Good morning!
Markets rebound on crop progress and condition update... Corn futures rallied overnight as USDA’s initial crop condition rating and planting progress estimate were both lower than expected. Most contracts are currently 4 cents higher. Wheat futures were also bolstered by yesterday’s crop progress and condition data, and all three flavors are up 3 to 4 cents as of 6:40 a.m. CT. Soybean futures are 1 to 2 cents higher, with old-crop futures leading gains. The U.S. dollar index is down slightly, while crude oil futures are sharply lower.
PF CCI: Initial corn crop rating down from year-ago... When USDA’s initial crop condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500 point scale, with 500 being perfect), the corn crop came in at 363.77 points, down 16.58 points from last year’s initial rating that came at roughly the same time of year.
PF CCI: First spring wheat rating down nearly 18 points from year-ago... Pro Farmer’s weighted CCI shows the HRW wheat crop fell 1.20 points to 328.83 points last week. On the other hand, the SRW wheat crop climbed 3.99 points to 366.48 points. USDA also released its initial spring wheat ratings of the season, which translated to a reading of 367.21 points on our CCI, which is down 14.70 points from last year’s initial rating (which came a week earlier than this year) and 17.99 points below year-ago.
Early harvest results confirm fears about another low-protein HRW wheat crop... “It seems like it’s going to be more across-the-board low protein,” says Tregg Cronin, analyst with Halo Commodities, in reference to the HRW wheat crop. Early harvest reports signal fears this year will mark the second year in a row of a low-protein HRW wheat crop may be founded. Plains Grains Inc. conducts HRW wheat tests during harvest, and on Friday it detailed that the average protein of its first 14 samples was 10.6%, down from last year’s historically low final average of 11.2%. But the company cautioned that these early samples, “may or may not reflect the overall crop.”
China’s soy crushers pushing to delay or cancel soybean shipments... Chinese soybean processors are pushing to postpone or cancel cargoes of soybeans, which at this point in the year come mainly from Brazil. Earlier, strong crushing margins prompted them to aggressively scoop up soybeans, but now those profit margins have eroded to their lowest level in three years. Shanghai JC Intelligence last week said that four to five cargoes were canceled for May and June loading, and another two or three were resold to neighboring cargoes. Another trader cited by Reuters said that cancellations are unlikely to top five to seven cargoes. China is likely to import around 9 MMT to 9.5 MMT of previously booked soybeans in May and June, before shipments drop to around 8 MMT in July and taper off thereafter.
China’s May PMI tops expectations... China’s official Purchasing Managers’ Index (PMI) came in at 51.2 points in May, steady with the month prior and 0.2 points higher than expected. For the 10th month in a row, the figure is above the 50.0 level separating contraction from expansion in the nation’s manufacturing sector.
EPA could soon announce proposed RFS volume requirements... The Environmental Protection Agency (EPA) “any day now” could announce a call for comment on proposed 2018 corn-based ethanol and 2019 biodiesel volume requirements via the Renewable Fuel Standard (RFS), according to one industry contact. A 15 billion gallon mandate is expected for corn-based ethanol, while biodiesel could see a slight increase for 2019 from the 2018 proposed level announced last year.
Argentine inspectors to launch three-day strike... Inspection workers at Argentina’s ports plan to kick off a three-day strike today, two unions announced yesterday. This comes after workers at Senasa, Argentina’s phytosanitary inspection unit, failed to reach a labor agreement with the government. The strike would shut down the majority of export activity at the country’s ports, since Senasa is required to inspect all grain exports.
EU trade official downbeat on trade pact with U.S... European Commissioner for Trade Cecilia Malmström is casting doubt on the revival of trade talks with the U.S., telling the European Parliament that the Transatlantic Trade and Investment Partnership (TTIP) “has been mentioned but not discussed in detail” in discussions between the EU and the U.S. The Trump administration needed “more time” to make a decision on resuming negotiations, she said. But U.S. Commerce Secretary Wilbur Ross said the U.S. is not closing the door on TTIP. “It’s no mistake that, while we withdrew from TPP, we did not withdraw from TTIP,” Ross told CNBC on Tuesday. “The EU is one of our largest trading partners, and any negotiations legally must be conducted at the EU level and not with individual nations,” Ross said.
U.S. trade officials to travel to China next week to work on beef trade protocols... The goal is to finalize trade specifics for U.S. beef shipments. Chinese imports of the meat have soared in recent years, reaching $2.5 billion last year -- up 700% on 2012 -- as rising incomes boost meat consumption while relatively inefficient domestic producers struggle to keep up with demand. Several Chinese importers told the Financial Times they were keen to start buying premium grain-fed U.S. beef as soon as possible. While most of China’s imports are of lower-priced grass-fed beef from Brazil, Uruguay and Australia, U.S. beef has long been perceived as higher quality, and it is this that has fueled the gray market trade via Hong Kong. Still, experts warn it may take many more years for a large-scale beef supply chain from the U.S. to China.
Maryland cracks down on antibiotics use in animals... Maryland has joined California in passing a law that goes beyond guidelines from the U.S. Food and Drug Administration in terms of restricting antibiotics use in animals. Whereas FDA guidelines prohibit the use of antibiotics for growth promotion, these states prohibit the regular use of antibiotics for disease prevention. They only allow the use of antibiotics for sick animals or to control a verified disease outbreak. Perdue Farms, which is based in Maryland, is already compliant with the new legislation.
Cattle futures remain at wide discount to cash... Live cattle futures benefited from efforts to narrow the discount they hold to last week’s cash cattle trade that took place at an average price of $131.50 to start the week. But futures are still well below that price level, signaling more such action is possible. But on the other hand, traders also note that the latest Cattle on Feed Report points to a greater-than-expected build in supplies. Nearer-term, showlist estimates are down a net 11,000 head this week, as a big drop in Nebraska was partially offset by gains in other locations. Boxed beef movement was fairly strong at 131 loads Tuesday on choppy prices.
Cash hog bids strengthen post-holiday... Impressively, cash hog bids strengthened yesterday afternoon, despite Memorial Day downtime that slowed marketings. Tuesday’s kill was an aggressive 440,000 head as packers worked to make up for time off and take advantage of strong margins. But the product market got off to a ho-hum start to the week, with the pork cutout value slipping 19 cents and 297.65 loads of pork changing hands.
Overnight demand news... Egypt tendered to buy an unspecified amount of wheat from global suppliers. Japan received no offers in its simultaneous buy and sell auction to purchase 200,000 MT of feed barley and 120,000 MT of feed wheat. South Korea tendered to buy up to 140,000 MT of corn from worldwide origins.
Today’s reports:
- 9:30 a.m., Weekly Ethanol Production -- EIA
- 2:00 p.m. Agricultural Prices -- NASS
- 2:00 p.m. Egg Products -- NASS
