Good morning!
Weekend rains pressure grain and soy markets... Corn futures are down 6 cents and soybeans are posting losses around 16 to 17 cents after weekend rains. Winter wheat futures are down 5 to 7 cents, while spring wheat is 4 to 9 cents lower to start the week. The U.S. dollar index and crude oil futures are both marginally lower.
Rains fall over the weekend, though some dry spots remain... Over the weekend, rains fell across much of the Midwest, but accumulation varied widely, with southern and western Iowa, eastern Nebraska, northern Missouri and far southern Illinois remaining on the dry side. Rains were most significant from eastern Iowa to northern Indiana and in central and southeastern Ohio. More rains are possible for the Midwest midweek. A heat advisory remains in effect for southwest South Dakota today, but cooler temps are expected for the Corn Belt and Northern Plains from July 29 to Aug. 2, according to the National Weather Service. However, the precip outlook is dry for these areas as the calendar flips to August.
Week ahead features spending bill action, possible health care vote, FOMC meeting... The House returns for one last session before the August recess. A four-bill “minibus” spending package is the major item of business expected on the floor, with many amendments and late-night votes expected. Over in the Senate, appropriators are expected to continue to mark up spending bills, and senators could take a procedural vote on health care legislation. In other events next week, the House ag panel on Wednesday has a hearing on reworking the North American Free Trade Agreement, while the Senate ag panel will hold a hearing Tuesday on risk management tools for the 2018 Farm Bill. The Federal Reserve Open Market Committee (FOMC) holds a two-day meeting (Tuesday and Wednesday). No interest-rate policy change is expected.
Spring wheat tour starts today... The Wheat Quality Council’s U.S. spring wheat tour kicks off Monday in Fargo, North Dakota today. Tuesday brings the first day of yield estimates, with final yield estimates issued Thursday around 1 pm CT.
Crop issues lead to a surge in Chinese corn buys for June... China imported 380,000 MT of corn in June, according to customs data, a dramatic six-fold increase from year-ago and well above May’s 42,219 MT. China’s ag ministry slashed its corn crop estimate to the lowest level in four years in June in response to drought that damaged crops and caused some farmers to shift some acres to other crops. In addition, heavy rains in southern areas of the country snarled grain transport, pushing up freight prices and further tightening supplies. China’s imports of ethanol and distillers dried grains remained minimal as restrictive tariffs remain in place. But its ethanol exports surged to 18,324 cubic meters, 10 times year-ago levels.
Chinese bean buys well above-year-ago halfway through 2017... China imported nearly 7.687 MMT of soybeans last month, which was a 6.74% decline from year-ago levels. Brazil supplied 6.418 MMT of that total, with Argentina shipping China 712,845 MT of soybeans last month. China’s soybean imports for the first half of 2017 stand at 44.808 MMT, up 14.19% from year-ago. So far this calendar year, the U.S. has shipped Brazil 19.062 MMT of beans, a 17.05% gain from year-ago. Brazil’s shipments to the country are also up from year-ago at nearly 23.196 MMT.
China bringing in a lot more cotton than last year... China imported 72,413 MT of cotton in June, a marginal decline from year-ago, with the U.S. supplying 28,714 MT of that business, a gain of 23.2% from year-ago. Halfway through the calendar year, China has brought in 639,057 MT of the fiber, a 48.25% surge from year-ago. The U.S. has supplied 360,597 MT of that cotton, representing a 206.39% surge from shipments at this point in 2016.
International Monetary Fund (IMF) downgrades its U.S. and U.K. growth projections... The IMF cut its U.S. growth projection to 2.1% from 2.3% for 2017 and to 2.1% from 2.5% for 2018, citing both weak growth in the first quarter of this year and the assumption that fiscal policy will be less expansionary than previously expected. The report cites “difficult-to-predict U.S. regulatory and fiscal policies” and the continued uncertainty surrounding the Brexit negotiations as key factors. The IMF forecast global economic growth of 3.5% for 2017 and 3.6% for 2018, unchanged from its April outlook.
Wanting to boost trans-Atlantic trade after Brexit... U.K. International Trade Secretary Liam Fox will hold talks with U.S. counterpart Robert Lighthizer today and with Mexico’s Economy Minister Ildefonso Guajardo later in the week. Fox says a transitional agreement would help U.K. businesses making investment decisions but that such a deal would need to end before the country’s next election in 2022.
Bearish report data could outweigh better-than-expected cash action... August live cattle futures start the week at nearly a $4 discount to cash cattle trade that got underway Friday in across the Plains around $120. Of note, extreme heat on the Central and Southern Plains late last week and through the weekend stressed livestock. But buying interest may be limited as USDA’s Cattle on Feed Report showed the number of cattle on feed and marketings above expectations (well above for placements). In addition, USDA’s Cattle Inventory Report showed more herd expansion than we expected.
Cash hog prices softened last week... The cash hog market posted the first weekly decline since late April last week, signaling the market may have put in a seasonal high right on schedule. August futures already have a hefty cash drop factored in, which should limit pressure on futures.
Overnight demand news... Saudi Arabia bought 900,000 MT of animal feed barley. Algeria issued an international tender to buy a nominal 50,000 MT of milling wheat from optional origins, but the country often buys more than it tenders for. Zambia will export 100,000 MT of corn to three east African states. Bangladesh tendered to buy 50,000 MT of wheat. Jordan issued a new tender to buy 100,000 MT of animal feed barley from optional origins.
Today’s reports:
- 10:00 a.m., Weekly Export Inspections -- AMS
- 2:00 p.m., Cold Storage-- NASS
- 3:00 p.m., Crop Progress-- NASS
