First Thing Today: Warm, Dry Outlook Heightens Argentine Crop Concerns

Posted on 12/04/2017 6:33 AM

Good morning!

Soybeans rally on weather concerns... Soybean futures gapped higher on the open and are 8 to 10 cents as of 6:30 a.m. CT thanks to rising weather concerns in Argentina. Corn futures are steady to fractionally higher, while wheat futures are up 1 to 4 cents. The U..S. dollar index is slightly higher. Crude oil futures are posting moderate losses.

Light weekend rains and warm, dry outlook for Argentine heighten crop concerns... Concerns about dryness in Argentina damaging crops are on the rise after weekend rains were erratic and generally light. More spotty rains are expected this week, with accumulation not expected to be enough to counter evaporation that could be hurried along by above-average temperatures. Looking farther ahead, a ridge of high pressure is expected to develop next weekend, keeping conditions hot and dry in the upcoming week and further stressing crops.

INTL FCStone ups Brazilian soybean crop estimate... Good weather to date in Brazil has prompted the consultancy INTL FCStone to raise its Brazilian soybean crop estimate by 1.5 MMT to 107.6 MMT. The firm also pegged Brazil's safrinha corn crop at 63.5 MMT for 2017-18.

Heavy rains fuel crop quality concerns in Australia... As expected, heavy rains fell in eastern Australia over the weekend, with accumulation amounts as high as 7 inches in some eastern areas of Victoria, according to World Weather Inc. The heavy rains raise concerns about the quality of unharvested wheat, barley and canola crops. The rains are boosting soil moisture for summer crops, however. More showers are possible for New South Wales and western Australia this week.

Senate passes tax overhaul... The Senate passed, 51-49, legislation to overhaul the tax code early Saturday morning, handing Republicans a major legislative victory. Vice President Pence presided over the final passage vote. Republican senators will now move to reconcile their legislation with the House's proposal, passed in mid-November, as they try to get a final product to President Donald Trump's desk by the end of the year. Broad differences between the House and Senate plans will still need to be resolved, though the final changes made Friday brought the Senate version closer in line with the House-passed bill. The House is set to take a vote Monday on going to conference with the Senate to work out a final tax plan. Get more details.

The week ahead... House members will return to Washington on Monday, a day earlier than planned, to vote to proceed to conference on tax policy overhaul. House Speaker Paul Ryan (R-Wis.) said early Saturday that the House would move "quickly" to a conference committee. Senate Majority Leader Mitch McConnell (R-Ky.) made similar remarks. Other key issues in Washington include the need for a stopgap funding measure beyond the current deadline of Dec. 8, and Friday's Employment report. House appropriators on Saturday morning introduced a two-week spending stopgap that would keep the government running until Dec. 22 and also help states temporarily bolster funding for the Children's Health Insurance Program. Welfare reform could be the next big focus for the White House and Congress, with Ryan and other republicans beginning to note that next year they will begin to move on changes in Medicare and Social Security. Get more details.

Trump to meet with petroleum interests on biofuels... Trump has agreed to meet and discuss U.S. biofuels policy with the U.S. refining industry and lawmakers related to those interests, according to a report by Reuters. One source indicated Trump has been "briefed" on the situation and agreed to the meeting, with a session potentially the week of Dec. 11 once a window of opportunity can be found. Bloomberg reports Trump has agreed to meet with key senators (including Sens. Ted Cruz (R-Texas) and Chuck Grassley (R-Iowa)) and Cabinet-level officials and that the session is tentatively scheduled to take place in early December. Politico is reporting the meeting will be with Cruz and will not include any petroleum/refining industry officials. Cruz has put a hold on the nomination of Bill Northey to be an undersecretary at USDA, saying his hold will last until he gets a meeting with the White House on biofuel policy. Read more.

Consultancy expects bigger EU to produce bigger rapeseed, soybean crops in 2018-19... The European Union's rapeseed crop will likely total 22.6 MMT in 2018-19, up 900,000 MT from the current season, according to the consultancy Strategie Grains. Rapeseed is the bloc's most widely grown oilseed crop. The consultancy also called for soybean production to climb 100,000 MT from 2017-18 to 2.7 MMT.

Cattle futures drop sharply Friday despite higher cash trade... Cash cattle trade took place last week mainly between $120 and $121, which based on subsequent futures price action was less of a gain from the week prior than traders had hoped. Heavy losses Friday resulted in December futures finishing nearly $3 below the low end of that cash cattle range. That could lead to some corrective action today.

Cash hog index remains in focus... Concerns about the ongoing sideways move in the cash hog index and weight data signaling marketings may not be current curbed bullish enthusiasm last week and will likely do so until these reads improve. Futures are trading at a premium to the cash index, signaling their bias, but traders are unlikely to widen that premium much until the index rises.

Weekend demand news... Saudi Arabia purchased 495,000 MT of hard wheat in an international tender. Jordan tendered to buy 100,000 MT of hard milling wheat from optional origins. Turkey tendered to buy 84,000 MT of feed barley and 60,000 MT of corn.

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