Korea, North

First Thing Today: Risk Aversion Overnight

Wed, 21 Sep 2022 02:37:03 GMT

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

First Thing Today: Trump Wants Major NAFTA Changes, Canada and Mexico Want Tweaks

Thu, 12 Nov 2020 04:42:10 GMT

Good morning!

Short-covering lifts corn and soybeans overnight... Corn futures are a penny higher as of 6:30 a.m. CT after favoring the upside during a quiet overnight session. Soybeans also benefited from short-covering overnight and are currently up 8 to 9 cents. Winter wheat futures are narrowly mixed, while spring wheat is down 1 to 3 cents amid ongoing harvest pressure. The U.S. dollar index is firmer this morning, while crude oil futures are down slightly.

Export sales data out today... Following are expectations for USDA’s Weekly Export Sales Report for the week ending Aug. 10.

Commodity	2016-17 (MT)	2017-18 (MT)
Corn	0 to 200,000	400,000 to 600,000
Wheat	NA	300,000 to 600,000
Soybeans	50,000 to 250,000	300,000 to 600,000
Soymeal	0 to 100,000	60,000 to 200,000
Soyoil	8,000 to 25,0000	0 to 10,000

Trump wants major NAFTA changes; Canada and Mexico prefer tweaks... Officials from the U.S., Canada, and Mexico began talks to renegotiate the North American Free Trade Agreement in Washington on Wednesday. U.S. Trade Representative Robert Lighthizer said the initial NAFTA has been a failure for “countless Americans” and that the U.S. will be pushing for major changes. In stark contrast were comments from Canada and Mexico, who focused on the benefits for all parties involved. Bottom line: The U.S. offered a combative tone while Canada and Mexico made it clear they won’t be easy pushovers. Expect contentious talks ahead with no guarantee one of the participants will not walk away from the process. Get more details .

Storage crunch in Brazil... Brazil brought in a record-shattering soybean crop that farmers have been reluctant to sell given low prices. This has filled up the country’s bins and created a storage problem for the its also-impressive safrinha corn crop. Outdoor grain piles are growing and silo bags are once again in high demand. In Mato Grosso, the country’s top grain producing province, the storage gap is estimated around 39 MMT, according to the growers’ association Aprosoja. Already, concerns are growing that there may not be enough space for the 2017-18 soybean crop if the massive corn crop is not cleared out in time.

Bannon comments on his push for the U.S. to take a tougher stance on China trade... “The economic war with China is everything,” Steve Bannon, a chief strategist for President Donald Trump, said in an interview with The American Prospect posted online Wednesday. “And we have to be maniacally focused on that. If we continue to lose it, we’re five years away, I think, 10 years at the most, of hitting an inflection point from which we’ll never be able to recover.”

Trump reportedly agrees to seek South Korea’s OK before taking action on North Korea... In the aforementioned interview, Bannon also undercut Trump on North Korea when he said, contrary to Trump’s threat of fire and fury, “There’s no military solution [to North Korea’s nuclear threats]. Forget it. Until somebody solves the part of the equation that shows me that 10 million people in Seoul don’t die in the first 30 minutes from conventional weapons, I don’t know what you’re talking about.” Meanwhile, South Korean President Moon Jae-in said Trump agreed to discuss options, including a U.S. military strike, with him before taking any action to rein in North Korea’s nuclear and missile programs. His remarks came after Pyongyang’s announcement that it would hold off on a threat to launch missiles at the U.S. Pacific territory of Guam.

Government to make critical ObamaCare subsidy payments... The U.S. government will make crucial ObamaCare-related subsidy payments to health insurers in August, according to a White House spokesman, despite threats by Trump to end them. The decision came a day after the Congressional Budget Office warned that ObamaCare premiums would soar an additional 20% above projected price increases if the payments are ended in 2018.

EPA extends comment period 30 days on rescinding WOTUS rule... The public will get another month to comment on EPA’s proposal to repeal the Obama-era waters of the U.S. (WOTUS) rule, with comments now due Sept. 27. When the proposal was officially released, the 30-day comment period was a point of contention for supporters of the Obama-era rule. The original Obama rule, also called the Clean Water Rule, was open for more than 200 days.

Still waiting for cash cattle trade... The cattle market is still waiting for cash trade to begin and a total lack of sales at the online Fed Cattle Exchange auction yesterday provided little direction. So far this week, just a few hundred head of cattle have changed hands in the Iowa/Minnesota market at $110 and in Nebraska at $111, down from last week’s average cash price of roughly $115 and just slightly above where futures are trading. Also of note, while boxed beef prices dropped 83 cents (Select) to $1.44 (Choice) on Wednesday, the softer prices spurred impressive movement of 201 loads.

Bearish reversal could lead to more pressure today... Lean hog futures posted bearish reversals on Wednesday, signaling followthrough selling is likely today. So far, futures have not done major technical damage, but that could change if followthrough selling is heavy today. Yesterday’s product market action could add to bearish sentiment as belly prices plunged $13.62, pulling the pork cutout value $2.31 lower.

Overnight demand news... Tunisia bought 100,000 MT of milling wheat but it made no purchase in its tender to buy 50,000 MT of animal feed barley. Jordan made no purchase in its international tender to buy 100,000 MT of optional origin wheat. Egypt bought 295,000 MT of wheat from Russia and 60,000 MT o wheat from Ukraine.

Today’s reports:

7:30 a.m., Drought Monitor -- USDA/NWS
7:30 a.m., Extended Weather Outlook -- NWS
7:30 a.m., Weekly Export Sales -- FAS

First Thing Today: Treasury to Propose Cutting Off Trade with Countries Doing Business with North Korea

Thu, 12 Nov 2020 04:42:10 GMT

Good morning!

Soybeans lead gains overnight... Cool weather for early September lifted the corn and soybean markets overnight. As of 6:35 a.m. CT most corn contracts are 3 cents higher, while soybean futures are up 8 to 11 cents after a gap-higher start. Winter wheat futures are 4 to 6 cents higher in most contracts, while spring wheat is narrowly mixed. The U.S. dollar index is down slightly, while crude oil futures are posting solid gains.

North Korea claims test of ‘missile-ready’ nuclear bomb... North Korea said Sunday that it had developed a more advanced nuclear bomb with “great destructive power,” releasing photos of Kim Jong Un inspecting what it said was a hydrogen bomb that could be attached to a missile capable of reaching the mainland United States. North Korean state media said that the test was carried to test “the accuracy and credibility” of its “H-bomb to be placed at the payload of the ICBM.” North Korea tested its intercontinental ballistic missile for the first time in July, and its second test later the same month showed the rocket could theoretically reach Denver or Chicago. Analysts say the claims should be treated with caution, but the North’s nuclear capability is clearly advancing. Get more details .

Treasury to propose cutting off trade with countries doing business with North Korea... Treasury Secretary Steven Mnuchin promised to consider a sanctions package that may cut off “all trade and all other business” with North Korea’s trading partners after North Korea’s latest nuclear test, saying the rogue country’s behavior is “unacceptable.” He added that, We are going to strongly consider everything at this point and, again, I will draft a package for [President Donald Trump’s] strong consideration that would go as far as cutting off all trade and other business,” Mnuchin said in response to whether a package would also censure Chinese financial institutions and companies on Fox News Sunday.

Trump wants plans to withdraw from South Korea trade deal... Trump has instructed advisers to prepare a withdrawal from the Korea-U.S. (KORUS) free-trade agreement, a move that would raise economic tensions with the U.S. ally at a time both countries confront a crisis over North Korea’s nuclear weapons program. Under the terms of the KORUS pact, either side can pull out by giving 180 days’ notice. Negotiators from the U.S. and South Korea held several meetings over the summer with American officials leaving unhappy with what they felt was Seoul’s unwillingness to make significant changes to the KORUS. The president could decide to stay in the agreement in order to renegotiate its terms, but internal preparations for terminating the deal are far along and the formal withdrawal process could begin as soon as this week. Some believe the latest threat is a negotiating tactic to bring Seoul back to the bargaining table. Read more .

Warm in the western Corn Belt, cool in the east... More cool air moved into the the central and eastern U.S. early this week, and overnight lows in the 30s are possible in the Upper Midwest and Northern Plains early this week. However, no serious damage is expected. The National Weather Service forecast for Sept. 10-14 calls for warm temperatures in the western Corn Belt and into Wisconsin, with cool temperatures for the eastern Belt. Over this timeframe, dry weather is expected across the Midwest and Plains, with normal precip likely for Illinois and Indiana and wet weather expected in Ohio.

Cordonnier leaves yield estimates unchanged... Crop Consultant Dr. Michael Cordonnier left his corn yield estimate at 166 bu. per acre and he has a neutral bias going forward. He noted concerns about the recent trend of cool, dry weather for the central Corn Belt with more of the same expected early this month, which he says increases the risk the crop will run out of water in addition to slowing crop development and increasing the threat of frost. Cordonnier also left his soybean yield estimate unchanged at 48 bu. per acre and he has a neutral bias toward the crop. He expressed similar concerns about cool, dry weather affecting the bean crop in the central Corn Belt, but says recent rains likely helped the crop in southern and far eastern growing areas.

Consultancy raises grain crop and export forecast for Ukraine... UkrAgroConsult raised its 2017-18 grain export projection by 3.4% to 42.06 MMT, noting the crop was even bigger than expected. It raised its grain production estimate by 1.5 MMT to 63.2 MMT, and said the wheat crop could total 26 MMT, just 100,000 MT shy of last year’s crop and up 1 MMT from its crop peg last month. Meanwhile, the country’s grain traders’ union said it expects Ukraine to have an exportable wheat surplus between 16 MMT and 17 MMT in 2017-18, with production pegged at 26.6 MMT.

Congress returns to a full agenda... Lawmakers return from their long summer recess to must-pass issues that have they lingered for months. One exception is aide for Hurricane Harvey victims, with the White House sending the initial aid requests late Friday. The House will vote on a shutdown-avoiding spending package that pulls together all eight appropriations bills that weren’t passed before the recess. Meanwhile, an across-the-board, stopgap spending measure known as a continuing resolution (CR) will be necessary to prevent a shutdown, as none of the 12 spending bills for the new fiscal year beginning Oct. 1 have been sent to the president. By the end of the month, Congress must come up with a plan to raise or suspend the nation’s debt limit to steer away from a default. Click here for more congressional issues in the month(s) ahead. Also of note is a likely decision by Trump soon that he will end protections for young immigrants who were brought into the country illegally as children (DACA), but with a six-month delay.

EPA reportedly considers a cutoff date for dicamba usage... The Environmental Protection Agency (EPA) is considering a ban on spraying the ag herbicide dicamba after a set cutoff date, possibly sometime during the first half of 2018, according to state officials advising the agency, Reuters reports. This comes amid concerns that drift of the chemicals has damaged soybeans and other crops this season.

Beef market in focus... Traders will monitor the boxed beef market for a read on clearance of red meat over the long holiday weekend. If clearance is strong, retailer buying should be solid this week. But since Labor Day marks the unofficial end of grilling season, retailer buying may not last long.

Lean hog futures start week at double-digit discount to the cash index... Supplies are building seasonally, which has been a weight on the lean hog market and kept momentum on the side of market bears. But traders could work to narrow futures’ wide discount to the cash hog index. While the index has softened, losses in futures have far outpaced those of the cash hog market.

Overnight demand news... Algeria tendered to buy a nominal 50,000 MT of durum wheat.

Today’s reports:

10:00 a.m., Weekly Export Inspections -- AMS
2:00 p.m., Dairy Products -- NASS
3:00 p.m., Crop Progress -- NASS