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Not for the first time, anticipation focused on the June 30 acreage numbers only for quarterly grain stocks to set the tone. Planted corn acres came in slightly above expectations, soybeans and wheat below. But quarterly corn stocks at 5.29 billion bushels were well below the average estimate of 5.408 billion, implying even stronger-than-expected usage in the third quarter.
- December corn ended 6 cents higher
- November soybeans up 4 ¾ cents
- September SRW wheat up 10 ½ cents, September HRW wheat up 10 ½ cents and September hard spring wheat up 17 ¼ cents.
Check out the data and market reaction here.
Screwworm dangers: A significant majority of agricultural economists expect New World screwworm (NWS) to impact the bottom line for cattle producers if it spreads beyond its current footprint. Farm Journal’s latest Agricultural Economist Monthly Monitor found 75% of respondents anticipate at least a “moderate” (50%) or “significant” (19%) to “severe” (6%) economic impact if there’s a meaningful increase in cases. However, none of the respondents currently view it as a “catastrophic” threat (0%), suggesting they believe the risk is manageable if contained. This points to the fact producers should remain vigilant but focused on containment rather than panic.
Don’t snooze on the yen: The Japanese yen on Tuesday traded at its weakest to the U.S. dollar in 40 years. That comes despite record intervention efforts by the Bank of Japan earlier this year. Recent weakness stems from the Iran war and the spike in crude prices, which underlined the country’s dependence on energy imports. Traders are now on edge for another round of intervention, but as we’ve warned previously in Evening Report, investors – and ag market participants – should keep an eye on yen moves and their implications for U.S. Treasuries.
A surge in the yen could threaten what’s known as the “carry trade,” in which traders borrow in cheap yen to buy higher-yielding assets, such as U.S. Treasuries and equities, elsewhere.
- “Everyone’s focused on whether Tokyo will intervene in the currency market…The more important question is how Japan pays for that intervention,”said Nigel Green, CEO of U.K.-based brokerage deVere Group, in a note. “If authorities are compelled to step up support for the yen over a prolonged period, global investors could suddenly find themselves confronting an entirely different risk: one of the world’s largest foreign holders of US Treasuries becoming a more significant seller.”
- Japan holds more than $1 trillion in U.S. Treasury securities, making it one of the largest overseas creditors of the U.S., Green noted.
CME to introduce beef-trim futures contracts: CME Group on Tuesday announced plans to launch two types of beef trim contracts, which the exchange operator contends will help the agriculture industry manage risk associated with the key ingredient in producing hamburgers. Trading is expected to start on July 20, pending regulatory review. The financially-settled 90% and 50% Lean Beef Trim futures and options contracts track products used to produce high-volume ground beef. In the physical market, 90% and 50% represent the lean percentages for beef trim relative to the fat.
“These new contracts are designed for the last stage of bringing cattle to market, giving producers a complete set of risk management tools,” said John Ricci, managing director and global head of agricultural products, in a news release. “By offering both 90% and 50% lean beef trim specifications, market participants can now precisely manage the input costs tied to popular retail blend ratios, bridging the gap between live cattle prices and the ground beef they ultimately sell.”
Indonesia’s biofuel hurdle: Indonesia will kick off its national B50 fuel mandate, a blend of 50% palm-based diesel and 50% conventional diesel, on Wednesday as part of its push for energy independence, Reuters reported, noting that analysts see slumping oil prices and costlier palm oil as a threat to the program’s viability. The plan is one of the world’s boldest attempts to substitute domestically produced biofuel with imported diesel, the report noted. It was revived after the outbreak of the Iran war sent crude and fuel prices soaring.
Brent crude futures, however, slid for a third straight month in June, down 21% to about $73 a barrel, on rising supply following an interim peace deal between the U.S. and Iran, Reuters noted. At the same time, palm oil prices have remained elevated, supported by expectations of stronger biofuel demand. Palm traded at a premium of more than $260 per metric ton to diesel in June.
“The real test now is whether the government can sustain the higher feedstock and funding requirements of B50,” Aryan Mithiborwala, biofuels analyst at Rystad Energy, told Reuters.
Egg settlement: The Justice Department and 17 state attorneys general reached a $3.3 million settlement with three of the nation’s largest egg producers for alleged price manipulation that “artificially increased” egg prices for consumers and retailers, CNBC reported. The egg producers – Cal-Maine Foods, Versova and Hickman’s Egg Ranch – also agreed to donate about 53 million eggs combined to food banks or related non-profits as part of the settlement. Based on the current average price of a dozen large Grade A eggs — about $2.19 per dozen — those eggs could be worth roughly $9.7 million at the retail level, the report noted.