First Thing Today | July 20, 2021
Rally mode… Corn futures rallied overnight and most contracts are currently up 12 to 13 cents. Soybeans are 19 to 21 cents higher amid ongoing weather concerns. Winter and spring wheat futures are 13 to 16 cents higher as USDA once again made a bigger-than-expected cut to its spring wheat condition rating. Crude oil futures are slightly higher after yesterday’s dive. The greenback is up slightly.
Crop progress & Condition Report highlights… Following are highlights from USDA’s crop progress and condition update for the week ended July 18. Find more details here.
- Corn: 56% silking, 8% in dough, 65% “good” to “excellent” (G/E)
- Soybeans: 63% blooming, 23% setting pods, 60% G/E
- Spring wheat: 92% headed, 11% G/E
- Winter wheat: 73% harvested
- Cotton: 69% squaring, 23% setting bolls, 60% G/E
Another week, another plunge in spring wheat crop ratings… When USDA's weekly condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn crop improved 1.7 points to 368.5 points. The soybean crop firmed 0.4 point to 352.3 points. The CCI ratings are 4.0 points below the five-year average for corn and 7.3 points below for soybeans for the third week in July. The spring wheat CCI plunged another 20.9 points over the past week, paced by a 11.5-point dive in North Dakota. The spring wheat CCI rating is now 38.1% below the five-year average for this date.
Cordonnier holds U.S. crop forecasts steady, but eye on dry northwest Corn Belt… Crop Consultant Dr. Michael Cordonnier still expects the U.S. corn crop to yield an average of 175.5 bu. per acre, and his bias is neutral going forward. July weather has generally been favorable, with the exception of dryness in the northwest Corn Belt and too much rain in some areas of the central Belt. The forecast calls for warmer, drier conditions, which would be beneficial for all but the northwest Corn Belt. But if dryness lingers more than a week, it could be problematic—especially if temperatures climb in the western Corn Belt, Cordonnier says. He also stayed the course with his U.S. soybean yield projection of 50 bu. per acre and his bias is neutral going forward. Weather was mostly beneficial the first half of July, but the most important time for soybeans is now getting started. “Some warm and sunny days would be beneficial for most of the soybeans if the dryness is not extended,” Cordonnier says. He points out that the dry northwest Corn Belt states of North Dakota, South Dakota and Minnesota account for 18.5% of U.S. corn acres and 23.4% of soybean acres.
Consultant leaning down on his Brazilian corn crop estimate… Cordonnier maintained his Brazilian corn crop estimate of 88 MMT, but his bias toward the crop is neutral to lower and he said he suspects the final estimate “will be lower than the current estimate.” He noted more frosts/freezing temperatures are likely in Brazil Monday through Wednesday for the same areas that saw three consecutive nights of frosts three weeks ago. This could cause additional losses.
Safrinha corn harvest 30% complete; AgRural warns more rain could hurt crop quality… Through July 15, farmers in Brazil had harvested 30% of their safrinha corn crop, reports the agribusiness consultancy AgRural. That’s a 10-point gain for the week but still lags last year’s pace by 13 percentage points, which isn’t surprising given late planting of this year’s crop. AgRural reports excessive moisture has slowed harvest for major producing areas like Parana and Mato Grosso do Sul, and the forecast for a cold front this week could bring additional losses. AgRural says, “Both states are concerned with corn quality after frosts hit the corn during in the filling stage,” adding “It could get worse if it rains in the next few days.”
Chinese customs data reminds country fully focused on Brazilian beans… China imported 10.48 MMT of soybeans from Brazil during June, which was around 30,000 MT under last June’s record high but still up 14% from May’s 9.23 MMT, data from China’s Administration of Customs showed. The country’s recovering hog herd has kept demand for soybeans high, though that’s been countered to some degree by a drop in crush margins. China imported just 54,806 MT of soybeans from the U.S. in June, which was just a fraction of the 267,8553 MT of soybeans the U.S. shipped China in June 2020.
Argentina halves amount of biodiesel blended into diesel; could increase its soyoil exports… Argentine lawmakers late last week passed a law lowering the minimum amount of biodiesel in diesel sold to the public from 10% to 5%, with the possibility that percentage could slide to 3%. Several analysts Reuters spoke with indicated this will likely lead to a rise in Argentina’s soyoil exports, in turn weighing on international prices. Luis Zubizarreta, head of Argentina's Carbio biofuel industry chamber, points out that with the blend at 10%, Argentina consumed around 1 MMT of biodiesel each year; under the new law, that volume would be halved.
Biden applauds uptick in U.S. economy, pushes passage of two infrastructure measures... President Joe Biden argued that upgraded infrastructure would boost the economy broadly and reduce inflation over time. Expanding the temporary child tax credit that was part of his Covid-19 relief package and subsidizing preschool and community college educations, he continued, also would make the economy stronger, more equitable and more competitive globally. Biden separately expressed support for Democrats who want to include a provision establishing a pathway to citizenship for some immigrants, including “Dreamers” brought to the U.S. as children. But he said the Senate parliamentarian would have to decide whether the proposal could be incorporated into the spending bill.
Republicans balk at initial procedural vote on infrastructure Wednesday… Republicans have balked at scheduling of an initial procedural vote Wednesday, given that the particulars — namely, how to pay for $1.2 trillion (roughly $600 billion in new spending) on roads, bridges, rail lines, electric vehicle charging stations and more — are still being worked out. They pressed to scrap a provision restoring money to the Internal Revenue Service for audits and enforcement; that forced negotiators to look for alternative sources of money. Senate Minority Leader Mitch McConnell (R-Ky.) said Monday that Republicans, even those who support the framework, were unlikely to go along with Schumer’s move to a preliminary vote Wednesday. “We need to see the bill before voting to go to it,” McConnell told reporters.
Last train or plane out of Washington?... Senator Lindsey Graham (R-S.C.), one of the 10 Republicans who has tentatively supported the bipartisan effort, suggested Sunday that Republicans could flee the Capitol to block a Senate vote on the larger Democratic bill — 51 lawmakers are required in the Senate to conduct business. In so doing, they’d be borrowing a tactic from Texas Democrats (members of the state legislature) who fled Austin last week to block a vote on the Republican majority’s restrictive voting bill.
More geopolitical turmoil may be coming to global oil markets… The U.S. is considering tighter sanctions on Iranian oil sales as a way to encourage Tehran to conclude a nuclear deal and raise the costs of abandoning stalled negotiations, the Wall Street Journal reports. One plan being drafted would choke off Iran’s swelling crude-oil sales to China, the country’s main client and a key lifeline for the country’s oil sector amid sanctions that were launched in 2018. The new measures would target the shipping networks that help export an estimated 1 million barrels a day and bring in critical revenue.
The U.S. officially climbed out of a recession in April 2020… The pandemic-driven economic contraction lasted only two months. The announcement Monday from the National Bureau of Economic Research also marks April as the official start of the economic recovery from the initial shock of the coronavirus pandemic last spring, which triggered widespread business and school closures, a steep drop in demand for services and record job losses.
White House says China likely behind Microsoft Exchange server attack… The Biden administration and a group of allies on Monday attributed the Microsoft Exchange server attack that impacted tens of thousands of customers with “high confidence” to hackers affiliated with the Chinese government. The Biden administration did not announce retaliatory actions against China apart from the vocal criticism. China’s Foreign Ministry called the accusations a smear campaign by the U.S. that lacked evidence.
Ag ministry officials emphasize China has ASF under control, despite reports of ongoing outbreaks… Controlling and preventing African swine fever (ASF) in China remains a “complicated” and “severe” task, according to Xin Guochang, an official at the husbandry bureau of the country’s ag ministry. But Xin says Chian’s overall disease situation is stable. Industry sources reported new outbreaks in northern and northeastern China earlier this year, along with outbreaks in China’s southwest Sichuan province. But despite the outbreaks, Zeng Yande, head of development and planning under the ministry, said China’s hog herd totaled 439 million pigs at the end of June, representing 99.4% of late 2017 levels (before ASF struck). Zeng detailed that China’s sow herd stood at 45.64 million head, up 2% from late 2017 levels. China’s use of wheat in feed is expected to remain relatively high given its price advantage over corn, another ag ministry official said at the press briefing.
Beef prices continue their march lower… August live cattle futures on Monday settled around $2.50 under last week’s average cash cattle price of $122.82, which represented a 66-cent drop from last week. Boxed beef values continue to slide, with Choice dropping $1.45 and Select falling $2.30 on Monday. Movement was decent to kick off the week at 125 loads.
Pork prices on the rise… Monday’s kill of 457,000 head was up 8,000 head from the week prior but down 12,000 head from last week, with the tally reminding this is a period of seasonally slow slaughter. Packer profit margins have improved, rising from negative $8.45 a head last Monday to $9.80 a head to start the week, according to HedgersEdge.com. The product market got off to a solid start to the week, with the cutout value climbing $1.91 and all cuts except hams rising. Movement was lackluster, however, at nearly 250 loads. Cash hog bids dropped a national average of $1.08 on Monday.
Overnight demand news… Iran’s state grain buyer reportedly made no purchase in its international tender for up to 60,000 MT of milling wheat.
Today’s reports
- 2:00 p.m. U.S. Bioenergy Statistics — ERS
