Good morning!
Traders remove some weather premium overnight... Corn and soybean futures are mostly 2 to 3 cents lower amid some profit-taking after yesterday’s gains and as traders recognize that temps did not drop low enough overnight across the Upper Midwest to do any major crop damage. Winter wheat is also seeing some profit-taking, with most contracts down 2 to 5 cents. Spring wheat, on the other hand, is up 2 to 5 cents. The U.S. dollar index is marginally higher and crude oil futures are posting solid gains.
PF CCI: Minor dip in corn and bean ratings... When USDA’s crop ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500 point scale, with 500 being perfect), the corn crop edged 0.68 points lower to 358.28 points, which is more than 28 points under year-ago levels. The soybean crop also declined slightly over the past week, sliding 1.22 points to 350.09 points. This is just over a 25-point decline from year-ago levels. Get more details here.
Canadian grain stocks data out today... Statistics Canada will likely report Canadian wheat stocks stood around 6.0 MMT at the close of the 2016-17 marketing year (July 31), according to analysts surveyed by Reuters. This would be up from year-ago, when stocks stood at 5.178 MMT. The market expects canola stocks to come in around 1.5 MMT as of the end of July, the smallest figure in four years. The report will be released at 7:30 a.m. CT.
Wheat trade still suffering in aftermath of hurricane... Hurricane Harvey-related destruction continues to disrupt wheat exports and will likely continue to do so for several more days. The week ending Aug. 31, federal inspectors did not check any wheat for export for Texas ports, which helped pull down total inspections for the week to 251,950 MT, the lowest figure since November. The week prior, inspections out of Texas totaled 219,219 MT. Texas’ railway tracks remain under water, according to BNSF Railway Co. Meanwhile, port operations are getting back underway across the Gulf, though many still have restrictions on vessel draft.
FEMA warns on funding as Harvey payouts going faster than expected... FEMA officials are warning that they could run out of funds for assistance to areas hit by Hurricane Harvey as soon as Friday, congressional aides have signaled. FEMA’s disaster relief fund had about $541 million left that could be used for Harvey relief as of Tuesday afternoon, a FEMA spokeswoman said. While the FEMA disaster fund contains about $1 billion, $473 million is deemed base funding devoted for potential future disasters and fighting fires. The pace of aid flowing thus far as been faster than expected, reflected by an increase in the request for an initial aid package by the Trump administration.
House votes this morning on emergency aid for Hurricane Harvey victims... The House will vote on appropriations of $7.9 billion in emergency fiscal 2017 funds -- an initial installment for Hurricane Harvey aid. could come as soon as today. Because it is designated as “emergency” and does not count against spending caps, even budget sticklers may get on board and vote for the measure. One possible hurdle: The White House and some Republicans want the aid tied to an increase in the federal debt limit, but a conservative bloc opposes that. The topics could be paired in Senate action later. Treasury Secretary Steven Mnuchin warned over the weekend that aid could be slowed unless the debt limit is increased to accommodate the extra borrowing his agency must do to pay for disaster relief.
Irma makes landfall... The Category 5 hurricane, one of the most powerful Atlantic storms ever recorded, hit the Caribbean island of Barbuda overnight and is expected to strike Puerto Rico and other islands today. Irma could reach Florida this weekend.
Brazil exporting corn at a rapid clip... Brazil’s corn exports climbed dramatically over the summer, with shipments of 1.0 MMT in June climbing to 3.3 MMT in July and 5.5 MMT in August, according to Thomson Reuters Trade Flows. Cumulative shipments for the three-month span are up 48% from 2015 and 105% from year-ago when drought clipped the crop. Analysts expect another strong showing in September as a record-large safrinha crop and limited storage provide incentive to ship corn in spite of low prices and high transportation fees. Indeed, the Sept. 5 Williams Line-up report shows that 4.8 MMT of corn exports have already been loaded this month, which already tops total shipments for September the past two years.
Brazil’s soybean shipments through August already top annual exports from 2015 and 2016... Brazil has shipped 56.3 MMT of soybeans between Jan. 1 and Aug. 31, according to Thomson Reuters Trade Flows. This is well above shipments of 46.3 MMT over this period last year or 43.2 MMT in 2015. The tally also tops annual shipments of roughly 49 MMT for both those years. So far, 73% of Brazil’s soybean exports have gone to China. Shipments of the oilseed have slowed since May, but they remain strong relative to recent years. In August Brazil shipped 5.4 MMT of soybeans. The latest Williams Lineup Report shows that 2.9 MMT of soybeans are scheduled to load and sail this month and that figure is likely to climb.
Final spending package for fiscal 2018 may take until Christmas... That is the message from House Majority Leader Kevin McCarthy (R-Calif.). Meanwhile, support for a Republican budget resolution could be tested in a closed-door House GOP conference today. The resolution promises to balance the budget in 10 years, but requires some deep cuts in entitlement programs, including agriculture, while making questionable assumptions about revenue growth. It also would bust the cap on defense spending by $72 billion -- triggering across-the-board cuts to military programs unless a new budget deal is reached to raise the cap. With none of the 12 annual bills that fund the government yet enacted, a stopgap continuing resolution will be required by Sept. 30 to extend current funding levels into the new fiscal year and avoid a government shutdown.
NAFTA update... Trade negotiators from the U.S., Canada and Mexico praised the work of their teams in the first weeks of talks on the North American Free Trade Agreement (NAFTA), sidestepping President Donald Trump’s threats to pull out of the deal. Top trade officials from the U.S., Canada and Mexico held a joint statement in Mexico City on Tuesday as the second round of talks concluded, highlighting their progress and shared commitment to finish talks this year. The officials said they have made headway and now have a deeper understanding of each other’s demands. Lighthizer still stressed a new deal must benefit “all Americans,” including those in manufacturing who lost their jobs as a result of NAFTA. He added, “I expect when I finish this agreement that the president will be supportive of it, because I’m not going to agree to things that he’s not supportive of.” The third round is scheduled to take place Sept. 23-27 in Ottawa.
Congressional leaders tell Trump to improve, not withdraw, KORUS... The chairmen and ranking Democrats of the House Ways and Means and Senate Finance committees issued a joint statement yesterday calling South Korea a “significant economic partner, our seventh largest export market, and a vital customer for U.S. manufacturers, services providers, farmers and ranchers.” The lawmakers called on Trump to push South Korea to improve its compliance with the agreement. “To be effective and constructive, however, we must not withdraw from the agreement while we do so,” the lawmakers added.
Decent post-holiday beef movement... Choice boxed beef cuts climbed $1.10 on Tuesday while Select fell 18 cents. Post-Labor Day movement was the strongest of the past week at 141 loads, which is encouraging. However, traders remain aware that the holiday marks the unofficial end to grilling season. Showlist estimates are up a net 4,000 head this week, which could boost packers’ bargaining power. But they are also enjoying very strong profit margins, which could limit their urgency to lower bids. Last week, sales took place at an average price of $104.66, according to USDA.
Traders work to narrow lean hogs’ discount to the cash index... On Tuesday there were strong gains in lean hog futures as traders worked to narrow futures’ discount to the cash hog index. Traders also noted mixed cash hog bids yesterday, as some packers found themselves in need of supplies and profit margins that are closing in on $40 a head gave them room to lift bids. Also of note, two new plants began slaughtering this week in Iowa and Michigan, increasing competition for hogs.
Overnight demand news... South Korea tendered to buy around 100,000 MT of GMO-free soybeans.
Today’s reports:
- 7:30 a.m., Canadian grain stocks -- StatsCan
- 8:00 a.m., Milk Cost of Production-- ERS
- 8:00 a.m., U.S. Bioenergy-- ERS
- 2:00 p.m., Latest U.S. Agricultural Trade Data-- ERS
