First Thing Today: Favorably Dry Weather Expected Mid-month for Much of the Corn Belt

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Softer tone overnight... Corn futures are down 1 to 2 cents to start the week after trading on either side of unchanged overnight. Soybean futures and the wheat complex are posting losses between 2 to 4 cents to start the week, which is near the lower end of their overnight trading range. The U.S. dollar index is slightly higher, while crude oil futures are just above unchanged.

 

Favorably dry weather expected mid-month for much of the Corn Belt... The National Weather Service forecast for May 13-17 calls for below-normal precip for all but the far western side of the Corn Belt, where above-normal precip is anticipated. Dry weather is also expected for the bulk of the Central and Southern Plains. Cool temps are forecast from Iowa eastward as well as across much of Kansas, Oklahoma and eastern Texas. Also of note, frost and freeze warnings are in effect today for Ohio as well as northern areas of Indiana and Illinois.

 

Brazilian soybean sales continue to lag... Farmers in Brazil have sold 50% of their soybean crop, which is 17 percentage points behind last year at this point and 15 points behind the five-year average, reports Safras & Mercado, an independent consultancy. Farmers in the country have been holding off on sales in hopes of better prices, which has in turn kept the U.S. shipping beans much later in the season than many anticipated. In the top-producing state of Mato Grosso, farmers have sold 62% of their crop, versus 70% last year at this point.

Another month of record-setting Chinese bean imports... China imported a record-high 8.02 MMT of soybeans in April, marking the fourth consecutive month where shipments were record-large for their respective months, according to preliminary customs data. Last month's shipments were up 13.4% from year-ago and 26.7% from March.

Chinese soybean production expected to rise as corn acres slide... China will likely produce a 211.5 MMT corn crop in 2017, down 3.7% from year-ago levels, says the China National Grain and Oils Information Center. It estimates the country's soybean crop at 14.3 MMT, up 9.2% from the year prior. China's wheat crop will likely total 129.2 MMT in 2017, up marginally from the year prior.

Mills increasingly concerned about supplies of high-quality wheat... Flour mills in the U.S. are reportedly scrambling to secure high-protein wheat supplies amid concerns this year's crop will yield lower-quality grain after recent freeze events and a late winter storm. Cash HRW wheat prices have soared, allowing producers holding wheat with 12% to 14% protein to sell at prices of $5.50 per bu. or more, according to Reuters. "Everything sitting in warehouses is generally low-protein. So if we have back-to-back years of low-quality HRW wheat, that's a huge concern," explains Tregg Cronin, an analyst at Halo Commodities.

Perdue touches on trade policy, ethanol in Iowa remarks... USDA Secretary Sonny Perdue’s speech Friday in Iowa was not the “first major farm policy address” of his tenure leading USDA, as he spoke mostly “from the heart” and not from the 17 pages he said some staff had written for him. He confirmed the Trump administration's support for ethanol and listed trade, support for farm labor and working as the nation's chief agriculture salesman as his top priority. Between the North American Free Trade Agreement, expected USDA budget cuts, the construction of a new farm bill, and naming new subcabinet members, Perdue added that he is focused on the building blocks of a better USDA. Click here for more highlights.

Relatively quiet week ahead for Washington... The House is out but the Senate is in during a relatively quiet week ahead for Washington. The Senate will hold confirmation hearings on several sub-Cabinet posts. The chamber is expected to vote on the nomination of Robert Lighthizer to be the next U.S. Trade Representative (USTR). That could also result in the administration finally delivering the notice to Congress that it intends to renegotiate NAFTA. The Trump administration will probably still make trade policy headlines as officials have noted there will be new trade announcements nearly every week ahead. Some additional names could surface for posts at USDA now that Sonny Perdue is getting up to speed in his office.

Macron wins French election... Centrist candidate Emmanuel Macron won the French presidential election on Sunday and pledged to heal France's rifts after his major victory over Marine Le Pen in yesterday’s presidential election — Marine Le Pen lost by 30 points. The first priority for the new president will be to secure as much support as possible in the parliamentary elections on June 11 and 18. Initial reaction to the as-expected result in currency markets has been very muted.

Trade focuses on correcting cattle's overbought condition, but futures well below cash... Cattle futures posted a sharp setback on Friday as traders focused on the markets' overbought condition more so than futures' discount to the cash market. More corrective trade is likely early this week, but we also would not be surprised to see some bargain buying on a price break. Limits are expanded today.

Buying in hogs could moderate this week... Cash hog bids strengthened last week, helping lean hog futures to extend their recent sharp correction. But with futures trading well above the cash hog index, some leveling off is very much a possibility this week. Traders will also monitor the product market for signs the recent price runup for beef has shifted some demand to pork.

Overnight demand news... Iraq tendered to buy at least 50,000 MT of wheat from the U.S., Canada or Australia; the U.S. has the lowest offer. Pakistan purchased around 60,000 MT of soybeans, likely from the United States. The country also bought around 60,000 MT of canola from Australia. Jordan tendered to buy 100,000 MT of wheat and 100,000 MT of barley.

Today's reports:

 

 

 

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