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We are realistically still in the infancy of this growing year, yet we have already seen a number of extremes. We move from a cooler than normal April to a warmer than normal May. A behind average planning pace for corn to now ahead of average, 97% compared to a normal 95%. So far, the conditions of both this young corn and bean crops register as better than average with corn rated 78% good/excellent and beans at 75% but of course wheat, in turn, has been ranked rather poor all season with the most recent winter wheat rating showing just 37% in the good/excellent range and 35% in the poor/very poor. Spring wheat does look a slightly better though with the first rating of the year showing 69% good/excellent. The point is, it is difficult to imagine that we will not see the pendulum continue to swing from one side to the other a number of times in the months ahead so the current breakdown in prices should be taken in stride. If this were the 5th of July instead of June, the outlook could be a bit more disconcerting, but at this point, it would appear that we have pretty well erased any weather risk premium from the price range and there is a lot of summer yet ahead.
The hog market received another sharp slap across the face as Mexico now says that in response to the proposed US tariffs on industrial metals they are prepared to place a 20% tariff on US pork shoulders and legs later this week. Mexico imported $1.07 billion of pork from us last year. Since the trade/tariff threats erupted shortly after the beginning of this year, the hog market has lost around $.10 in price and moved most if not all operations into the red. We slaughter around 2.3 million hogs a week, which at dressed weight amounts to around 490 million pounds so this equates to $49 million per week in lost revenue. That would be $2.5 billion a year. Granted, maybe not all of the losses can be attributed to the trade tariff rhetoric but even if it were half, it is too much. I wonder if this will be a topic at the Pork Congress in Des Moines this week?
We are catching a nice little rebound in the grain and soy markets this morning, but I suspect that unless the current weather forecast makes a dramatic turn for the worse, we have additional negative correction type action in store for the near-term.
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