Good morning!
Quiet overnight session... Corn futures stuck to roughly a penny-wide trading range overnight and as of 6:40 a.m. CT most contracts are fractionally lower. Soybeans are narrowly mixed with an upside bias. Winter wheat futures are steady to 2 cents higher while spring wheat is down 3 to 6 cents. The U.S. dollar index is moderately higher, with crude oil futures posting slight gains.
Export Sales Report expectations...
| Commodity | 2016-17 | 2017-18 |
|---|---|---|
| Corn | 0 to 200,000 | 400,000 to 700,000 |
| Wheat | NA | 300,000 to 600,000 |
| Soybeans | -600,000 to 200,000 | 1,000,000 to 1,500,000 |
| Soymeal | 30,000 to 160,000 | 75,000 to 150,000 |
| Soyoil | 8,000 to 25,0000 | 0 to 10,000 |
Texas governor estimates federal funding needs ‘far in excess’ of $125 billion... Harvey left a rising number of deaths and costly destruction in Texas, where Governor Greg Abbott forecast federal funding needs are “far in excess” of $125 billion, topping the $120 billion mark for Hurricane Katrina. “The worst is not yet over for southeast Texas as far as the rain is concerned,” he said, referring to a region that includes the cities of Beaumont and Port Arthur, where more than 2 feet of rain fell in just 24 hours as Harvey neared land again. USDA Secretary Sonny Perdue said he expects significant damage to the $1 billion agriculture sector in the 54 counties hit by Harvey. John Robinson, an economist at Texas A&M’s AgriLife Extension Service, conservatively estimates cotton losses at 400,000 bales.
It will take time to get hurricane-impacted railways up and running again... While Hurricane Harvey did not significantly damage coastal grain elevators, grain exports remain at a standstill since other transport problems have cut off the flow of supplies. Major railways have warned it will take time before operations get back to normal in the Houston area, with some analysts guessing this could take between two and six weeks. Union Pacific Corp. and BNSF Railway, the nation’s top railways, have suspended operations in areas affected by the storm, with BNSF saying normal train flows are unlikely to resume for “an extended period.” Kansas City Southern, a regional railway that focuses largely on U.S./Mexico trade, said that its lane between Houston and Laredo on the border remains closed, but that so far its infrastructure has not seen major damage. Until things get back to normal, there will be a lot of rerouting and reliance on other modes of transport to move goods.
Transportation impact update... While the U.S. Coast Guard has opened the Houston Ship Channel to some vessels, full access for large ships could be days or even weeks away, transportation sources note. As for trucking, “We’re seeing the beginning of a massive impact on all trucking networks. It’s going to get ugly,” said Jett McCandless, chief executive of trucking technology company Project44, on Harvey’s aftermath.
Impressive growth in Chinese manufacturing... China’s official Purchasing Managers’ Index climbed 0.3 points in August to 51.7, surprising analysts who had expected a slight decline in manufacturing activity. The figure was easily above the 50.0 mark that separates contraction from expansion in the sector. Production, total new orders and business expectations all strengthened, while export orders slipped, suggesting a rise in domestic demand. The data eased concerns about a cooling housing market and rising financing costs in China to some degree.
Egypt extends relaxed moisture limits on wheat imports... Egypt will permit wheat imports to have moisture levels of to 13.5% for another nine months, effective Oct. 3, its trade ministry announced today. In February, the country raised the moisture limit by 0.5 percentage points to 13.5%, but that nine-month extension is winding down. While the boost to its moisture limit applies to wheat from all origins, the change is meant to benefit French wheat that has struggled to meet more stringent moisture limits. That said, France has had a hard time competing with low prices out of the Black Sea region this season.
Trump urges Congress to act on tax reform package, but details lacking... President Donald Trump warned Congress not to stymie the chance to rewrite the U.S. tax code and reinvigorate the economy as he kicked off his effort to sell the American public on a tax plan. During a speech Wednesday at a manufacturing plant in Springfield, Missouri, Trump said, “I am fully committed to working with Congress to get this job done, and I don’t want to be disappointed by Congress -- do you understand me?” One senior White House official said there would be ample time to discuss the specific points of the tax plan later, and Trump outlined four principles that he’s referred to before — simplifying the tax code and closing loopholes that benefit wealthy Americans and special interests; slashing the corporate rate to create more jobs and higher wages; providing tax relief for middle-class families; and cutting the tax companies would pay to bring back the trillions of dollars in profit that they currently hold offshore. He repeated his endorsement for a 15% corporate income tax rate, down from the current 35%.
Perdue: NAFTA a success for most of U.S. agriculture... USDA’s Perdue said Wednesday he’s been trying to convince the Trump administration the North American Free Trade Agreement (NAFTA) is “good for U.S. agriculture.” The trade deal just has some “rough edges” that need to be smoothed for improvement, he said during a presentation at an industry event in Decatur, Illinois. “I talked to him this morning, actually,” Perdue said of his conversations with Trump. “He’s concerned about American agriculture,” but he’s also concerned about trade deficits in other parts of the economy, particularly in automobiles and manufacturing, he said. Perdue said he hopes the administration can find a solution that “reconciles” and “resolves those issues.”
Last chance to comment on RFS... The public comment period is closing today for an Environmental Protection Agency (EPA) proposal to reduce the amount of some biofuels added to the nation’s motor fuels. The EPA is expected to finalize new Renewable Fuel Standard (RFS) levels no later than Nov. 30 every year. EPA’s July proposal would keep the requirement for conventional biofuels like corn-based ethanol at the 15 billion gallons set for 2017. The biomass-based diesel standard, which is set a year in advance of the others, would be 2.1 billion gallons in 2019, the same amount set for 2018.
Brazil expands meat sector bribery investigation... Yesterday, Brazilian police advanced their probe into alleged inspection bribes involving officials with the ag ministry, meatpackers and dairy companies in the country. This is an expansion of the “weak flesh” probe that shook the country’s meat sector in May. Brazil’s ag ministry closed four plants impacted by the latest round of investigations.
Light cash trade at lower levels... Cattle traded at an average price of around $105 at the Fed Cattle Exchange auction yesterday, but a lack of sales at the online auction in recent weeks makes it tough to draw comparisons. So far, there has been a light cash market test in the $104 to $105 range across the Plains and Midwest, which would be down a bit from action last week that took place at an average price near $107.
Corrective buying in hogs, but cash and product remain areas of concern... Hogs rallied late in yesterday’s session amid some corrective short-covering. But the market’s downtrend remains in effect. Average lean hog carcass bids have fallen $5.90 over the past week to $74.59, but that is still up more than $10 from last year at this point. The cutout value is also down on the week and movement slowed again yesterday following Tuesday’s surge.
Overnight demand news... South Korea bought 55,000 MT of soymeal from South America in a private deal. It also purchased around 68,000 MT of optional-origin feed wheat in a similar deal.
Today’s reports:
- 7:30 a.m., Drought Monitor -- USDA/NWS
- 7:30 a.m., Weekly Export Sales-- FAS
- 2:00 p.m., Egg Products-- NASS
- 2:00 p.m., Dairy Data (Dairy Monthly Tables & Dairy Quarterly Data)-- ERS
