Brazil’s Safrinha Corn Crop Taking Total Production Down Fast: Sources

Posted on 05/03/2021 7:57 AM

U.S. tone on China continues aggressive

 


In Today’s Digital Newspaper


 

Market Focus:
Dallas Fed’s Kaplan said signs of excess risk-taking in financial markets
Freight industry executives expect a squeeze on trucking capacity to persist
Corn has led rally among agricultural crops, rising more than 30% in 2021
• How low can’s Brazil’s total corn crop go due to slipping Safrinha crop  

 

Policy Focus:
Biden invited lead GOP negotiator on infrastructure package to meet this week
March DMC payments triggered by margin prices

 

China Update:
U.S. tone on China continues aggressive
USTR says China’s new IP rights protections fall short

 

Coronavirus Update:
TSA will extend its face mask requirement for passengers

New restrictions on travel from India
100 million U.S. adults have received a full Covid-19 vaccine regimen

 

Politics & Elections:
• Bustos won't run for re-election in 2022
Manchin doesn't support DC statehood, election reform bills

 


MARKET FOCUS


 

Equities today: Global stock markets were mixed overnight, with Asian shares mostly weaker and European shares mostly firmer. U.S. stock indexes are pointed toward higher openings.

 

     U.S. equities Friday: The Dow fell 185.51 points, 0.54%, at 33,874.85. The Nasdaq declined 119.86 points, 0.85%, at 13,962.68. The S&P 500 lost 30.30 points, 0..72%m at 4,181.17. For the week, the Dow declined 0.5%, the S&P 500 was nearly unchanged and the Nasdaq fell 0.4%. So far this year, the Dow is up 10.7%, the Nasdaq is up 8.34% and the S&P 500 has gained 11.32%.

 

     Dallas Fed President Robert Kaplan said signs of excess risk-taking in financial markets show it is time for the Federal Reserve to consider reducing its massive bond purchases.  

 

     For the week, the S&P eked out a slim gain while the Dow and Nasdaq fell slightly, but all three benchmarks posted sharp gains for April, with the S&P and Nasdaq both up more than 5% and the Dow lagging with a 2.7% gain.

 

On tap today:

 

     • IHS Markit's U.S. manufacturing index for April is expected to hold at 60.6, unchanged from a preliminary reading. (9:45 a.m. ET)Institute for Supply Management's manufacturing index for April is expected to tick up to 65.0 from 64.7 a month earlier. (10 a.m. ET)
     • U.S. construction spending for March is expected to rise 1.8% from the prior month. (10 a.m. ET)

     USDA Grain Export Inspections, 11 a.m. ET.
     • USDA Crop Progress report, 4 p.m. ET.
     • Federal Reserve Chairman Jerome Powell speaks on community development at 2:20 p.m. ET (livestream here), New York Fed President John Williams speaks to a symposium on women in housing and finance at 2:10 p.m. ET, and Dallas Fed President Robert Kaplan speaks to his bank’s global perspectives event at 5 p.m. ET.
     • South Korea's consumer price index for April is expected to rise 2.2% from a year earlier. (7 p.m. ET)

 

Freight industry executives expect a squeeze on trucking capacity that has been driving up shipping costs for U.S. companies to persist through the rest of the year. “There’s more freight than trucks, or maybe I should say, than drivers,” David Menzel, chief operating officer at freight broker Echo Global Logistics, said in an earnings call Wednesday. “The ports are backlogged, demand is strong, so rates are high.” Trucking fleets have been stepping up equipment orders and raising driver pay as they compete for labor with industries such as construction. But those efforts still haven’t caught up with demand as the freight market roars back in an expanding economy, the Wall Street Journal reports (link).

 

    Freight

 

Market perspectives:

 

     • Outside markets: The U.S. dollar index is lower. Nymex crude oil prices are slightly lower and trading around $63.50 a barrel. Meantime, the yield on the benchmark 10-year U.S. Treasury note is presently fetching around 1.646%.  


     • Crude oil futures are narrowly mixed ahead of U.S. trading, with U.S. crude around $63.70 per barrel and Brent around $66.75 per barrel. Crude oil futures eased in Asian action, with U.S. crude down 14 cents at $63.44 per barrel while Brent was down 19 cents at $66.57 per barrel.
 

     • Corn has led the rally among agricultural crops, rising more than 30% in 2021 to touch its highest prices in nearly eight years. Record settlements were at $8.38¾ in August 2012 for corn and $17.68¼ in September 2012 for soybeans.

 

     • How low will Brazil’s corn crop go? A lot lower than many think and definitely way below USDA’s current 109 million tonne forecast, based on conversations with veteran Brazil crop watchers. Sources inform the crop is likely in the low-90-million-ton area, with the country’s safrinha crop the major problem. Other private-sector estimates are at 100 million tonnes or less, with most indicating a downward bias to their outlook. If so, veteran commodity traders see the potential for all-time highs for corn and soybean markets, with volatility in the export and fobbing markets. Anxiety is rising that come fall, significant demand for both corn and soybeans will produce major logistics problems. Front-end futures are expected to lead the way to all-time highs. Concerns about the crop in Brazil make potential rains all that much more important for U.S. crop prospects. Trade data this week will be interesting to see if the pattern of imports rising faster than exports continues. The economic recovery is continuing to add demand for imported goods in the U.S., foods and other ag products included.

 


POLICY FOCUS


 

— President Biden invited a lead GOP negotiator on the infrastructure package to meet this week as he seeks a bipartisan agreement. Republicans, who have offered a far narrower and less expensive alternative to Biden’s $2.25 trillion plan, said they wanted to see that the president was willing to make some concessions to prove his willingness to work across the aisle.

 

— March DMC payments triggered by margin prices. Payments under the Dairy Margin Coverage (DMC) program are triggered when the national all milk price and the national average feed cost (margin) falls below the margin trigger levels selected by producers. The calculations for March for milk prices and feed components (corn, blended alfalfa hay, and soymeal) will trigger prices for March 2021 as the national average margin is $6.46 per hundredweight (cwt). As a result, dairy operations that elected Tier 1 margin coverage levels at $9.50, $9.00, $8.50, $8.00, $7.50, $7.00, and $6.50 per cwt., and Tier 2 margin coverage levels at $8.00, $7.50, $7.00, and $6.50 per cwt. will be issued a payment. Payments range from $0.04 per cwt. for the $6.50 margin trigger to $3.04 per cwt. for the $9.50 margin trigger coverage level.

 


CHINA UPDATE


 

— U.S. tone on China continues aggressive. Secretary of State Antony Blinken declared that China has been acting “more aggressively abroad” and has taken on an “adversarial” tone, according to his remarks on  CBS 60 Minutes broadcast that aired Sunday. Asked if the U.S. and China were headed for a confrontation, Blinken said, "It's profoundly against the interests of both China and the United States to, to get to that point, or even to head in that direction." But he reiterated China’s actions over the past few years have been much more aggressive. "What we've witnessed over the last several years is China acting more repressively at home and more aggressively abroad. That is a fact,” Blinken stated. He also pointed to the U.S. push to round other countries to take on China, saying the administration’s message has been “bringing like-minded and similarly aggrieved countries together to say to Beijing: 'This can't stand and it won't stand.'" However, Blinken also said the U.S. is not trying to “contain China” in its focus on the country.
 

USTR says China’s new IP rights protections fall short. President Joe Biden’s administration urged China to do more to respect the intellectual property of American companies, signaling the U.S. will maintain pressure applied under Donald Trump to crack down on commercial crimes ranging from IP theft to counterfeiting and digital piracy. The U.S. Trade Representative’s office in Washington kept China on its “priority watchlist” of nations whose practices require monitoring. It noted that China’s patent, copyright and criminal law has been amended in the past year. “However, these steps toward reform require effective implementation and also fall short of the full range of fundamental changes needed to improve the IP landscape in China,” the report (link) released Friday stated. The USTR also highlighted a move in recent months by Chinese courts that “broadly prohibit right holders from asserting their patents anywhere else in the world,” and expressed concern about comments from President Xi Jinping “about promoting the extraterritorial application of China’s IP law.” The report concluded: “Widespread counterfeiting in China’s e-commerce markets, the largest in the world, has also been exacerbated by the migration of infringing sales from physical to online markets, which accelerated during the Covid-19 pandemic.”
 

     The IP report carries no immediate penalties.
 

     U.S. tariffs remain in place on about $335 billion of Chinese goods annually.

 


CORONAVIRUS UPDATE


 

Summary: Global cases of Covid-19 are at 152,900,958 with 3,203,430 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 32,421,713 with 577,045 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 245,591,469 doses administered, 96,472,537 have been fully vaccinated, or 29.4% of the U.S. population.
 

— Transportation Security Administration will extend its face mask requirement for passengers using transportation networks through Sept. 13. The original mask mandate, which went into effect Feb. 1, was set to expire May 11.
 

— New restrictions on travel from India, effective May 4, were announced by the White House. "The policy will be implemented in light of extraordinarily high Covid-19 caseloads and multiple variants circulating" in India, White House Press Secretary Jen Psaki said in a statement.
 

— White House announced that 100 million U.S. adults have received a full Covid-19 vaccine regimen. White House Covid-19 Response Coordinator Jeff Zients said the administration is now focused on populations that are harder to reach and warned the number of shots administered daily will "moderate and fluctuate."

 


POLITICS & ELECTIONS


 

— Rep. Bustos won't run for re-election in 2022. Rep. Cheri Bustos, the Illinois Democrat who led her party’s House campaign arm in the 2020 cycle and barely won her own re-election said Friday she will not seek a sixth term in the House. She said she would serve the remainder of her current term, which ends in January 2023. Her 17th District, in the northwest corner of the state that includes farmland along the Mississippi River to downtown Peoria, is a competitive seat. With Illinois set to lose one seat in the House, thanks to the 2020 census, all the state’s district boundaries are subject to change. The National Republican Congressional Committee put Bustos on its initial target list for the 2022 midterm elections after she won ree-lection in 2020 with 52% of the vote to 48% for Republican Esther Joy King. David Wasserman, House editor of the Cook Political Report notes that Bustos is now the fourth Democrat to forgo re-election. “All four of their seats could be substantially redrawn and are potentially at risk of a GOP takeover. And, there will certainly be more exits that complicate the DCCC's already-tenuous math for 2022,” he concludes.

— Manchin doesn't support DC statehood, election reform bills. Sen. Joe Manchin (D-W.Va.) said on Friday that he does not support a House-passed D.C. statehood bill or a sweeping bill to overhaul federal elections. Manchin's comments, made during a radio interview with West Virginia MetroNews's Hoppy Kercheval, underscore how some of Democrats' biggest priorities face hurdles even if they got rid of the 60-vote legislative filibuster — which also faces its own hurdles. Manchin, asked about a bill to grant D.C. statehood, said the idea had been studied by previous Justice Departments. "They all came to the same conclusion: If Congress wants to make D.C. a state, it should propose a constitutional amendment ... and let the people of America vote," Manchin said. Pressed if he would oppose a stand-alone bill, Manchin added "Yes, I would." "I would tell all my friends ... if you go down that path because you want to be politically popular ... you know it's going to go to the Supreme Court," Manchin said. "So why not do it the right way?" Besides Manchin, Sens. Angus King (I-Maine), Kyrsten Sinema (D-Ariz.), Mark Kelly (D-Ariz.) and Jeanne Shaheen (D-N.H.) have not signed on as co-sponsors.

 

     Manchin also said that he would vote against a sweeping election overhaul bill known as the For the People Act if it was brought to the floor in its current form. The bill is a top priority for Democrats and Senate Majority Leader Charles Schumer (D-N.Y.) has pledged to give it a vote. "It's a far reaching 800-page bill that I do not support in its totality," Manchin said. "As it exists today I would not be able to support that bill and I would vote 'no.' I hope it doesn't come to that." Manchin signaled that he thought Congress should take up legislation to reauthorize the Voting Rights Act and noted that he was talking with Rep. James Clyburn (D-S.C.) about voting and election legislation and that they were moving "in a very progressive way… The vote should be accessible, it should be secure and it should be fair," Manchin said.
 


 

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