First Thing Today: Slow Brazilian Bean Sales a Boon for the U.S.
Position evening ahead of the weekend... Corn futures favored the downside overnight and most contracts are currently down 1 to 2 cents. Soybeans are narrowly mixed, with old-crop favoring the upside and new-crop the downside. SRW and HRS wheat futures are fractionally to a penny higher, with HRW wheat up 1 to 4 cents. The U.S. dollar index is under pressure while crude oil futures are firmer.
Flood and winter storm warnings in effect... The National Weather Service has issued flash flood warnings stretching from southeast Oklahoma through Missouri and Arkansas and into southern Illinois, as heavy rains are expected to move across the region Friday through Sunday. This could lead to some crop damage, though significant losses are not expected. Meanwhile between 3 and 9 inches of snow are expected over the weekend for eastern Colorado, western Kansas and the Oklahoma and Texas panhandles, according to World Weather Inc. This could stress livestock and likely contributed to this week's strong cash market gains.
WMO ups odds of El Nino... There is a 50% to 60% chance an El Nino weather event will return this year, says the United Nations World Meteorological Organization (WMO). It details that "sea surface temperatures in the far eastern tropical Pacific Ocean increased to 2.0° Celsius or more above average during February and March." A spokeswoman for WMO said it was difficult to predict how severe of an impact an El Nino this year would be. The group also noted that forecasts made before May or June are less certain than ones made later in the year.
Slow Brazilian bean sales a boon for the U.S.... At the end of March, farmers in Brazil had sold just 49% of their soybean crop -- the lowest in seven years and well behind the five-year average of 63%, according to AgRural. While harvest is in its final stages, farmers have held onto beans due to low prices. This has led to strong U.S. shipments at a time when low tallies or even cancellations are more common. This has spurred more and more talk that USDA's 2.025 billion bu. soybean export forecast for 2016-17 is too low. Also of note, the lack of supplies at Brazilian ports have resulted in shipping rates to China that are more expensive than those from the U.S. Gulf for much of the marketing year.
Brazil ag minister pushing tariff on U.S. ethanol... Brazilian Ag Minister Blairo Maggi has asked Brazil's foreign trade council to place tariffs on ethanol imports, noting a surge in shipments from the U.S. In the first quarter, the U.S. shipped Brazil a record 720 million liters of ethanol, prompting ethanol producers to push for a 20% tariff on the biofuel. The council will meet next Wednesday. Any decision to tax ethanol could have broader trade policy implications regarding relations between the U.S. and Brazil. U.S. ethanol producers had recently shifted their attention to Brazil after China reintroduced a 30% tariff on the biofuel. Plus, Brazilian ethanol production has faded as high prices have encouraged a shift to sugar.
Brazil workers may hold general strike today... Brazil's labor unions are calling for nationwide strikes today to protest President Michel Temer's efforts to curb social security benefits and weaken labor laws. Besides anger over the reform, many are also expected to join the strike as it will extend a holiday weekend. The strike is expected to disrupt rail and road transport. This would be the country's first general strike in more than 20 years.
Buenos Aires Exchange encouraged by strong yields... In its weekly update, the Buenos Aires Grains Exchange reports that strong soybean yields across Argentina could more than make up for the 1 million hectares (2.47 million acres) that were lost to flooding and drought this season. It adds that yields are especially strong in northeastern Argentina and the eastern Entre Rios province. The exchange details that 32.3% of the crop has now been harvested, an advance of 16 percentage points over the past week. It also notes that its 56.5 MMT soybean crop peg could climb if good weather and high yields continue.
Trump threatens to terminate the U.S. trade agreement with South Korea... In an interview Thursday night with the Washington Post, President Donald Trump declared that the five-year-old accord with a key ally, South Korea, was “a horrible deal” that has left America “destroyed.” South Korea is the U.S.’s sixth-largest goods trade partner, and the U.S. goods trade deficit with Korea was $27.7 billion last year, according to the Office of the U.S. Trade Representative. Next week marks an anniversary for KORUS and triggers a review period to potentially renegotiate or ratify a new version of the agreement. “We’ve told them that we’ll either terminate or negotiate,” Trump said. “We may terminate.”
One-week stopgap spending measure likely to be approved today... Both the House and Senate are preparing to vote today on a one-week continuing resolution to keep the government open long enough to wrap up a fiscal 2017 spending agreement.
French wheat ratings on the decline amid dry conditions... Dry weather is taking a toll on France's wheat crop, leading FranceAgriMer to slash the amount of soft wheat rated in good to excellent condition to 78% as of April 24, down seven points from the week prior. This was the third week in a row where ratings have slipped.
Fears about GMOs curbing soyoil usage in China... Chinese consumers have long been wary of genetically modified crops, and that distrust is now beginning to impact their demand for soybean oil, the country's main cooking oil. Chinese consumers are increasingly seeking out alternatives to soyoil such as sunflower, peanut or sesame oil. In fact, Supermarket sales of soyoil fell 1% last year to 35.7 billion yuan while alternatives saw growth between 2% and 6%, according to data from Euromonitor, despite nearly a 20% price difference. China's soy crushing industry is highly dependent on GMO soybeans from the U.S. and Brazil.
Higher cash cattle trade prompts futures rally... Cattle futures surged in response to strong gains in the cash cattle market yesterday. The limit-higher close for most contracts means limits will be expanded today. Trade was fairly active across the Plains yesterday, with action ranging mostly from $135 to $138, with Kansas, Texas and Colorado favoring the upper end of that range. But futures could see some profit-taking to wrap up the week given the market's overbought condition.
Hogs follow cattle higher... Pork movement slowed to just 252.45 loads on Thursday on a 28-cent uptick in the pork cutout value. Nevertheless, the market enjoyed strong gains yesterday thanks largely to strong spillover support from the cattle complex. The lean hog market could take its cue from the cattle market again today.
Overnight demand news... A group of Philippines importers issued an international tender to buy up to 55,000 MT of feed wheat.
- 2:00 p.m., Livestock & Meat Domestic Data -- ERS
- 2:00 p.m., Egg Products -- NASS
- 2:00 p.m., Poultry - Production and Value - NASS