Evening Report | June 21, 2021

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Hot, dry weather stresses corn in heart of the Corn Belt… USDA now rates 65% of the U.S. corn crop “good” to “excellent” (G/E), a three-point drop from the week prior and a point lower than analysts surveyed by Reuters expected, on average. Recent heat and dry weather had a bigger toll on crops than the market expected.

Of particular note, top-producing Iowa had just 56% of the crop rated G/E as of Sunday, a seven-point dive from the week prior, with state statisticians reporting corn curling and ground cracking. Some areas of the state did see some modest rainfall on Sunday. Also of note, Minnesota has just 50% of its crop rated G/E, an eight-point drop from the week prior. And in South Dakota, just 34% of the crop is rated G/E.

Ratings are better in the eastern Corn Belt where drought is far less prevalent, and in Nebraska. Sixty-four percent of Illinois’ crop and 83% of Nebraska’s crop is rated G/E.

Soybean ratings drop as expected… As of Sunday, USDA rates 60% of the U.S. soybean crop G/E, which was right in line with expectations and a two-point dip from the week prior. The crop is rated 10 points below last year at this time. Again, the lowest ratings of the top-producing states come in Iowa, Minnesota, Missouri and the Dakotas.

Soybean planting advanced three percentage points over the past week to 97% complete, which was in line with expectations and three points ahead of average. Ninety-one percent of the crop had emerged as of Sunday vs. 85% on average. Five percent of the crop is blooming, which is right in line with the norm.

Big improvement for cotton ratings… Cotton planting advanced to 96% complete as of June 20, a point more advanced than the five-year average. USDA reports 21% of the crop was squaring and 4% of it was setting bolls, four points behind and right in line with the respective five-year averages. Six percent of Texas’ crop is setting bolls along with 1% of the Georgia crop.

Recent moisture helped lift crop ratings, with 52% of the crop now rated G/E, a seven-point jump from the week prior. Top producing Texas is largely free of drought. And a tropical storm brought needed moisture to the Carolinas.

Spring wheat condition ratings plummet… USDA now rates just 27% of the spring wheat crop G/E, as rains last week had little impact on bone-dry soils in the Dakotas. That represented a 10-point plunge from last week’s already low rating and easily outdid the two-point dip analysts expected on average. Of note, USDA now rates 37% of the crop “poor” or “very poor,” a 10-point surge from last week.  

Twenty-seven percent of the spring wheat crop is headed, which is nine percentage points more advanced than the five-year average.

Winter wheat harvest picks up, but still lags the average… As of Sunday, 96% of the winter wheat crop was headed and 17% of it had been harvested. The latter is a 13-point advance from the week prior but still nine points behind the average. USDA now rates 49% of the crop G/E, a one point improvement from the week prior and a point better than the market expected.

RCR expects Chinese soybean buying to fade later this summer and into the fall… Refinitiv Commodities Research (RCR) says trade flow data signals China will likely import 11.6 MMT of soybeans during June, which would be an all-time monthly high. The arrival of nearly 11.4 MMT of Brazilian beans are expected to drive up the tally. For the first half of the year, Refinitiv projects China will import 46.9 MMT of soybeans, a 4.5-MMT (10.6%) rise from year-ago.

The research division says, “After taking into account rapid imports in the first six months and currently fast deliveries of Brazilian soybeans, China's demand for the U.S. new-crop soybeans that will be harvested in late August/early September will likely be much weaker than a year ago.” It also points out crush margins are at their lowest since early 2019.  

Brazil’s Dias comments on food inflation, cattle tracking, trade and more… At an online event today, Brazilian Ag Minister Tereza Cristina Dias commented on a wide array of topics, many of which pertained to the meat and poultry sector. Dais said Brazil’s strong meat exports contributed to food inflation within the country and around the world, and said the solution to domestic food inflation is to produce more. If the drought persists, she said irrigated areas of the country should be planted to grain in 2021-22.

On the trade front, Dias said Brazil’s use of the feed additive ractopamine undermines the country’s ability to sell more pork to Russia. She also commented that Brazil is working with the Saudi government to reestablish a 400,000 MT annual chicken export quota.

Brazil’s government also plans on proposing a new law to track indirect cattle suppliers who sell animals to the country’s large meat producers like JBS SA and Marfrig SA, with concerns mounting about the cattle sector contributing to deforestation, according to Dias. She said the current tracking system is ineffective.

At the same event, Bartolomeu Braz, head of the farmer group Aprosoja, forecast Brazilian producers will likely lift soybean planted acreage to 40 million hectares (98.8 million acres) in 2021-22, a 5.8% jump from the current season. 

High corn prices clip Japan’s use of the grain in feed… Japan’s use of corn in animal feed stood at 47.8% in April, a 0.9-point drop from year-ago and a 0.3-point dip from March, according to data from the country’s ag ministry. This isn’t surprising given the runup in corn prices. Sorghum use also fell 0.4 percentage points from year-ago to 1.2%.

On the other hand, wheat now makes up 1.7% of the feed mix, slightly from 1.6% in March and 1.5% in April 2020. Barley use is also up 0.1 point from year-ago at 3.7%.

The data shows Japan imported 2.038 MMT of feed ingredients during April, which was down 2.7% from year-ago when the pandemic was shutting down economies.

USDA announces $55 million in grant funding meant for small/midsized meat and poultry processors and producers… USDA today announced $55.2 million in competitive grant funding available through the new Meat and Poultry Inspection Readiness Grant (MPIRG) program. The new program is funded by the Consolidated Appropriations Act of 2021, and the announcement is part of the Build Back Better Initiative. Ag Secretary Tom Vilsack signaled such funds were coming in a hearing last week.

In today’s press release, he said the program would boost capacity and increase economic opportunities for small and midsized meat and poultry processors and producers. “Through MPIRG, meat and poultry slaughter and processing facilities can cover the costs for necessary improvements to achieve a Federal Grant of Inspection under the Federal Meat Inspection Act or the Poultry Products Inspection Act, or to operate under a state’s Cooperative Interstate Shipment program.”

USDA encourages grant applications that focus on improving meat and poultry slaughter and processing capacity and efficiency; developing new and expanding existing markets; increasing capacity and better meeting consumer and producer demand; maintaining strong inspection and food safety standards; obtaining a larger commercial presence; and increasing access to slaughter or processing facilities for smaller farms and ranches, new and beginning farmers and ranchers, socially disadvantaged producers, and veteran producers. Eligible meat and poultry slaughter and processing facilities include commercial businesses, cooperatives and tribal enterprises.

Applications must be submitted electronically through www.grants.gov by Aug. 2, 2021.

DOJ defends USDA socially disadvantaged farmer debt forgiveness in court filing... The Department of Justice (DOJ) Friday filed court documents in response to the suit brought by white farmers against the debt forgiveness plan launched by USDA for socially disadvantaged farmers. The suit was filed in U.S. District Court for the Eastern District of Wisconsin, and Judge William Griesbach granted a temporary restraining order on the effort. DOJ argued a preliminary injunction should be denied as “Plaintiffs are white farmers who object to the government’s effort to remedy the lingering effects of discrimination because the government used a race-conscious remedy to do so. They seek to further delay pandemic relief designated for minority farmers, despite failing to provide any basis to question Congress’s conclusion that minority farmers were largely left out of prior relief efforts.”

DOJ said the farmers bringing the suit “cannot show irreparable harm” and said that the farmers could “obtain any monetary relief they seek at the conclusion of this case if they are entitled to it.” DOJ argued that to delay the debt forgiveness for socially disadvantaged farmers would further harm minority farmers.

 Griesbach is to make a decision on a preliminary injunction by July 23.

Chinese regime: Wuhan lab scientists ‘should be awarded the Nobel prize’… A Chinese foreign ministry spokesperson has claimed that researchers at the Wuhan lab deserve the Nobel Prize just as calls renew for a harder look into whether the virus that causes Covid-19 could have leaked from the facility. The Wuhan Institute of Virology (WIV) hosts China’s first P4 laboratory, the highest biosafety designation that allows it to handle the world’s most dangerous pathogens. The lab is located just a few miles from a major seafood market in the city that Beijing first identified as the source of the virus.

Zhao Lijian, of China’s Ministry of Foreign Affairs, sought to deflect attention on the lab, claiming that the WIV scientists were being faulted because they were the first to identify the Covid-19 genome sequence. “That does not mean Wuhan is the source of the coronavirus, nor can it be inferred that the coronavirus was made by Chinese scientists,” he said at a June 18 press briefing.

Meanwhile, President Joe Biden's national security adviser Jake Sullivan said the administration is seeking answers from China on the origins of Covid-19 with the international community. Sullivan said the U.S. is working on two tracks on finding out the origins of Covid, including an assessment by the intelligence community that Biden gave a 90-day deadline for, and a second international investigation led by the World Health Organization. “We are not, at this point, going to issue threats or ultimatums," Sullivan said Sunday on CNN's State of the Union. "What we are going to do is continue to rally support in the international community, and if it turns out that China refuses to live up to its international obligations, we will have to consider our responses at that point, and we will do so in concert with allies and partners.” China will risk international isolation if it fails to allow a “real” investigation on its territory Sullivan said.

Chart trend… The daily chart turned down for soybeans, while the weekly chart points sideways. Find more updates to our short-term, intermediate- and long-term trends for commodity and key outside markets here.