First Thing Today: Flooding in Southwest Argentina

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Firmer tone in grains and soybeans to start the week... Corn and soybean futures are both posting gains around 2 to 3 cents, with the corn market extending Friday's surge and soybeans seeing some short-covering after the report-inspired plunge. Winter wheat futures are 3 to 4 cents higher, while spring wheat is fractionally to a penny lower. The U.S. dollar index is up slightly, while crude oil futures are near unchanged.


Busy week in Washington... A Friday Senate vote on Neil Gorsuch as a Supreme Court justice, several more House farm bill hearings, FOMC minutes and a Friday Employment report are the highlights from Washington this week. A Senate vote on the nomination of Sonny Perdue to be the next USDA Secretary is unlikely due to action on Gorsuch, but Senate Agriculture Chairman Pat Roberts (R-Kan.) continues to seek a vote before the April 7 Easter recess or quickly after the chamber returns. Also of note, Chinese President Xi Jinping will meet President Donald Trump on Thursday and Friday in Florida to talk about trade and security issues. This meeting is also expected to bring some Chinese buyers to the U.S., so there could be announcements on sales commitments.

Flooding in southwest Argentina... Heavy rains have led to flooding in southwest Argentina, with more rainfall expected for the region this week. World Weather Inc. notes that "harvest delays and a general slowdown in crop maturation rates are likely because of the rain and the cooler weather that will soon follow." But it continues that drier weather next week should help get some fieldwork underway and no crop quality issues are expected, so long as conditions do dry out. Bahia, Brazil also experienced some flooding rains over the weekend, causing crop damage in low-lying areas. But conditions elsewhere in the country are favorable.

Private PMI slows more than expected in March... IHS Markit/Caixin's seasonally adjusted Purchasing Managers' Index (PMI) slipped 0.5 points to 51.2 points in March, falling short of analysts' expectations for a reading of 51.6 points. The PMI for small and mid-size manufacturers is still above the 50.0 mark separating expansion from contraction in its manufacturing sector and it is still one of the highest readings from the the past four years. But growth in production and new orders slowed since February.

Russia's ag ministry drops grain export forecast... Russia's ag ministry has slashed its 2016-17 grain export forecast by 3.1 MMT to 33.9 MMT, according to First Deputy Minister Dzhambulat Khatuov. This would be in line with 2015-16 shipments. A rise in its currency have slowed Russia's grain shipments, despite plentiful supplies.

Allegations JBS knowingly bought cattle from illegally deforested land... JBS SA, the world's largest meatpacker, is in hot water again, this time regarding allegations that for years it knowingly bought cattle raised on illegally deforested land. IBAMA, Brazil's environmental regulator, ordered the suspension of two JBS meat packing plants and 13 others in the southwest state of Para for buying cattle raised on pastures cleared illegally from the Amazon forest. It also leveled fines of 24 million reals ($7.7 million) against JBS. IBAMA says JBS bought 49,438 illegal cattle between 2013 and 2016, half of those directly from embargoed pastures and the remainder by three-way "laundering" transactions to disguise the source. JBS denies the allegations, and says it has no way of knowing where cattle were raised when supplied by a legal rancher. The company is also involved in a corruption scandal regarding bribes of meat inspectors.

Trend of the cattle market remains lower... While momentum points to followthrough selling, futures start the week well below last week's cash cattle trade that took place in a wide range of $124 to $130, with much of the action around $128 in Kansas and Texas. But with that said, traders may be comfortable with the discount structure as most believe the cash market has topped. Boxed beef prices dropped $1.09 (Choice) to $4.05 (Select) on Friday, though movement was solid at 140 loads.

Path of least resistance is down for hogs... Hog futures faced pressure last week and more such action is likely this week, since market-ready supplies are plentiful, which has kept cash hog bids under pressure. The calendar flip to April could shift a bit more attention to the April contract's $3-plus discount to the cash hog index, however.

Weekend demand news... Iraq reportedly canceled a tender to buy at least 50,000 MT of wheat due to a lack of offers. South Korea bought around 125,000 MT of feed wheat to be sourced from optional origins; the EU is expected to get the business.


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