First Thing Today: Wet Corn Creating Problems for Exporters

Posted on 11/22/2017 6:36 AM

Good morning!

Firmer tone overnight... Corn futures are fractionally higher after a quiet overnight session. Soybeans faced pressure early in the overnight session, but most contracts are currently trading 4 cents higher. Winter wheat futures are up 1 to 2 cents, while spring wheat futures are narrowly mixed. The U.S. dollar index is marginally lower, while crude oil futures are posting solid gains.

Wet corn creating problems for exporters... Rains and cool temperatures this fall prevented later-planted corn from drying down, which is boosting premiums for dry grain and upping costs for exporters that are struggling to compete against Argentine supplies. In addition, the massive crop size means some farmers have used up all their storage and have nowhere to dry their corn. As a result, basis bids at the Gulf have climbed 17 cents over the past month, keeping U.S. prices a bit more expensive than Argentine supplies. According to Reuters data, U.S. cargoes are priced around $156 per MT versus $155 per MT for Argentine corn.

USTR issues NAFTA 2.0 warning... U.S. Trade Representative (USTR) Robert Lighthizer said Canada and Mexico are not responding seriously to U.S. proposals to renegotiate the North American Free Trade Agreement (NAFTA) and warned that if the two countries don't change their tactics, "We will not reach a satisfactory result." The three countries ended a fifth negotiating round without major breakthroughs. "I hope our partners will come to the table in a serious way so we can see meaningful progress before the end of the year," he added. Canadian and Mexican officials placed blame on the U.S. for putting forth a list of proposals that they said would weaken the pact, and would move its long-time focus away from the accord's initial intention to integrate trade between the three nations. The three countries have agreed to keep negotiating until the end of March.

New TPP deal could be signed without Canada... That's what Sankei newspaper reports, which said Japan wants an agreement as soon as possible and may look to move ahead without Ottawa. Canada's leader, Justin Trudeau, has always stopped short of full support for the pact and often declares that his government is almost entirely preoccupied by ongoing NAFTA 2.0 talks.

Border wall funding included in Senate spending bill... The Senate Appropriations Committee's fiscal 2018 spending bill for the Homeland Security Department (DHS) includes $1.6 billion to begin building President Donald Trump's wall on the U.S./Mexico border. The draft bill, released by the committee Tuesday, would provide DHS with $1.6 billion that Trump requested in March to construct a wall along 74 miles of the border near San Diego and in southern Texas.

Aggressive expansion in hog production expected for northeast China... China is working to crack down on pollution in its farm sector, forcing out many small pork producers and making way for huge mega hog farms. At least eight listed companies have announced or confirmed plans build new facilities in the northeast that will produce around 17 million pigs each year, with many other companies moving forward with similar plans. Some researchers say the northeast region's hog output will likely surge from 69 million head annually to 120 million pigs each year. "In the next few years, almost 20% of China's hogs will be transferred to new territory. That's equivalent to the number slaughtered in the U.S. annually," notes Feng Yonghui, chief analyst at consultancy Soozhu.com. This region of the country is more sparsely populated, making it attractive for huge operations, despite its colder temperatures.

Industry group optimistic Russia will lift its ban on Brazilian pork and beef soon... ABPA, a Brazilian poultry and pork industry group, says it expects Russia to reverse its temporary ban on beef and pork imports from the country soon. Earlier this week, Russia announced it would temporarily restrict imports of these meats from Brazil because ractopamine was found in some shipments. Brazil's ag ministry has requested lab evidence and documentation proving Russia truly found ractopamine in a shipment. The ministry also noted it had not been formally notified of the ban. ABPA estimates Russia accounted for 41% of Brazil's total pork shipments through September, while the beef industry group Abiec says Russia has accounted for 11% of its beef trade volume through October.

Cash cattle trade picks up at steady to slightly lower prices… Cash cattle trade got underway in Kansas and Texas yesterday around $118, down a buck from last week, with Nebraska seeing trade at steady prices around $119. This represented less of a drop than traders feared, sparking short-covering in the market as traders readied positions for a Thanksgiving break from trade. Also encouraging, Choice boxed beef prices surged $2.45 yesterday and movement was impressive at 178 loads.

Average hog weights slip in the Iowa/southern Minnesota market… Average hog weights slipped 0.1 lbs. the week ending Nov. 18 to 284.5 lbs. in the Iowa/southern Minnesota market, which was an encouraging shift from higher weights in recent weeks. But weights could very well creep up in next week's update due to Thanksgiving downtime. And weights are still up 4 lbs. from year-ago. Also of note, USDA will release its monthly update on the amount of pork in cold storage during market hours today.

Overnight demand news... Japan says it will import 380 MT of feed wheat and 7,560 MT of feed barley via a simultaneous buy and sell auction. Turkey issued a series of tenders to buy 96,000 MT of animal feed corn. The country also purchased around 48,000 MT of feed barley in a tender.

Today's reports:

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