Good morning!
Building some weather premium back into prices... A drop in USDA’s crop ratings paired with a hot forecast for the Midwest and Northern Plains lifted the grain and soy markets overnight. Spring wheat futures are leading the charge, posting gains around 20 cents. Corn futures are 12 to 13 cents higher, while soybeans are up 15 cents. Winter wheat futures are 8 to 10 cents higher as of 6:30 a.m. CT. Outside markets are also supportive, with the U.S. dollar index under pressure and crude oil futures posting gains.
PF CCI for spring wheat still on the decline... When USDA’s weekly crop ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500 point scale, with 500 being perfect), the spring wheat crop declined another 6.93 points to 284.38 points, which is more than 86 points under year-ago levels. Not surprisingly, North Dakota led the decline. Get the state-by-state breakdown.
Corn and soybean CCIs also fall over the past week, despite rains... Our weighted CCI for corn dropped another 4.22 points from week-ago to 363.05 points. The crop is now rated roughly 25 points under year-ago levels. The soybean crop dropped a similar 3.17 points over the past week to 349.41 points, which is a 22.82-point drop from last year at this point. Get more details.
Cordonnier leaning down on U.S. crop pegs... Crop Consultant Dr. Michael Cordonnier left his corn yield estimate unchanged at 165 bu. per acre, but he says that rating could decline next week if this week’s rainfall comes in lighter than expected or misses areas that need it most. He noted that last week’s rainfall were not enough to recharge soil moisture deficits in dry areas, but it did give the crop some breathing room. He reiterated that “there is a greater downside risk for the corn crop than upside potential.” Cordonnier also left his U.S. soybean yield estimate unchanged at 47.5 bu. per acre, but he has a neutral bias toward it going forward. He says that conditions remain too dry in the western Corn Belt and too wet in the eastern Corn Belt.
As harvest advances, Brazilian corn shipments take off... Brazil exported 820,000 MT of corn the first two weeks of July, according to government trade data released yesterday. This represents a 65% surge from last year at this point. Brazil is in the midst of harvesting its safrinha corn crop, with private analysts estimating harvest is anywhere from 33% to 36% complete as of the end of last week.
Strong Russian grain crop prospects... Russia will likely produce between 115 MMT and 118 MMT of grain this year, according to Russian Grain Union Chair Arkady Zlochevsky. He added that good weather conditions could even help the crop to top last year’s 121 MMT crop. Wheat production will likely top 79 MMT, Zlochevsky forecasts.
House GOP leaders to release budget resolution details today... The budget blueprint will likely call for cutting spending on the Supplemental Nutrition Assistance Program (SNAP/food stamps) by $10 billion over 10 years, a total House Agriculture Chairman Mike Conaway (R-Texas) helped negotiate, largely via tightening the program’s work requirements. SNAP cuts would face hurdles in the Senate, but full budget details are needed before any solid outlook can be made.
Senate health bill collapses… Two more Republicans said on Monday that they would oppose their party’s measure to repeal ObamaCare, killing, for now, a seven-year promise to overturn former President Barack Obama’s signature item. Facing defeat, Mitch McConnell, the Senate majority leader from Kentucky, outlined plans to repeal the health law first and replace it later, a strategy that could leave millions without insurance. Our sources say there will not likely be enough votes to even pass a repeal-only measure. A Bloomberg News poll published yesterday showed that health care ranked as the most important issue facing the country, ahead of jobs, terrorism and immigration. Investors seem to see the failure to pass the bill as a warning sign for President Donald Trump’s legislative agenda, with the dollar and U.S. equity futures falling after the outcome became clear.
Brazil, U.S. has different timing on Brazilian beef to U.S…. Brazilian Agriculture Minister Blairo Maggi was more upbeat than USDA Secretary Sonny Perdue about his country’s chances to start exporting beef again to the U.S. The two met Monday afternoon. Maggi said he expects the U.S. to lift the ban in one or two months. Perdue seemed less optimistic than Maggi about the resumption of trade. “Open dialogue is good, but we need to see progress,” Perdue said. Maggi acknowledged that U.S. inspectors were finding bones in Brazilian shipments, with concerns that foot and mouth virus can hide in bone marrow.
Trade panel leaders want role in South Korea trade talks... Leaders of the House Ways and Means Committee and Senate Finance Committee sent a letter Monday to U.S. Trade Representative Robert Lighthizer, insisting that he first consult with Congress before trying to negotiate changes to the U.S. trade pact with South Korea (KORUS). The Trump administration last week notified South Korea that it wanted a bilateral meeting to discuss altering KORUS. U.S. beef industry leaders like the existing KORUS language regarding beef trade, with U.S. gaining market share due to lower tariffs and even lower levels ahead.
Beef prices may be working on a low... Futures are still more than $3 below last week’s cash cattle trade that largely took place around $120. Plus the beef market is giving some hints of stabilizing. Prices were mixed on Monday and the recent price drop has spurred strong movement.
Pork market struggles... The pork cutout value fell 45 cents to start the week and movement was light at 229.07 loads. Pork prices above the $100 per cwt. level paired with the the recent sharp drop in beef values could make it tough for pork to compete in the meatcase. Adding to negative attitudes, cash hog prices slipped across the Midwest on Monday.
Overnight demand news... Algeria purchased around 70,000 MT of corn to be sourced from optional origins. Egypt tendered to buy an unspecified amount of soft and/or milling wheat from global suppliers. Japan tendered to buy a total of 89,443 MT of food-quality wheat from the U.S. and Australia.
Today’s reports:
- 11:00 a.m., Livestock, Dairy, & Poultry Outlook: July 2017-- ERS
- 2:00 p.m., Dairy: World Markets and Trade-- FAS
