Evening Report | June 1, 2021

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Strong corn condition rating to kick off season… Just 5% of the U.S. corn crop had yet to be planted as of Sunday, which is well ahead of 87% seeded at this point for the five-year average. Eighty-one percent of that corn had emerged, which is 11 points more advanced than the five-year average. That includes 86% of the Illinois crop (72% on average), 76% of Indiana’s (59%) 87% of Iowa’s (80%), 66% of Kansas’ (71%), 89% of Minnesota’s (76%), 84% of Nebraska’s (78%) and 82% of South Dakota’s crop (57%).

USDA’s initial crop condition rating for the season of 76% “good” to “excellent” was strong and toward the upper end of expectations. On average, those surveyed by Reuters expected a 70% G/E rating. This year’s initial rating is two percentage points above year-ago. Assessing damage from the weekend cold snap for northern locations will take time and may show up more in next week’s report.

 

This week

Last week

Year-ago

Very poor

1

NA

1

Poor

3

NA

3

Fair

20

NA

22

Good

62

NA

61

Excellent

14

NA

13

                                                                               

Soybean planting slowed by rains, but progress still well ahead of the norm… Soybean planting advanced nine percentage points over the past week to 84% complete, which was a bit slower than the 12-point jump analysts surveyed by Reuters expected on average. But planting is still running well ahead of 67% complete for the five-year average. Sixty-two percent of the crop has emerged, meaning we’ll get USDA’s initial crop condition rating for beans next week. Emergence is running 20 percentage points ahead of the five-year average and roughly that same amount  of more ahead of normal in most key producing states, with the exception of Missouri where 38% of the crop has emerged vs. the usual 35%.

 

More of the U.S. cotton crop rated in ‘poor’ to ‘very poor’ condition vs. year-ago… Cotton planting is running near in line with the seasonal norm, with 64% of the crop in the ground versus the five-year average of 65% planted as of late May. Texas has seeded 54% of its crop, which lags the average by two percentage points. As of Sunday, USDA reports 6% of the crop was squaring, which is also a point behind the five-year average.

USDA’s initial cotton crop rating of 43% “good” to “excellent” is a fairly typical rating to start the season, and just a point under last year at this time. But it should be pointed out that 19% of the crop is rated “poor” to “very poor” as of May 30, which is up sharply compared with 8% in the bottom two categories last year at this time.

 

This week

Last week

Year-ago

Very poor

1

NA

1

Poor

18

NA

7

Fair

38

NA

48

Good

38

NA

39

Excellent

5

NA

5

 

Already-low spring wheat ratings slide… Spring wheat planting is basically complete, with 97% of the crop in the ground as of Sunday. That marks an early end to planting, as producers usually still have 7% of the crop left to seed as the calendar flips to June. Eighty percent of the crop had emerged as of Sunday, which is seven percentage points more advanced than the five-year average.

Condition ratings dived from last week’s already low levels. USDA now rates just 43% of the crop G/E, vs. 45% last week and 80% last year at this time. The amount of crop rated “poor” to “very poor” shot six points higher to 20%.

 

This week

Last week

Year-ago

Very poor

4

2

1

Poor

16

12

1

Fair

37

41

18

Good

39

41

72

Excellent

4

4

8

                                                                               

Winter wheat rating ticks up… Seventy-nine percent of the winter wheat crop was headed as of Sunday, which is near in line with 78% for the five-year average. The amount of crop USDA rates G/E climbed a point to 48%, with rains over the past week lifting ratings. But that’s still three percentage points shy of last year at this time.

 

This week

Last week

Year-ago

Very poor

6

5

6

Poor

13

13

13

Fair

33

35

30

Good

40

39

43

Excellent

8

8

8

                                                                               

 

Ransomware attack with suspected Russian ties downs operations at JBS plants… Today, Brazil’s JBS SA informed the White House a ransomware attack against the company has disrupted meat production in North America and Australia. The company says the attack likely originated from a criminal organization that’s based in Russia. The attack has shut down JBS’s operations in Australia and stopped livestock slaughter at plants in several U.S. states. The company says its backup servers were not affected.

JBS is the world’s largest meatpacker and it controls around 25% of all U.S. beef capacity and roughly 20% of its hog slaughter capacity. Estimated cattle slaughter today at 94,000 head was down 27,000 head (22.3%) from week ago, while hog processing dropped 95,000 head (19.6%) from last Monday.

White House spokeswoman Karine Jean-Pierre said the U.S. has contacted Russia's government about the matter and the FBI is investigating. This comes soon after a criminal group with Russian ties attacked Colonial Pipeline last month.

The situation underscores the fragility of our food supply system and reignites debate about consolidation in the processing sector. Four companies control 80% of U.S. beef processing. The attack is particularly ill-timed for consumers and producers. It comes at a time when beef prices are at record levels, adding to concerns about inflation and padding packer profit margins. Meanwhile, an increasing number of feedlots are struggling to make ends meet with feed costs rising and an abundance of market-ready supplies and limited work force stagnating cash prices.

Lawmakers are slated to hold hearings on industry consolidation later this month, though ranchers worry concrete solutions could prove elusive.

 

AgRural slashes forecast for Brazil’s corn crop… AgRural now estimates Brazil’s center-south safrinha corn crop at 60 MMT, a 5.1 MMT dive from its forecast at the start of the month. Dry weather paired with late planting sliced production potential, with recent rains arriving too late to help much of the crop. AgRural now estimates Brazil’s total corn crop at 90.9 MMT, a 4.6-MMT drop from its previous forecast and well under last year’s 102.6 MMT output. USDA in May projected the Brazilian corn crop at 102 MMT. Its next update will come June 10.

 

Brazil’s soybean exports up 16% from year-ago in May… Brazil’s government reports the country exported 16.4 MMT of soybeans during May, which was up 2.3 MMT from last year. Brazil’s shipping season really ramped up over the past month as harvest of a record crop brought fresh supplies to market.

The country’s shipments of poultry also climbed nearly 11,000 MT from year-ago to 383,191 MMT. Its beef shipments fell 28,210 MT from May 2020 to 126,763 MT. Chinese buying has driven strong meat exports out of Brazil, though a rebuilding Chinese hog herd and rising feed costs have recently tapped the brakes on shipments.

 

April soybean crush falls short of expectations… U.S. plants crushed 169.8 million bu. of soybeans during April, which was less than the 171.1 million bu. analysts polled by Reuters anticipated and below the 170.5 million bu. the NOPA data released in mid-May implied. The April crush dropped 18.4 million bu. (9.8%) from March and 13.6 million bu. (7.4%) from last year’s record for the month.  Soyoil stocks at the end of April totaled 2.178 billion lbs., down 3.0% from March and 16.3% less than last year. Soymeal stocks at 417,603 tons rose 0.5% from March and 22.2% from April 2020.

Corn use soars, underscoring consumers’ return to the roads… The U.S. consumed 463.7 million bu. of corn during April, which was a 2.0% drop from March but a 55.6% surge from April 2020 when pandemic-related slowdowns slashed use. Corn consumed for ethanol made up 410.0 million bu. of that tally, which was a 2.3% drop from March but a 67.4% surge from April 2020. The report also showed 1.79 million tons of distillers dried grains with solubles (DDGS) were produced during April, down 0.9% from March but up 76.2% from year-ago.

 

Russia’s wheat exports expected to slide in coming marketing year… The ag market research firm SovEcon now estimates Russia will export 36.6 MMT of wheat in 2021-22, as a smaller crop is expected to curb shipments. SovEcon last week estimated Russia’s wheat crop at 80.9 MMT, which would be a 5-MMT drop from the previous season. That’s expected to drop shipments 1.1 MMT from the current marketing year. The consultancy also cited a rise in domestic feed consumption, relatively slow farmer sales amid hopes export taxes would be lifted and tougher competition from the EU and Ukraine for the smaller export forecast.

 

Marked downshift in the Ag Economy Barometer… Purdue University and CME Group report the Ag Economy Barometer dropped 20 points during May to a reading of 158 points, the lowest since September 2020. The index of current conditions and the index of future expectations both declined in May. The index for current conditions dropped 17 points from April to a reading of 178. The index for future expectations fell 20 points from April to a reading of 149. The farm financial performance index dropped from a record high of 138 in April to 126; that was still the second highest reading since this question was added in spring 2018.

Today’s report says, “Producers’ expectations for good vs. bad times in U.S. agriculture have undergone a marked shift.” In May, just 27% 27 percent of respondents said they expect good times in U.S. agriculture during the next five years, the lowest reading in the survey’s history and down 12 points from a month earlier. “A driver of this shift appears to be a large divergence in expectations for the crop vs. the livestock sectors in the upcoming five years,” the report says. This divergence may help explain why producers seem bullish about farmland values and cash rental rates while at the same time being less optimistic about current and future ag economic conditions.

Another possible reason for the shift is worries about changes in U.S. tax policy. That includes worries about the possibility of higher capital gains taxes, a loss of the step-up in cost basis for inherited estates and the possible reduction in the estate tax exemption for inherited estates.

Also of note, rising materials costs are weighing on respondents’ construction plans. “Fifty-nine percent of respondents said their construction plans for the upcoming year are lower compared to a year ago and just 28% of producers said their construction plans were about the same as a year ago. Both of these response categories were more negative for construction than for farm machinery purchases suggesting that construction plans are an important driver in the Capital Investment Index’s recent weakness,” today’s update noted.

Regarding plans for farm machinery purchases, farmers shifted from saying they expect to keep machinery purchases in the year ahead “about the same” to “lower.” The percentage of producers planning to increase purchases was unchanged from April.

 

Red states outperforming blue ones... Of the top 10 states with the lowest unemployment rates in April, nine have Republican governors. Economist Dan Mitchell looked at these figures and concluded that there’s “a clear relationship between joblessness and the degree to which states pursue big-government policies.” The Wall Street Journal notes that the only Democratic-controlled state in the 10 states with the best unemployment rates is Wisconsin, where the state Supreme Court forcibly nullified the governor’s overzealous lockdown measures.

 

Biden has 46-page blueprint to reform and expand legal immigration, including farm workers... The New York Times reports it has obtained a 46-page draft blueprint that details the Biden administration’s plans to significantly expand the legal immigration system, including methodically reversing the efforts to dismantle it by former President Donald Trump. The document, in seven sections, offers policy to aid more foreigners to move to the United States, including high-skilled workers, trafficking victims, the families of Americans living abroad, American Indians born in Canada, refugees, asylum-seekers and farm workers. Immigrants who apply online could pay less in fees or even secure a waiver in an attempt to “reduce barriers” to immigration. And regulations would be overhauled to “encourage full participation by immigrants in our civic life.”

 

Two courts block Biden’s SBA from passing out benefits by race; will same happen with challenged selected minority farmer payments?... Two rulings last week sided with plaintiffs who sued the Small Business Administration (SBA) for violating equal treatment under the law. A federal judge in Texas ruled that the SBA’s Restaurant Revitalization Fund was wrong to distribute $28.6 billion in Covid-19 relief on the basis of an owner’s sex and race. The SBA justifies its bias as necessary to remedy past societal discrimination. Sound familiar? That in essence is how USDA Secretary Tom Vilsack and some farm-state lawmakers defend the at least $4 billion initially be paid this month to selected minority producers.

 

Major milestone for Canada’s cattle sector… Last Thursday, Canada announced the World Organization for Animal Health changed its bovine spongiform encephalopathy status to “negligible risk,” a key change many years in the making. BSE was first detected in Canada in 2003, which resulted in roughly 40 export markets closing their doors to the country’s beef. Since then, many of those markets have reopened, but the change in BSE status from “controlled risk” to “negligible risk” will further improve Canada’s market access. Canada is the world’s seventh largest beef exporter. The change puts the country on the same playing field as the U.S., whose BSE risk status changed to negligible in 2013.

 

Chart Trend… Weekly and monthly charts are still pointed higher for corn, soybeans and wheat. Find updates to our short-term, intermediate- and long-term trends for commodity and key outside markets here.

 

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