Evening Report | June 29, 2021

Click here for weekly Commitments of Traders Report charts.

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

StatsCan calling for big jump in canola acres, smaller wheat planted area… Analysts surveyed by Reuters did a pretty good job anticipating Statistics Canada’s planted acreage adjustments. StatsCan now estimates Canadian farmers will plant 23.36 million acres to all wheat, a 100,000-acre boost from spring intentions but a 6.5% slide from last season. Durum acres at 5.53 million would be 2.8% under year-ago and spring wheat plantings at 16.48 million would be down 8.1% from 2020-21.

Oilseed plantings are expected to climb amid rising global demand for oilseeds and this year’s strong price gains. A number of companies have announced plans to construct oilseed processing plants in or near Canada. Strong demand paired with tight ending stocks shot canola prices to record-highs the first half of 2021, comments MarketsFarm Editor Mike Jubinville, who adds prices are expected to remain elevated for the coming year. Consequently, producers have signaled they seeded 22.48 million acres to canola this year, nearly a 1-million-acre jump from April intentions and an 8.2% rise from last season. Soybean plantings are expected to climb 4.9% to 5.32 million acres.

Barley acreage is expected to jump 9.7% to 8.30 million acres amid strong demand for the grain. That represented a 317,000-acre decline from April whereas analysts anticipated an increase.

StatsCan reports dry conditions were a concern for farmers in parts of western Canada throughout seeding and into the start of the growing season, though dry conditions did help planting to advance quickly.

China announces more corn auctions… China’s state grains stockpiler Sinograin said it would auction off 123,977 MT of imported corn from the U.S. and 31,539 MT of the grain from Ukraine on July 2. These auctions are the fourth and fifth such sales to be announced as the country works to cool rising commodity prices.

India lowers import tax on crude palm oil… India announced it would lower the duty on imports of crude palm oil from 15% to 10% for the next three months. The lower rate will take effect June 30. India is the world’s biggest importer of vegetable oils. This tax cut is an attempt to rein in food price inflation; edible oil prices hit record-highs within India last month.

Sandeep Bajoria, chief executive of the vegoil broker Sunvin Group, says the tax cut could lead to the import of 500,000 MT of additional palm oil during the next three months, pushing average monthly imports to around 850,000 MT. India’s main suppliers are Indonesia and Malaysia.

India did not lower duties on competing oils like soyoil, sunflower oil or rapeseed oil that are more favored by households; palm oil is primarily used by bulk buyers like food processors.

Brazil’s harvest plan increasing farm loan funding but also interest rates… Brazil’s federal government released its Harvest Plan for 2021-22 last week, with the bill’s 251.22-billion-reais ($50.94 billion) price tag up 6.3% compared with last year. The program begins July 1, 2021 and runs through June 30, 2022. The bulk of the funding goes toward subsidized low-interest loans for Brazilian producers.

The 2021-22 Harvest Plan increases funding for production and investment loans (especially for smaller and mid-size producers), but interest rates for the loans will also rise. The interest rates for loans to large producers will rise 1.5 points to 7.5%; the rate for medium and small producers will each rise 0.5-point to 5.5% and 4.5%, respectively. South American Crop Consultant Dr. Michael Cordonnier comments: “Many in the agricultural community are complaining about the intertest rate hike especially considering that the prime interest rate in Brazil is currently 4.25%.”

He also notes that this year’s plan puts renewed emphasis on sustainable agriculture, boosting spending by 100%. When announcing the plan, Brazil’s ag minister emphasized the program would make Brazilian agriculture more sustainable and competitive globally.

How infrastructure/reconciliation measures might play out… If infrastructure and reconciliation measures are both passed, here is how that will likely unfold, based on conversations with insiders:

House Speaker Nancy Pelosi (D-Calif.) has indicated that she will not take up any Senate-passed infrastructure measure without reconciliation first passing the Senate. Those thinking Pelosi will not hold up the measure should recall how she delayed a pandemic aid measure for months to get what she and other Democrats wanted — this time the want list includes climate change provisions and additional tax credits and subsidies for families, home health workers and college students.

White House and Democratic congressional leaders will make sure centrist Senate Democrats like Senators Joe Manchin (D-W.VA.), Krysten Sinema (D-Ariz.) and others get significant funding and programs for their states, enough to make sure they vote for reconciliation. “It probably will not be everything our most progressive members want,” said Sen. Chris Coons (D-Del.), a close ally of the president. “It will probably be more than what some of our moderate members want.”

The final key is to convince Sen. Bernie Sanders (I-Vt.) to vote for reconciliation if the final price tag is “only” $2 trillion or $1.5 trillion, a level signaled by Manchin to get his support. Sanders will also get a likely promise of something big.

Bottom line: Biden is attempting to simultaneously satisfy liberal Democrats and secure a bipartisan breakthrough, which requires major legislative acrobatics. He initially appeased progressives by promising to link the bipartisan deal with a second Democrats-only bill that would address issues such as child and elder care, stating that he wouldn’t sign one without the other. But when moderate Republicans who’d negotiated the deal’s framework with White House officials threatened to pull their support, Biden issued a lengthy statement walking it back. Insiders say the tandem strategy was in place all along, but Biden just fouled up and said it out loud.

There is no free lunch… Industry veteran and Pro Farmer Consultant Jim Wyckoff made the following observation in his daily column: “It appears the summertime doldrums have arrived early this year, as the marketplace is generally quiet, has set aside inflation and potential pandemic resurgence concerns, with many traders seemingly more interested in family outings and vacations as the Independence Day holiday approaches.

“Still, many wonder if there will be a reckoning for the U.S. at some point down the road. A Wall Street Journal story this week is entitled, ‘Americans are buying, buoyed by savings and federal stimulus during the pandemic.’ The first sentence of the story reads, ‘A gusher of money is spilling out from the U.S. economy and rippling around the world, driving the global recovery to an extent it hasn’t in decades and giving confidence to businesses to invest in meeting the huge American demand.’ In Economics 101 we learned the saying, ‘there is no free lunch.’ So many veteran market watchers are now asking the question, ‘How and when will Americans pay the piper?’ The answer may be problematic price inflation down the road.”