Benign forecast weighs on markets overnight... Corn futures are down a nickel to start the week, while soybeans are 11 to 12 cents lower as traders view the cool forecast as favorable for the crops. Spring wheat futures are down 7 to 8 cents, while winter wheat is mostly around 4 cents lower. The U.S. dollar index is firmer today, while crude oil futures are down slightly.
Cool, dry forecast... Midway through this week, a system will likely bring heavy rains to the Plains and into Minnesota and Wisconsin, but the remainder of the Corn Belt will likely remain dry. But mild temps should help to limit the impact of dry conditions. The National Weather Service forecast for Aug. 5-9 calls for cool conditions to linger across much of the country. Dry weather is expected over the Northern Plains and Illinois, Missouri and Indiana. Normal precip is expected elsewhere in the Midwest.
What's in store this week in Washington?... The Senate is in and the House is out for its August recess. The key economic report comes Friday with the employment update. The White House staff upheaval continued late last week when President Donald Trump replaced Chief of Staff Reince Priebus with John F. Kelly, a retired four-star Marine general, in hopes of projecting toughness, discipline and inspiring respect on Capitol Hill and stopping the infighting among some White House officials. With the Senate defeat of health-care reform legislation last week, focus has moved in part to tax reform and the need to increase the debt limit. Treasury Secretary Steve Mnuchin is pushing lawmakers to make a decision by Sept. 29, before the end of the current fiscal year. Get more details on what's ahead.
Impacts of ruling against EPA's use of waiver on RFS... The Environmental Protection Agency erred in its use of a waiver to set a target lower than Congress mandated in a Renewable Fuels Standard (RF) law that prescribes how much of the nation's motor fuel supply should be plant based, the Court of Appeals for the D.C. Circuit ruled Friday. It is not clear how the decision about the 2016 target will impact the target for 2018, which the agency must set no later than Nov. 30. While an EPA spokesperson said the agency is "currently reviewing the decision," EPA said its proposed renewable volume obligations (RVOs) for 2017 and 2018 won't be affected because it kept the ethanol figure at the full 15 billion gallons. ClearView Energy Partners said one way the agency could have addressed this deficit in the past is by incorporating some or all of the deficit into the 2017 and 2018 RVOs. The net effect would be higher RIN prices and more demand for ethanol (and biodiesel, which could be the big winner, some observers note). FBR Capital Markets & Co. noted "the ruling will increase the intensity of push for remaining options for relief, such as shifting the point of obligation or encouraging congressional intervention."
A new farm bill will be the focus of several field hearings this week... The House Agriculture Committee is holding three farm bill listening sessions, including one today in San Angelo, Texas (USDA Secretary Sonny Perdue was previously expected to be in attendance, but will now remain in Washington). The panel will also be in Morgan, Minnesota, on Thursday and will hold another session Saturday in Modesto, California. Conaway will stay in San Angelo after today's meeting to participate in the West Texas Legislative Summit, an annual conference that this year will highlight a new farm bill. Perdue will speak on Saturday at the Iowa Ag Summit in Des Moines, an event organized by agribusinessman Bruce Rastetter, who put together a similar conference in 2015 with the presidential candidates. Meanwhile, some new farm bill proposals have already been sent to the Congressional Budget Office for scoring, with panel aides working during the summer recess on more proposals.
Attache expects record-setting Chinese bean buys in 2017-18... Changes in government support to corn production encouraged a shift toward oilseeds in China for 2017-18, reports a USDA ag attache in the country. Therefore, the post expects Chinese soybean production to climb 1 MMT from 2016-17 to 14.1 MMT in 2017-18. But the post also notes that climbing demand for oilseeds "continues to far exceed the growth in domestic production." Therefore, China will likely to import a record 91.5 MMT of soybeans in 2017-18, up 3 MMT from 2016-17, according to the attache. Also of note, the post expects China to produce a 9.5 MMT cotton crop in 2017-18, up 600,000 MT from the year prior, also due to policy changes.
Disappointing Chinese manufacturing data for July... China's official Purchasing Managers' Index came in at 51.4 points for July, which is down 0.3 points from June. Analysts had expected a reading of 51.6. But the reading still topped the 50.0 mark that denotes expansion in manufacturing, the 12th time in a row it has done so. The private Caixin PMI for July that will be released Tuesday is expected to come in around 50.4 points, steady with June.
Egypt ups wheat import target... Egypt hopes to import 7 MMT of wheat for government purchases in 2017-18, according to its supply minister. This is an 800,000 MT increase from its previous target, as the country hopes to build a strategic reserve ahead of harvest. This year's crop was the lowest in several years as the country has cracked down on illegal smuggling of foreign wheat that previously inflated crop pegs.
Comments on violations and abuses of U.S. trade laws are due today... Public comments are due by midnight tonight to Office of the U.S. Trade Representative (USTR), Commerce Department and others on the World Trade Organization and other bilateral and regional free trade deals. This is via the executive order signed by Trump earlier this year and the review of the agreements and public feedback are due to head to Trump by Oct. 26.
TPP would have avoided Japan's beef import restrictions... Japanese officials said the tariff increase coming Aug. 1 on U.S. and other country frozen beef imports, but not from Australia, is the first such step in 14 years involving beef, noting it was mandated under a framework that took effect following a 1994 global trade deal. However, the framework was to be scrapped under the Trans-Pacific Partnership. Trump formally pulled the U.S. out of the TPP before it was submitted to Congress for approval. "I am not surprised," said Darci Vetter, the former chief agricultural trade negotiator in the Obama administration. "If we had the TPP we would be exempt." Craig Unden, president of the National Cattlemen's Beef Association, said, "We hope the Trump administration and Congress realize that this unfortunate development underscores the urgent need for a bilateral trade agreement with Japan absent the TTP."
Solid beef market performance last week... Boxed beef prices were mixed on Friday and movement slowed to 94 loads. But for the week as a whole, Choice cuts are down slightly, while Select cuts strengthened. Plus, movement was solid. Cash action last week took place largely around $117, which is above where futures start the week but down from action the week prior. Sales volume was on the light side, however, which could weigh on this week's cash prospects.
Cash hog bids softened last week... Cash hog bids softened for much of last week, pulling the lean hog index under the $90 threshold for the first time in a month. But declines in the index have been gradual, leading some to believe futures may have overdone it to the downside. Meanwhile, the pork cutout value softened on Friday and traders remain on watch for a drop in belly prices.
Weekend demand news... There is no business to report.
- 10:00 a.m., Weekly Export Inspections -- AMS
- 2:00 p.m., Agricultural Prices-- NASS
- 3:00 p.m., Crop Progress-- NASS