First Thing Today: Coming USDA Reports Grab Market's Attention

Posted on 01/12/2018 6:33 AM

Good morning!

Firmer tone as traders await reports… Corn and soybean futures are both fractionally higher leading up to a barrage of USDA report data to be released at 11:00 a.m. CT today. SRW wheat futures are also fractionally higher, with HRW wheat narrowly mixed and HRS wheat posting fractional losses. The U.S. dollar index and crude oil futures are both under pressure.

Key USDA reports out today… There’s no shortage of USDA report data out today. Traders surveyed by Reuters expect the department to raise its U.S. corn crop estimate 1 million bu. to 14.579 billion bu., with carryover expected to slip 6 million bu. to 2.431 billion bushels. The market expects USDA to raise its U.S. bean crop estimate by 2 million bu. to 4.427 billion bu., with carryover expected to climb 27 million bu. to 472 million bushels. Wheat carryover is expected to edge 1 million bu. lower to 959 million bushels. Dec. 1 stocks are expected to come in at record-highs of 12.431 billion bu. and 3.181 billion bu., for corn and soybeans, respectively. Quarterly wheat stocks are expected to come in around 1.849 billion bushels.

The market also expects USDA to peg total winter wheat acres at their lowest level in more than a century, with winter wheat acres expected to come in around 31.307 million acres. HRW wheat is expected to account for most of the decline.

Traders surveyed by Bloomberg expect USDA to trim its U.S. cotton crop peg to 21.36 million bales and up its export forecast, paring ending stocks to 5.51 million bales. Check your website following the release for report highlights and our report reaction.

AgroConsult also calls for this year’s Brazilian bean crop to match last year’s record-high… AgroConsult also hiked its estimate of Brazil’s bean crop to 114.1 MMT, a 3.1 MMT increase from its November peg and in line with last year’s crop record-high crop peg. This also roughly aligns with where AgRural pegged the crop this week. On the other hand, the consultancy cut its corn crop estimate by 2.8 MMT from November to 91.6 MMT, with the summer crop expected at 26 MMT. AgroConslut also noted that forward-sales of soybeans are lagging levels of the prior five or six crop cycles and that low prices are deterring forward sales of Brazil’s winter corn crop.

Good rains expected for Argentina over the weekend… Showers and thunderstorms are expected across Argentina over the weekend, with the most significant precip expected in central and northern areas of the country and in northeast Buenos Aires. World Weather Inc. notes that follow-up rainfall is likely over the Jan. 20-25 timeframe, with central and northern areas again expected to be the biggest beneficiaries. Traders have pushed soybean futures lower this week, in part as an effort to remove any remaining weather premium.

Chinese bean buys surge… Preparations for its Lunar New Year holiday and strong crush margins boosted Chinese soybean purchases to 9.55 MMT in December, a gain of 10% from the month prior and 6% above year-ago levels, according to preliminary data from its General Administration of Customs. This tally was the second-highest volume on record for December. For all of 2017, China imported a record-high 95.54 MMT of soybeans, up 11.63 MMT (13.9%) from year-ago.

China’s ag ministry raises corn import forecast… China’s agriculture minister added 200,000 MT to its corn import forecast for 2017-18, pushing the tally to 1.2 MMT. Rising domestic prices have sent users on the hunt for cheap imports, according to the monthly report. The ministry also made a small cut to its soybean acreage estimate, which now stands at 8.1 million hectares (20.0 million acres), but the country is not a major bean producer.

Trump signals no decision on NAFTA exit until after Mexico elections… President Donald Trump said he is in "no rush" to exit the North American Free Trade Agreement (NAFTA) and there was no timetable on that decision given the July 1 presidential elections in Mexico. "I'm leaving it a little flexible because they have an election coming up," Trump told the Wall Street Journal in an interview. "I understand a lot of things are hard to negotiate prior to an election.” However, he reiterated that if a “fair deal” is not found in NAFTA, "I will terminate. With that being said, I would rather be able to negotiate.” He noted a lot of headway has been made in the negotiations so far. Regarding any NAFTA termination, Trump made an observation that recent market activity could suggest is not accurate: "I'm not sure that markets would dip … I'm not sure about world markets, but I can tell you I think the American market would go up if I terminated NAFTA and renegotiated a new deal."

India cancels cotton export contracts, presenting opportunity for the United States… India’s domestic cotton prices have rallied, as has its currency, prompting Indian cotton traders to cancel contracts to export around 400,000 bales of cotton in favor of domestic sales, Atul Ganatra, the president of the Cotton Association of India, told Reuters. The situation could drop the country’s cotton exports to 5 million bales in 2017-18, nearly a quarter under an initial estimate and 800,000 bales under year-ago levels, Ganatra continues. This has left buyers like Bangladesh, Vietnam and China searching for alternatives and adds to the positive U.S. cotton export outlook.

Study: Foreign competitors boost export promotion, but U.S. effort more effective… The European Union, New Zealand and Australia are all spending more on promotion of farm products, but the U.S. approach led by USDA’s Foreign Agricultural Service (FAS) may be more effective, says an industry-commissioned study. The report by Informa Economics IEG says the EU is increasing its ag export promotion by 29% over three years. The report's analysts believe FAS programs are more effective because they encourage cooperation between industry and the government and are better focused on long-term export goals. The report was commissioned by the U.S. Dairy Export Council, U.S. Grains Council, U.S. Meat Export Federation, Almond Board of California and Wine Institute.

Monsanto plans to launch Dicamba-resistant soybean seed in Brazil… The Brazilian unit of Monsanto plans to run field tests on dicamba-resistant GM soybean seed in Brazil for the 2019-20 crop, with plans to commercially launch the INTACTA2 XTEND seed the year following. Brazilian regulators approved Monsanto’s request to sell dicamba-resistant seed in 2016.

CME Group lowers margins on soy products… CME Group lowered its margins on soybean futures from $1,450 per contract to $1,300 per contract for January. The exchange also dropped margins on soybean meal futures by $200 to $1,000 per contract for January. The changes take effect at the close of business today.

Beef prices slip again… After an impressive runup spanning several weeks, Choice and Select boxed beef values have softened the past two days, signaling the product market may be due for at least a short-term correction. Light movement of late signals also that may be warranted. But seasonal factors indicate any setback would likely be short-lived.

Lean hogs may have put in a short-term top… Lean hog futures have signaled the market may be working on a short-term top, with yesterday’s pullback in cash prices contributing to the setback. But we don’t expect any setback to be long-lasting. Recent losses have made short work of narrowing futures’ premium to the cash hog index, though the premium structure remains in place. There was also some talk that reports Canadian officials expect the U.S. to withdraw from the North American Free Trade Agreement rattled the hog market.

Overnight demand news… South Korea purchased around 70,000 MT of corn from optional origins.

Today's reports:

 

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