July 6 at 7:30 a.m. CT. Traders expect the report to show corn sales between 350,000 MT and 700,000 MT, soybean sales ranging from 250,000 MT to 600,000 MT, wheat sales of 300,000 MT to 500,000 MT, soymeal sales between 25,000 MT and 250,000 MT and soyoil sales of 5,000 MT to 25,000 MT.
Notable slowdown in Chinese bean buys... China imported 7.69 MMT of soybeans during June, which fell short of expectations (for imports of at least 8.5 MMT) and represented a 1.9-MMT drop from the month prior. However the figure was still up 130,000 MT from year-ago levels. Plentiful stocks for crushers, congestion at ports, and a change in taxes reportedly slowed its shipments. But for the first half of the year, China’s soybean imports are still up an impressive 14.2% from year-ago at 44.81 MMT. In July, traders expect China to bring in around 8.5 MMT to 9.0 MMT of beans.
China’s latest trade data could boost friction with Trump... Chinese exports to the U.S. surged 19.8% in June, the fastest pace since 2015, while its overall exports only rose 11.3%. That has driven a 23% on-year rise in the U.S./China trade deficit to its widest level since late 2015. The data could increase trade policy tensions between the U.S. and China, especially because President Donald Trump has been vocal about lingering U.S. trade deficits, notably with China. Tariffs on steel and other measures aimed at redressing the balance could follow.
Trump administration wants to meet South Korea to alter trade agreement... Changes are being sought between the two countries regarding the U.S./Korea Free Trade Agreement, known as KORUS. “President Trump continues to keep his promises to lower our trade deficit and negotiate better trade deals for American workers, farmers, ranchers, and businesses,” U.S. Trade Representative Robert Lighthizer said. “Since KORUS went into effect, our trade deficit in goods with Korea has doubled from $13.2 billion to $27.6 billion, while U.S. goods exports have actually gone down.” But the U.S. meat sector is nervous. Find out why.
Aggressive Brazilian corn exports expected... Brazil is expected to ship a near-record amount of corn this year, with the government estimating it will ship 28 MMT of the grain and the cereals exporters association Anec projecting shipments at 30 MMT, nearly in line with last year’s record. Government auctions guaranteeing a premium to depressed market prices aid the competitiveness of Brazil’s corn, plus the country brought in a big winter crop and storage is limited, necessitating farmer sales.
Strategie Grains cuts EU soft wheat crop estimate in wake of heatwave... The ag consultancy Strategie Grains made another cut to its crop forecasts for the EU in its latest monthly update. It now projects the 2017 soft wheat crop at 140.7 MMT for the EU, down nearly 1 MMT from its previous estimate and just 3% above last year’s disappointing crop. The firm explained that much of the decline was due to extreme heat on crops in Sprain and France during the key grain-filling phase. Strategie Grains did note better crop prospects for Poland, Hungary, Romania and Bulgaria.
Chinese wheat crop up marginally from year-ago... China’s 2017 winter wheat crop totaled 127.35 MMT, up 0.9% from year-ago, the National Bureau of Statistics reports. It details that sunshine and heat during the maturing phase and harvest helped yields to make up for a slight drop in acreage.
Ag spending bill heads to House floor after panel clearance... The fiscal year 2018 agriculture spending bill approved by voice vote in the Appropriations Committee would provide $20 billion in discretionary spending for USDA, FDA and the Commodity Futures Trading Commission. It now heads for House floor. The measure would provide $1.1 billion less than FY 2017 enacted levels after adjusting for the CFTC. The combined total of both discretionary funds and required mandatory spending for programs like nutrition assistance and crop insurance is $144.9 billion, $4.1 billion above Trump’s request and $8.6 billion below the fiscal 2017 enacted level. The measure includes two meat trade-related amendments. One requires USDA to conduct a food safety equivalency determination for all products eligible for export to the U.S. from Brazil. A second one requires USDA to report on measures officials from China will take to inspect chicken and report disease outbreaks prior to finalizing any rule allowing chicken raised and slaughtered in the country to be exported to the U.S. Read more.
Markup on E15 ethanol bill likely before delayed August recess... A committee vote on legislation to boost ethanol sales is likely to take place before the August recess, a spokeswoman for Senator Chuck Grassley (R-Iowa) told Bloomberg BNA. The legislation would allow sales of transportation fuel containing 15% ethanol (E15) in the summer months. Sen. John Barrasso (R-Wyo.), chairman of the Environment and Public Works Committee, said a markup will be held but he did not give a specific date. Barrasso opposes the bill. He and GOP Senate leadership promised ethanol supporters a vote on the E15 bill in exchange for “yes” votes on a measure to roll back an Interior Department regulation on methane venting and flaring. The bill faces hurdles.
Futures surge in response to higher cash cattle trade... Cattle futures surged in response to reports that cash cattle trade was getting underway around $120 in Texas and Kansas yesterday and in other states around $118 to $120, steady to up $3 from last week. Even after yesterday’s limit-higher close, futures are still below the cash market, signaling the potential for followthrough buying today. Limits will be expanded to $4.50 for live cattle and $6.75 for feeder cattle futures today.
Cash hog prices slip again... Pork movement was solid Wednesday at 344.18 loads as the pork cutout value continues to extend its rally above the $100 per cwt. mark. But the cash market has shown signs of faltering. Cash hog prices softened again Wednesday across the Midwest, resulting in a 47-cent drop in the national average price, according to USDA. This has tempered buying interest in the lean hog market.
Overnight demand news... Indonesia bought around 55,000 MT of wheat over the past week, likely from the Black Sea region. Algeria issued an international tender to buy 70,000 MT of corn. Japan purchased 62,900 MT of food-quality wheat from the U.S. and 30,865 MT from Australia.
Today’s reports:
- 7:30 a.m., Drought Monitor -- USDA/NWS
- 7:30 a.m., Weekly Export Sales-- FAS
- 8:00 a.m., Feed Grains Database-- ERS
- 2:00 p.m., Dairy Data (Dairy Monthly Tables)-- ERS
- 2:00 p.m., Wheat Data-- ERS
- 2:00 p.m., Turkey Hatchery-- NASS
