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Your Pro Farmer newsletter is now available… Weather concerns are front-and-center as recent cold temperatures flipped to heat, with needed rain very much a questionmark. That has corn, soybeans and wheat rallying. Meanwhile, another Russia-linked cyberattack was handled pretty well by meat processor JBS, but the event reminded of the fragility of the U.S. food sector and reignited debate about consolidation in the livestock sector. USDA also unveiled a new Pandemic Cover Crop Program this week. You’ll find more on these topics and others, as well as market-by-market analysis and advice in this week’s newsletter. Access it here.
Another firm drops its Brazilian corn crop forecast under 90 MMT… IHS Market (formerly IEG Vantage) sliced another 5 MMT off its Brazilian corn crop forecast that now stands at 88 MMT. Drought and the crop’s late planting date has diminished safrinha crop prospects. Earlier this week, StoneX dropped its crop estimate to 89.7 MMT. AgRural cut its Brazilian corn crop estimate to 90.0 MMT. In May, USDA projected the Brazilian corn crop at 102 MMT. A significant cut is expected in next week’s Supply & Demand Report.
Algeria’s grain crop comes up short… Algeria’s grain crop is likely to fall 35% to 40% from last year’s 5 MMT output, due to drought, Mohamed Alioui, the head of the country’s farmers’ union told Reuters. Covid-related restrictions on workers also clipped production. That would point to a 3.00 MMT to 3.25 MMT crop for the major grain importer. Algeria typically spends around $1.3 billion annually on cereal grain imports.
Payrolls rise, but shy of expectations… The U.S. economy added 559,000 non-farm payrolls in May, which was up from an upwardly revised 278,000 the previous month but short of the expected 650,000-jobs increase. The unemployment rate dropped by 0.3 points to 5.8%. Average hourly earnings increased another 0.5% in May and will likely continue to rise. The data likely means the Fed will continue to pause before tapering its monthly bond purchases.
U.S. economy is 93.03% recovered, according to the latest reading by Oxford Economics… The “recovery tracker” index combines a range of high-frequency statistics — Covid cases, hotel stays, job postings, mortgage applications and the like — to gauge economic activity in relation to late January 2020, before the pandemic turned everything upside down.
Sharp rise in inflation will probably subside over the next year… "The Biden administration is pursuing an infrastructure bill and other legislation that will pile on added stimulus. Households have done enough saving during the pandemic to sustain spending long after the fiscal impulse ends. And the Fed has committed to keeping short-term interest rates at zero until the economy has achieved maximum employment and inflation has reached at least 2% and is expected to stay above 2% for some time. In other words, the Fed — according to its own policies — is likely to act too late to prevent the economy from overheating. So, no matter what prices do this year, the risk of higher inflation down the road remains elevated," former New York Fed President Bill Dudley writes at Bloomberg Opinion.
Grassley used the JBS situation to push long-sought structural change for the livestock sector... Senator Chuck Grassley (R-Iowa) said the cyberattack’s fallout showed the risks of industry consolidation that has led to a handful of big companies processing the bulk of America’s meat. “If you had 10 companies instead of four, or 20 companies instead of four, we’d be less vulnerable if one of them was hacked,” said Grassley, who has proposed legislation that he said would require meatpackers to compete more directly on livestock purchases. “It ought to teach us something, that there have been too many mergers,” he said.
Grassley and some other farm-state senators in March introduced legislation that would require beef processors to make at least half of their weekly livestock purchases on the open market, versus through pre-negotiated contracts. Proponents say the requirement would make cattle markets more competitive and improve prices for ranchers. Other senators proposed a separate bill in March that would set regional minimum cash prices for cattle and increase reporting requirements for processors.
Bottom line: JBS’ note that the cyberattack caused less than one day’s worth of meat production, and that it would make up the difference by the end of next week, shows the firm was prepared for a major attack. But lawmakers and Biden administration officials are pushing for major changes on this topic.
The hits keep coming for JBS… Brazil’s Justice Ministry announced it has opened an investigation against JBS SA regarding a toxic gas leak at one of its units in Brazil’s Rondonia state. Ammonia reportedly leaked from one of the refrigeration chambers and may have contaminated meat stored in the chambers, the ministry details. JBS has 15 days to respond.
