Good morning!
Short-covering lifts corn and soybeans overnight... Corn futures are up 2 cents amid some corrective trading to start the week. Soybeans also enjoyed gains overnight and are currently up around 4 cents. Winter wheat futures are down 5 to 7 cents, while spring wheat is 3 to 5 cents higher. The U.S. dollar index is slightly higher, as are crude oil futures.
Health-care reform votes, immigration and USDA reports the focal point... A possible Senate vote on health-care reform and House votes on two bills that would crack down on illegal immigration are the focus in Congress in the week ahead. The Senate may vote Friday on whether there is enough support to pass the GOP’s health-care proposal. The Congressional Budget Office (CBO) early this week will release its score of the legislation. The immigration measures would boost penalties for immigrants who try to re-enter the U.S. after being deported and would toughen penalties for sanctuary cities and expand mandatory detention policies. This is also a big week for reports. On Thursday USDA will release its Quarterly Hogs & Pigs Report and on Friday the Acreage and Grain Stocks Reports will be released. Get more details.
House speaker, budget panel leader continue talks with ag panel head... House Budget Chairman Diane Black (R-Tenn.) continues to talk with House Ag Chairman Mike Conaway (R-Texas) over his concerns that making mandatory cuts this year through budget reconciliation will make it harder for the agriculture panel to do a farm bill next year. “We’re trying to figure out how we can do a glide path off of SNAP (food stamps),” he said, referring to the Supplemental Nutrition Assistance Program. Conaway said House Speaker Paul Ryan (R-Wis.) understands he needs some savings to accomplish what he hopes to do in the farm bill but added that he’s been engaged in daily conversations with the speaker and Black about helping achieve some savings via reconciliation.
Supreme Court justice announcement today?... White House sources think Justice Anthony Kennedy, the Supreme Court’s swing vote, may announce his retirement today, as the justices gather on the bench for the last time this term. Kennedy, who will be 81 in July, is the longest serving of the justices; Kennedy joined the court more than 29 years ago.
EU/Mexico trade talks begin today... Trade talks between the EU and Mexico commence as officials work to complete an update the North American Free Trade Agreement (NAFTA) that was made in 2000. Both sides want an updated agreement this year as a means of leverage on the Trump administration.
India’s Prime Minister Narendra Modi visits the White House today... It will be his first visit to Washington since the start of the new Trump administration. Several U.S. lawmakers wrote Trump urging a lifting of India trade barriers, including those involving farm products. “While Indian businesses continue to benefit from open U.S. markets, India has failed to eliminate, or even address concretely, multiple trade and investment barriers,” the letter sent Friday to President Donald Trump read. Energy trade will be highlighted with a focus on the $32-billion in contracts Indian energy companies have signed to import U.S. liquefied natural gas.
Funds slash bearish position in SRW wheat... The week ended June 20, hedge funds and other money managers slashed their short position in SRW wheat from 82,859 futures and options contracts to 20,971 contracts, their least bearish position since Nov. 10 2015. The active short-covering was spurred by concerns about a shortage of high-protein wheat due to crop issues in the U.S., Europe, Ukraine and China. On the other hand, benign weather prompted funds to build their net short position in corn from 17,929 contracts to 53,825 futures and options contracts. Speculators also expanded their bearish bet in soybeans slightly, pushing their net short position from a net 79,673 contracts to 87,140 futures and options contracts over the past week.
Data confirms fears about low-protein wheat... Plains Grains Inc. on Friday reported that the average protein content of its first 133 winter wheat samples was 11.1%, down 0.1 percentage points from last year’s low average. This was actually an improvement from the week prior, when the average stood at 10.8% protein. Wet weather and poor financial conditions that deterred nitrogen application are to blame, according to experts.
Weather issues curb Ukraine’s crop prospects... Ukraine’s 2017 grain crop will likely total around 59 MMT, down 10.6% from year-ago, according to its state weather center. The head of the ag department there detailed that this year’s wheat crop may total just 23.1 MMT, down 2.9 MMT from 2016, due to poor weather.
USDA letter suggests Brazil has ‘systemic’ food safety issues... USDA’s Food Safety and Inspection Service has told Brazilian authorities they must address systemic issues in that nation’s inspection system before the country can resume selling beef products to the U.S., according to a letter dated June 22. It cites serious and repeated food safety violations. FSIS inspectors found abscesses, stomach contents and unidentified foreign material in fresh beef sent to the U.S. from seven Brazilian processing plants.
Brazil to revise how beef is inspected... Brazil wants to finalize by the end of the month a new ordinance that revises the way slaughter house beef is inspected, says Blairo Maggi, the head of the country’s agriculture ministry. This comes after USDA Secretary Sonny Perdue announced the suspension of fresh beef imports from Brazil until its ag ministry “takes corrective action which the USDA finds satisfactory.” The U.S. suspension was triggered by abscesses found by U.S. inspectors “in the front end of the cow, where most cuts of U.S.-bound Brazilian fresh beef originate,” Maggi says. The abscesses were a reaction to front-end-region vaccinations against foot-and-mouth disease (FMD), he explained, adding that the ministry is opening an inquiry to see “if a vaccine reagent is leaving residues in the beef.” The U.S. had long banned beef from Brazil over concerns about FMD, only lifting that ban in August 2016.
Futures may respond to negative COF report... Friday’s Cattle on Feed report came in on the bearish side of expectations, which could cause the market to reverse Friday’s corrective gains. But overall bearishness should be kept in check by the steep price pressure the market faced most of last week. This could mean that the data has already been factored into prices.
Lean hog traders watching cash market... Cash prices softened at times last week, leading to choppy action in deferred contracts and talk a top may be near. This could keep buying interest in check moving forward, especially if more cash weakness is noted. Meanwhile, the pork cutout value strengthened $1.47 on Friday, but movement was quite light at 171.97 loads.
Weekend demand news... Iraq tendered to buy at least 50,000 MT of hard milling wheat to be sourced optionally from the U.S., Canada or Australia. South Korea’s Nonghyup Feed Inc. bought around 207,000 MT of corn from optional origins last weekly -- likely from the U.S. or South America. The country’s Major Feedmill Group bought around 418,000 MT of corn from optional origins last week. And South Korea’s Feed Leaders Committee bought around 68,000 MT of corn from optional origins. Jordan made no purchase in its tender for 100,000 MT of barley.
Today’s reports:
- 10:00 a.m., Weekly Export Inspections -- AMS
- 2:00 p.m., Poultry Slaughter -- NASS
- 3:00 p.m., Crop Progress -- NASS
