First Thing Today | July 27, 2021
Markets bounce as crop condition ratings slide… Corn futures are 7 to 9 cents higher, and soybeans are up 17 to 20 cents after USDA unexpectedly lowered its crop condition ratings yesterday. Its spring wheat crop estimate also dropped more than the market anticipated, helping to lift nearby HRS contracts 9 to 13 cents. HRW wheat futures are up 6 to 7 cents and SRW wheat futures are up 2 to 3 cents. The greenback is slightly higher, as are crude oil futures.
Sultry weather grips Northern Plains and western Corn Belt… Heat advisories and excessive heat warnings are in effect for the North Plains and western Corn Belt, with heat expected to stretch all the way down to the northwestern Gulf Coast. Temperatures are expected to climb well into the 90s or 100s as soybeans go through or near key development stages. The bulk of the corn crop has made it through pollination, but the forecast does raise some concern about grain fill. High temperatures are expected to ease Thursday when a front moves in.
Crop Progress & Condition Report highlights… Following are highlights from USDA’s crop progress and condition update for the week ended July 25. Find more details here.
- Corn: 79% silking, 18% in dough, 64% “good” to “excellent” (G/E)
- Soybeans: 76% blooming, 42% setting pods, 58% G/E
- Spring wheat: 97% headed, 3% G/E
- Winter wheat: 84% harvested
- Cotton: 78% squaring, 37% setting bolls, 61% G/E
No change in Cordonnier’s U.S. crop estimates… Crop Consultant Dr. Michael Cordonnier maintained his U.S. corn yield projection of 175.5 bu. per acre this week, and his bias is neutral going forward. He explains that with the exception of the northwestern Corn let, the crop had a good July with adequate moisture and moderate temperatures. “The short-term forecast going forward is calling for hotter and dry conditions, so it is uncertain how good the weather will be for grain filling,” he adds. He expects corn yields to be “good” in the eastern Corn Belt, but he’s unsure if they will be good enough to make up for disappointing yields in the northwestern Belt. Cordonnier also stuck with his U.S. soybean yield projection of 50 bu. per acre and his bias is neutral going forward. “Soybeans have not fared as well as the corn thus far this growing season, and the next four to five weeks will determine the eventual soybean production,” he says. Again, he comments eastern Belt yields should be good, but the northwestern Corn Belt is uncertain.
Cordonnier slices Brazilian corn crop projection as farmer brace for another cold snap… Brazil’s late-planted safrinha corn plant has already been clipped by frosts and a third round is expected for southern Brazil this week. It’s expected to be the worst so far this year and further damage crop quality. Consequently, Cordonnier lowered his Brazilian corn crop estimate another 2 MMT to 86 MMT, and his bias is neutral to lower going forward. “It is uncertain if farmers will be able to sell some of the poorest quality corn,” he says. Cordonnier expects Brazil’s corn exports to be closer to 20 MMT than USDA’s 28 MMT projection. He also expects the country to import as much as 4 MMT of corn — primarily from Argentina, but also some from the United States. Some importing is already underway. Cordonnier also raised his Argentine corn crop peg by 1 MMT this week to 48 MMT; his bias is neutral going forward.
Spring wheat tour kicks off… Scouts on the Wheat Quality Council HRS tour will begin sampling spring wheat crops in North Dakota and neighboring areas today through Thursday. Given this year’s devastating drought and shockingly low crop ratings, attention on the Tour is elevated. A final yield estimate will be issued the final day of the tour.
Brazil an aggressive exporter of soymeal, while Argentine shipments of meal slump… Refinitiv trade data shows Brazil exported 1.7 MMT of soymeal during June, just off the May record. Ship lineup data shows the country will likely export 1.69 MMT of soymeal this month. Brazil’s year-to-date (YTD) soymeal exports of 9.07 MMT top last year’s record. In contrast, Argentine soymeal exports have held at five-year lows since May, with 1.6 MMT of the soy byproduct shipping during June and 1.5 MMT expected to be shipped this month. But the country’s shipments of soyoil so far this year are at a four-year high and up 16% from year-ago. The country’s YTD soymeal exports stand at 11.4 MMT, which is well under the five-year average. Argentina is typically the world’s largest soymeal and soyoil exporter.
China to hold another auction of imported corn July 30… China announced it will auction more than 202,000 MT (7.95 million bu.) of corn imported from the U.S. and nearly 50,000 MT (1.97 million bu.) of imported corn from Ukraine on July 30. These auctions are meant to ease food inflation, but recent sales have been met with light demand.
Latest WHIP+/ag disaster bill authorizes up to $8.5 billion for eligible 2020 and 2021 disasters… The measure is expected to be linked to a must-pass bill later this year. It would cover losses via drought, high winds, excessive heat and polar vortexes, and would also cover power outage, losses to wine grapes impacted by smoke and allow direct payments to sugar and dairy cooperatives for losses, including milk dumping, that affect an entire co-op. WHIP+ reforms include making it easier for farmers to qualify for drought losses, with those eligible facing a county with a USDA disaster designation due to D2 (severe) drought versus a previous requirement of D3 (extreme) or D4 (exceptional). Payment caps would generally be limited to $250,000 per person, but payments for high-value specialty crops would be capped at $900,000.
Biden's infrastructure bill hits snags… Lawmakers had previously set Monday as a target for closing out their talks on a roughly $1 trillion agreement. Aides disagreed over funding for water infrastructure and how to apply a requirement that federal contractors pay their employees a locally prevailing wage, among other issues. Republicans rejected a counteroffer advanced by the Biden administration and Democrats, saying it attempted to reopen settled issues. Democrats accused Republicans of stalling.
China's new ambassador to the U.S., Qin Gang, is heading to Washington today… This ends speculation over who will be handed the difficult task of trying to ease fractious relations between the powers.
White House announces Covid-19 travel restrictions will remain... The White House confirmed Monday that because of the surge in cases from the Delta variant, the existing travel restrictions for international travel will remain in place. White House Press Secretary Jen Psaki said the decision was due to a rise in infections among the unvaccinated with the Delta variant’s high rate of transmissibility and a recent advisory against travel to the United Kingdom. Also of note, the Department of Veterans Affairs will require its health care employees to receive the Covid-19 vaccine, becoming the first major federal agency to implement such a mandate.
House to take up FY 2022 Ag appropriations measure today… The House will take up the fiscal year (FY) 2022 agriculture appropriations bill today as part of a larger package, following House Rules Committee action on the bill.
Feeder cattle futures soar… Choice boxed beef values jumped $1.30 yesterday and Select strengthened 98 cents, with 106 loads changing hands. Prices have been climbing since last Wednesday, but until Monday gains had been subdued. The market is increasingly confident the product market has put in a low. Cash prices, on the other hand, turned down last week, with sales taking place at an average price of $120.77, which is a $2.05 drop from the week prior. Feeder cattle futures soared to new contract highs on a pullback in corn prices yesterday, with the front month hitting a 5.5-year high.
Will lean hog rebound hold?… Hog futures strengthened to start the week thanks to gains in the product market, seasonally tight supplies, futures’ discount to the cash market and improving market technicals. Analysts will be watching to see if the market is able to sustain and build on recent gains. The pork cutout value rose 57 cents on Monday, which was well off its $5.20 midday gain. Movement picked up a bit from recent days to 300.24 loads. Cash hog bids rose a national average of $1.40 to start the week.
Overnight demand news… Egypt tendered to buy an unspecified amount of wheat from global suppliers. Pakistan tendered to buy 110,000 MT of wheat. Turkey’s state grain board issued an international tender to buy around 395,000 MT of milling wheat and 515,000 MT of animal feed barley.
Today’s reports
- 2:00 p.m. U.S. Bioenergy Statistics — ERS
- 2:00 p.m. Livestock and Meat Domestic Data — ERS
