Corn futures challenging contract-low support... Corn futures are down a penny or two, with nearbys trading just above contract-low support. Soybean futures faced pressure throughout the overnight session and most contracts are currently down 3 to 5 cents. Winter wheat futures are mixed, with the HRW market favoring the upside thanks to some light short-covering. But spring wheat futures are steady to 2 cents lower. The greenback is slightly higher this morning, while crude oil futures are facing pressure.
China makes big corn buys... China recently purchased between 10 and 12 cargoes of corn, mainly from the U.S., as rising Chinese prices and a drop in U.S. corn prices has pushed the spread with Chicago corn prices to a record, according to three trade sources cited by Reuters. Given the spread, more purchases are likely. "The [import] price is about 300 yuan cheaper than domestic corn," a China-based trader cited by Reuters detailed. In addition, Beijing's push to lower corn production has also left the country with a demand deficit of 4.3 MMT for 2017-18, and other feed substitutes like sorghum and barley have relatively high prices.
Dryness disrupting planting in Argentina... "The weather focus in South America has certainly shifted to Argentina," says South American Crop Consultant Dr. Michael Cordonnier, who notes that the dryness is of immediate concern to Cordoba and Sao Luis and of longer-term concern to areas of Santa Fe and Buenos Aires. Dry conditions have prompted some farmers to halt planting and wait for an inch or two of rain, and just light, scattered showers are in the forecast his week. Nevertheless, Cordonnier made no change to his soybean or corn crop estimates that stand at 55 MMT and 42 MMT, respectively, and he has a neutral bias toward both crops. He says that if it stays dry, some farmers may switch some intended corn acres to beans, adding that this could also limit double-crop bean acres. Final soybean acreage in Argentina has yet to be determined, he concludes.
Consultant notes favorable weather in Brazil... Cordonnier explains that "After a somewhat problematic start to the 2017-18 growing season, the weather during November has turned beneficial for most of Brazil." This has upped crop prospects, prompting Cordonnier to lean up on his 107 MMT soybean yield estimate. Rains have also sped along planting, with AgRural reporting 83% of the crop has been seeded versus 79% on average. For corn, Cordonnier is sticking with his 88 MMT crop peg and a neutral bias. He reiterated that Brazilian farmers "significantly reduced their full-season corn acreage (which is approximately one-quarter of Brazil's total corn production) and they are expected to also reduce their safrinha corn acreage."
PF CCI: Big drop in HRW wheat rating... When USDA's weekly crop condition ratings are plugged into Pro Farmer's weighted crop condition index (CCI; 0 to 500 point scale, with 500 representing perfect), the the HRW wheat crop dropped 8.25 points to 331.63 points. This is 16.25 points below the final rating of 2016. Once again, Kansas led the decline. In contrast, the SRW wheat crop edged 1.41 points higher for the week to 377.78 points. This is up 5.74 points from last year at this time. USDA won't issue any more official crop condition ratings until April 2018. Get more details.
GOP leaders continue to make changes to Senate tax reform bill... While Republican leaders believe they will eventually have the 50 votes needed to clear the tax reform bill later this week, they haven't yet reached the end zone. Several changes are being made, as expected, including a significant change to make pass-through companies and associations on more equal footing to corporations using the lowered corporate tax. A sticking point is how to win over GOP senators worried about how the bill could boost deficits if revenue is lower than expected. Various trigger mechanisms are being mulled that would actually boost taxes in some situations. An important vote comes today in the Senate Budget Committee.
U.S. farm exports to South Korea show big increase... South Korean imports of meat, grains, fruits, vegetables and other farm products have risen by 25% this year from January through September, according to a new report from USDA's Foreign Agricultural Service. "Despite escalated competition from export-oriented competitors, consumer-oriented American products continued to lead the expansion of export market in Korea, which reflected Korean consumers' increased demand for better value, quality and diversity," the report said. Of note, the analysis said U.S. farm product exports to South Korea will continue to increase next year, adding the current Korea-U.S. (KORUS) trade accord is partially responsible.
Russia not slowing down on efforts to expand export capacity... Russia is working to modernize a grain terminal at the port of Novorossiisk, which would double its capacity, and a project is underway to develop its Black Sea port of Taman and to construct a new grain terminal in Russia's far east. Russia's Ag Minister Alexander Tkachev says "These [projects] will give us about 30 million tonnes of grain for exports in the next five years... This is what would give us speed, turnover and low prices." Russia is slated to export a record 45 MMT of grain this year, and analysts say its shipments would be even higher if it had greater export capacity.
Fed Governor Powell testimony signals no major shift in Fed policy... The course laid out by current Fed Chairwoman Janet Yellen is the one that Fed Governor Jerome "Jay" Powell will pursue if he is confirmed as the top U.S. central banker, according to his prepared opening remarks released by the Fed ahead of his Tuesday confirmation hearing. "We expect interest rates to rise somewhat further and the size of our balance sheet to gradually shrink," Powell said in the remarks to be delivered to the Senate Banking Committee. He noted the Fed's goal is to sustain a strong job market, with inflation moving gradually up toward the Fed's 2% target. Further, he stressed the Fed needs "flexibility" in its policy actions, a not-so-subtle pushback against some in the GOP wanting to limit the Fed's policy discretion.
Dallas Fed's Kaplan likely to back a December rate increase... Just over two weeks before the final 2017 Federal Open Market Committee (FOMC) meeting, Dallas Fed President Robert Kaplan said in an essay published on the bank's website that he thinks a rate rise will be needed at that meeting. "I believe it will likely be appropriate, in the near future, to take the next step in the process of removing monetary accommodation," Kaplan said. He previously expressed some reservations about a rate increase, but said he thinks now it will needed from a "risk-management point of view." He expressed concern about financial imbalances developing, noting the stock market has not seen a three percent decline in 12 months. "This is extraordinarily unusual," he said.
EU renews glyphosate license for five years... After months of indecision, the European Commission voted to renew glyphosate's license for the next five years. Germany, which had abstained from recent votes, crossed its key ally France to deliver the deciding vote. Debate has raged for months amid concerns the weed-killer causes cancer, despite numerous studies to the contrary. Licensing for the chemical had been set to expire Dec. 15.
Live cattle trading at slight premium to cash market... Cash cattle traded at an average price of $118.97 last week, according to USDA, which is roughly $1 below where futures finished on Monday. That signals profit-taking is a possibility today after a solid start to the week. Light boxed beef movement on Monday is also encouraging to that end.
Very light pork movement to kick off week... Just 192.54 loads of pork changed hands on Monday on a 33-cent drop in the pork cutout value. While this could very well be a post-holiday anomaly, movement bears watching. Hefty supplies of pork mean demand must hold strong to prevent supplies from overwhelming the market. Cash hog bids slipped 44 cents to start the week, which was a shift after the market stabilized last week.
Overnight demand news... Egypt tendered to buy an unspecified amount of wheat from global suppliers; once again, Russia has the lowest offer. South Korea purchased 25,000 MT of non-genetically modified yellow soybeans from the U.S. and it re-issued tenders to buy 55,000 MT of such beans.
- 1:00 p.m., Beige Book -- Fed