Evening Report | June 25, 2021

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Check our advice monitor on ProFarmer.com for updates to our marketing plan.

Your Pro Farmer newsletter is now available… Traders removed more weather premium from corn futures as much of the Corn Belt received or is expected to receive rains. But around a third of the Belt has missed out, including some key production areas. Besides weather, we also preview USDA’s June 30 Acreage and Grain Stocks Reports, cover USDA’s latest H&P Report and take a look at both sides of the livestock pricing issue. Also of note, a deal was reached on infrastructure, but getting to the finish line could be a struggle given Democratic caveats. Access this week’s letter here.

SCOTUS rules in favor of refiners… Today, the U.S. Supreme Court ruled 6-3 in favor of small refineries in their attempt to get exemptions from biofuel blending requirements. The ruling overturned a lower court decision saying EPA could only grant small refinery exemptions (SREs) to those that had previously received them. The Biden administration had come out and backed the 10th Circuit Court decision that the Supreme Court has now overturned.

This puts the SRE situation in disarray and raises questions about prior-year and pending SREs for the 2019 and 2020 compliance years. That said, we think the initial negative market reaction in corn and soyoil was overdone considering the administration will not likely approve many (if any) additional SREs.

Today’s decision puts the ball back in the court of EPA and the Department of Energy. Read more.

Ukraine’s final grain exports likely to come in around 45 MMT… With less than a week remaining in the 2020-21 marketing year, Ukraine’s ag ministry says the country’s grain exports are unlikely to top 45 MMT, with 44.485 MMT exported or loaded to vessels as of June 25. Another 512,000 MT of grain is expected to be loaded in the days ahead. Shipments are down notably from last year’s 56.7 MMT, when production was quite a bit higher.

USDA boosts food price inflation forecasts… Consumer food costs are rising and USDA has raised its forecast for overall food price inflation and its outlook for food at home (grocery store) and food away from home (restaurant) prices. USDA now forecasts overall food price inflation of 2.5% to 3.5% in 2021, up from its outlook last month that food prices would rise 2.0% to 3.0%. Grocery store prices are now expected to rise 2.0% to 3.0% in 2021, compared with USDA’s month-ago outlook that they would increase 1.5% to 2.5%. USDA is now calling for restaurant prices to climb 3.0% to 4.0% from 2020 levels, an increase from its prior outlook for a 2.5% to 3.5% rise.

The updated forecasts also mean that prices are seen rising for all three categories by more than their 20-year average. Those averages are 2.4% for all food prices, 2.8% for restaurant prices and 2% for grocery store prices. Despite the increased outlooks, the overall food Consumer Price Index (CPI) in 2021 is currently expected to fall short of 2020’s of 3.4% increase. And for grocery store prices, the projected increase would also fall short of the 3.5% increase seen in 2020. Restaurant prices, however, are now seen rising just above the 3.4% mark from 2020.

The year-to-date average of food prices in 2021 compared with the same period in 2020 has also increased, with grocery store prices up 1.4% and restaurant prices up 2.5%. The CPI for all food has increased an average of 1.9%. USDA’s Economic Research Service (ERS) noted that of all grocery store prices they track, “the fresh fruits category has had the largest relative price increase (4.8%) and the fresh vegetables category the smallest (0.3%). No 2021 price categories decreased compared to 2020 prices.”

Bottom line: Food is now taking a bigger share of consumers’ incomes as they work their way out of the pandemic. That could become a concern, especially if energy prices continue to move higher.

Cattle on Feed Report: Generally neutral… USDA estimated big feedlot (1,000-plus head) as of June 1 at 11.699 million head, up 28,000 head (0.2%) from last year but down 41,000 head (0.3%) from two years ago. May placements fell 6.9% compared with last year and 7.4% versus May 2019. Marketings surged 23.4% from last year when slaughter plants were restricted by Covid outbreaks, but they were down 9.7% from May 2019 levels. Given the unusual situation last year, analysts did a good job anticipating what the report would show.

Placements declined compared with year-ago in all of the weight categories except for 9-weights, which were unchanged, and accounted for only 12.3% of the total. Placements dropped 6.6% for lightweights (under 600 lbs.), 17.7% for 6-weights, 3.1% for 7-weights, 6.7% for 8-weights and 9.5% for heavyweights (1,000-plus lbs.). Texas feedlots accounted for two-thirds (95,000 head) of the 141,000-head drop in placements compared with year-ago. Nebraska and Colorado feedlots placed a combined 45,000 head fewer cattle than year-ago last month.

The placements data is just a bit more friendly than expected, which may support deferred live cattle, though we doubt it moves the market much on Monday.

Russia reportedly weighing higher duties on metal exports… Russia is reportedly considering levying $2.3 billion in export taxes for steel products, nickel, aluminum and copper. The country is looking to protect its defense and construction industries from rising international commodity prices. Some analysts say the added taxes could lift international metals prices even higher.

Market Watch… Cash soybean and corn prices extended recent sharp declines over the past week. You can check out this weekly table featuring monthly and quarterly price outlooks as well as weekly prices for a variety of ag markets here.