Choppy price action preceding USDA reports... Corn futures are fractionally lower amid some light profit-taking after yesterday’s rally. Soybeans are up 2 cents on some pre-report short-covering. While winter wheat futures are fractionally to 2 cents lower, the HRS wheat market is posting similar gains. The U.S. dollar index is down slightly while crude oil futures are near steady as of 6:30 a.m. CT.
Higher U.S. and world carryover stocks expected... USDA will update its supply and demand tables at 11:00 a.m. CT today. Traders anticipate modest increases to its domestic carryover estimates from March for corn, soybeans and wheat, which are expected to come in around 2.352 billion bu., 447 million bu. and 1.147 billion bu., respectively. Global carryover is also expected to climb for all three crops.
Global traders are focusing on geopolitical concerns... Asian equities were mostly lower on rising military tensions in the Korean Peninsula, as well as fears of a liquidity squeeze in Chinese markets — shares in Hong Kong-listed China Finance Investment, an agricultural an investment products trading firm, plunged as much as 85% in early trade before ending the morning session down 65%. European investors are reassessing the risks from the French election with a poll showing leftist candidate Jean-Luc Melenchon rising to third place ahead of Francois Fillon.
PF CCI shows reflects improvement in SRW and HRW wheat crops... When USDA’s winter wheat crop condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500 point scale, with 500 being perfect), the HRW wheat crop came in at 335.48 points, which was a jump of 6.69 points from week-ago. This was largely due to a 4.3-point gain in the No. 1 producing state of Kansas after recent rains. Our CCI showed the SRW wheat crop at 374.37 points, up 1.58 points from week-ago and near steady with year-ago. Get more details.
Forecast for timely rains prompts Cordonnier to raise Brazilian corn crop estimate... South American Crop Consultant Dr. Michael Cordonnier raised his Brazilian corn crop estimate by 2 MMT to 90 MMT this week, explaining that he has been conservative with his corn crop estimate up to this point due to drier conditions in southern areas of the country, but that rain is forecast to hit these areas as the safrinha crop approaches early pollination. He left his soybean crop estimate unchanged at 109 MMT. He has a neutral to higher bias toward both estimates.
Consultant concerned that flooding could trim Argentine crops... While Cordonnier left his Argentine soybean and corn crop estimates unchanged at 56 MMT and 37 MMT, respectively, he has a neutral to lower bias going forward due to recent flooding and the chances for more. Soybean harvest was 5.9% complete last week versus 7.6% done last year at this point, according to the Buenos Aires Grain Exchange. The exchange also reports that 15% of the corn crop had been harvested, down 3 points from the year prior.
Chinese ag ministry raises soybean and corn import forecasts... China’s ag ministry raised its 2016-17 soybean import forecast by 1.24 MMT to 86.55 MMT, as the country raised its soybean consumption peg. The ag ministry now expects China to run a soybean balance deficit of 1.89 MMT, versus its prior forecast for a deficit of 2.19 MMT. The ministry also raised its 2016-17 corn import estimate by 200,000 MT to 1.0 MMT. It expects corn ending stocks to total 5.11 MMT this marketing year, which is up 700,000 MT from its previous peg.
Australian wheat acreage expected to be near steady with year-ago... Australian farmers will likely plant 13.4 million hectares (33.1 million acres) to wheat in 2017-18, down just 1% from the 2016-17 season’s historically high sowings, says Profarmer Australia (not affiliated with our company). This comes despite benchmark prices that are near the lowest level in a decade and unfavorable forecasts. But while acreage is expected to be near in line with year-ago, production estimates are down notably. The country’s chief commodity forecaster last month projected a 2017-18 wheat crop of 23.98 MMT, down 32% from year-ago, as dry weather is expected to curb yields.
Cattle futures still well below cash... On Friday, cash cattle trade took place largely around $126, which is well above where futures started the week. That prompted some corrective buying Monday, and even after yesterday’s strong gains the front-month is still roughly $5 below the cash market. However, boxed beef movement was light to start the week on choppy price action and showlists are up a sharp 24,000 head from week-ago. This signals traders may not be overly aggressive in further efforts to narrow futures’ discount to the cash market.
Cash hog bids and pork movement remain weak... While the pork cutout value firmed 97 cents to start the week, movement was quite light at 222.10 loads. And cash hog prices slumped to start the week. Barring another day of strong spillover support from live cattle, buying interest is likely to be limited in lean hog futures.
Overnight demand news... Morocco bought 132,000 MT of soft wheat in the local market. Taiwan tendered to buy between 40,000 MT and 65,000 MT of corn to be sourced from the U.S., Argentina, Brazil or South Africa. South Korea’s Major Feedmill Group bought around 60,000 MT of soymeal likely to be sourced from South America. The country’s Feed Leaders’ Committee bought around 63,000 MT of feed wheat to be sourced optionally from worldwide origins. Japan tendered to buy a total of 126,405 MT of food-quality wheat from the U.S., Canada and Australia in its regular tender.
