Good morning!
Risk aversion weighs on markets overnight... Rains moving across Iowa early this morning as well as unease about a possible trade announcement from the Trump administration weighed on the grain and oilseed markets overnight. As of 6:30 a.m. CT, corn is down 3 to 4 cents, soybeans are 8 to 9 cents lower, winter wheat is posting losses of 6 to 8 cents, and spring wheat is down 11 to 17 cents. Outside markets are also price-negative, with the U.S. dollar index posting moderate gains and crude oil futures under pressure.
Forecast remains non-threatening... Rains over the weekend favored North Dakota and Nebraska as well as Ohio, and rains are moving across Minnesota and the northern half of Iowa early this morning. While temperatures are expected to warm a bit this week, no threatening heat is anticipated. Plus dry areas of Iowa and Illinois are expected to see some relief. The National Weather Service forecast for Aug. 19-23 calls for wet weather across the western Corn Belt and into northwest Illinois. Much of the eastern Belt is expected to see normal precip. Warm temps are expected from Minnesota, Iowa and northern Missouri eastward. Normal temps are likely elsewhere across the Midwest.
Legislative agenda for remainder of FY 2017... Congress remains on its long summer recess but a big workload awaits them on their return after Labor Day. The House has only 12 working days before the end of September when a new fiscal year (FY) begins; the Senate has 16 days. The legislative agenda when lawmakers return includes: (1) a bill raising the debt ceiling; (2) spending bills to keep the government open; (3) Extensions for expiring programs on Sept. 30, including the Children’s Health Insurance Program, the coast Guard, and others; and (4) a budget resolution setting overall spending levels for FY 2018 and one which will allow the Senate to use a filibuster-busting mechanism that could allow a tax bill to pass with just 51 votes. Also of note, North American Free Trade Agreement talks will take place Aug. 16-30 in Washington.
Update on North Korea... U.S./North Korea anxiety continues, but the focus will be on whether the situation eases somewhat after President Donald Trump late Friday talked with China’s leader. Chinese President Xi Jinping urged Trump to exercise restraint over tensions with North Korea, Chinese state media reported. The two leaders vowed to remain in close touch over the situation, state media said. The Associated Press reports that Joseph Yun, the U.S. envoy for North Korea policy, has been in regular contact with Pak Song Il, a senior North Korean diplomat at the country’s mission at the United Nations. The AP report indicated the discussions had not eased fears of a military confrontation, but could prove a foundation for negotiations going forward.
Politico: Admin to announce probe into China’s alleged violation of IP rights today... An investigation into China over allegations it violated U.S. intellectual property (IP) rights and forced technology transfers will be unveiled Monday, Politico reported, citing an unidentified administration official. Of note, there will be no immediate action against China following the president’s signing of the memorandum, but the steps will authorize U.S. Trade Representative Robert Lighthizer to determine if an investigation of Beijing’s laws, practices or actions is warranted. Senior administration officials denied that the memorandum is part of a coordinated effort by the White House to pressure its largest trading partner to be more aggressive in getting North Korea to curb its threats of ballistic missile action against allies in the region and the U.S. territory of Guam. A Chinese state newspaper said this “could trigger a trade war.” Read more.
Sugar producer challenges U.S./Mexico trade deal... lCSC Sugar LLC has filed a court case challenging a U.S./Mexico trade suspension deal that prevented U.S. duties on Mexican sugar. The two countries signed a deal in June that limits the amount of refined sugar Mexico could ship to the U.S., sets minimum prices to prevent sugar imports from undercutting domestic prices, and stopped the U.S. from imposing anti-dumping or countervailing duties. The company, which has operations in Mexico and the U.S., has yet to file a complaint laying out its claims.
New corn-only ethanol plant in Brazil first of its kind... On Friday, Brazil’s FS Bioenergia launched the country’s first ethanol plant that solely processes corn. The Mato Grosso-based plant is expected to produce around 240 million liters (63.4 million gallons) of the biofuel each year, as well as 6,200 MT of corn oil and 60,000 megawatts of power. It emphasizes the country’s need to find outlets for its growing corn crop. The industry is dominated by sugar cane-based ethanol, with around 360 plants processing cane.
Momentum still favors market bears in cattle market... Cattle futures sustained technical damage last week and momentum still favors market bears. That said, pressure could be limited by the discount the August contract still holds to the cash market. But cash prices could also slide going forward as supplies are building. Dressed cattle weights narrowed their discount to year-ago in the latest reporting period, though they remain well under year-ago levels.
October lean hogs well below cash index... August lean hogs go off the board at noon today, so the October contract’s still wide (nearly $17) discount to the cash hog index will garner increased attention. That could lead to additional corrective gains this week.
Weekend demand news... Saudi Arabia bought 660,000 MT of animal feed barley in a tender where Europe, the Black Sea, North and South America and Australia presented offers.
Today’s reports:
- 10:00 a.m., Weekly Export Inspections -- AMS
- 11:00 a.m., Cotton & Wool Outlook: August 2017-- ERS
- 11:00 a.m., Oil Crops Outlook: August 2017-- ERS
- 2:00 p.m., Feed Outlook: August 2017-- ERS
- 2:00 p.m., pm Wheat Outlook: August 2017-- ERS
- 3:00 p.m., Crop Progress-- NASS
