First Thing Today: Nearly a Five-fold Hike in China's Corn Deficit Forecast
Good morning!
Firmer tone heading into USDA reports... Corn futures are fractionally higher as a quiet overnight session winds down, with soybeans up 2 cents. Winter wheat futures are mostly a penny higher, while spring wheat is fractionally lower. The U.S. dollar index is marginally higher, while crude oil futures are facing heavy pressure.
Higher corn and soybean crop pegs expected today... Traders expect USDA to make slight increases to its yield and production estimates for both corn and soybeans today. Its corn crop estimate is expected to come in around 14.204 billion bu., with soybean production expected near 4.447 billion bu., according to a Reuters survey of analysts. But 2017-18 carryover for both crops is expected to edge down slightly from September. Wheat carryover is expected to climb around 13 million bu. to 946 million bushels. Analysts surveyed by Bloomberg expect USDA to lower both its production and ending stocks pegs for cotton, to 21.2 million bales and 5.7 million bales, respectively. Get more expectations.
Nearly a five-fold increase in China's corn deficit forecast... China's ag ministry now estimates its corn supply deficit for 2017-18 will be 4.31 MMT, a dramatic increase from the 890,000 MT it predicted last month. The country lowered its corn crop estimate by 2.38 MMT to 210.1 MMT, explaining that plantings were lower than anticipated due to reduced government support. The ministry also raised its consumption estimate by 1.05 MMT to 215.62 MMT, explaining that ethanol demand has been stronger than anticipated. But China plans to meet the supply shortfall with its reserves rather than imports. It left its corn import forecast at 1.5 MMT.
Weather watchers say transition to La Nina should bring drier weather to Argentina... Argentina has been dealing with too much rainfall that has caused problems with its wheat crop and slowed planting of corn and soybeans. But meteorologists cited by Reuters say the likely transition to La Nina conditions will help dry down fields and will eventually pose the threat of drought early next year. They expect flooded areas of Buenos Aires to receive average to below-average rainfall the remainder of the year.
Argy wheat crop prospects curbed by rain... Argentina's 2017-18 wheat crop will likely total 16 MMT, estimates the Rosario Grains Exchange. This would be down 1 MMT from the 2016-17 crop year, as heavy rains have drowned out some fields and reduced yields. The exchange left its corn and soybean planted acreage estimates unchanged at 6.2 million hectares (15.3 million acres) and 18.8 million hectares (46.5 million acres), respectively.
Strategie Grains expects marginal increase in soft wheat acreage in year ahead... Strategie Grains expects farmers in the European Union to plant more wheat and barley in 2018-19 and less corn, with the overall area planted to cereal expected to climb around 0.7% to 56.1 million hectares (138.6 million acres. The analyst expects soft wheat to climb around 0.5% from year-ago. It expects durum acreage to hold steady.
Canada dairy policies key topic re: NAFTA 2.0... There has been no give in Canada's position regarding the country's dairy policies. Canadian Prime Minister Justin Trudeau met yesterday with members of the House Ways and Means Committee, and he noted the importance of maintaining Canada's production and trade policies. Rep. Sandy Levin (D-Mich.) said dairy was one of the first things Trudeau talked about. "He did address the dairy issue and why it's important for Canada to maintain its present structure ..." Levin said. A U.S. proposal to reduce Canadian tariffs on U.S. dairy may be offered during the fourth round of talks this week. Comments by President Donald Trump yesterday regarding the talks were varied, with remarks the negotiations were "tough" and others signaling the possibility of bilateral deals with Canada and perhaps Mexico if talks falter.
Farm bill timeline could be decided today... House Agriculture Chairman Mike Conaway (R-Texas) today will confer with House Majority Leader Kevin McCarthy (R-Calif.) regarding the timing for the farm bill. Conaway wants to make sure he can still bring the bill to the floor later this year or early in 2018. "I'm laser-focused on getting the farm bill done," Conaway said.
Health care executive order coming... Trump plans to sign an executive order today that would relax rules on small businesses that band together to buy health insurance.
Dow to offer new E3 soybeans that aren't approved in Europe or China in 2018... Dow AgroSciences says it will launch a genetically engineered (GE) soybean seed known as Enlist E3 in the U.S. next year with tight controls, as the seed is barred by major importers, including Europe and China. Archer Daniels Midland (ADM) has an arrangement with Dow to oversee the handling of the harvests to make sure they are not shipped to either region. Farmers who opt to plant E3 seed must agree to deliver their harvests to four ADM facilities at set times. Dow is frustrated with lengthy approval processes overseas. It submitted the E3 soybeans for clearance in Europe in 2012 and in China in 2013. And since it can take as much as 10 years and up to $150 million to develop such products, time is of the essence when it comes to getting such products to market.
Japan to propose shortening review period on beef import safety mechanism... At its second round of economic talks with the U.S. on Oct. 16, Japan plans to propose changes to its safeguard mechanism on frozen U.S. beef imports, according to two government sources cited by Reuters. Specifically, Japan plans to propose shortening review periods on beef imports from quarterly to every 10 days and allowing importers to voluntarily lower import volumes to stop the tariffs from automatically kicking in. But the sources are uncertain whether the U.S. will go along with the proposal. Currently, Japan automatically hikes tariffs on countries it does not have economic partnership agreements (EPAs) with if quarterly imports of specific beef products from all nations or those without EPAs rise more than 17% from the previous years. This mechanism was triggered earlier this year, boosting taxes on frozen beef imports from the U.S. and others without EPAs from 38.5% to 50.0%. The higher rate is effective Aug. 1, 2017 to March 31, 2018.
CME says its efforts to tame volatility in the cattle market have worked... CME Group Inc. says it has no further plans aimed at reducing volatility in the cattle futures as industry feedback signals the steps the exchange has taken have worked. Over the past two years, CME has reduced trading hours and implemented new rules on order messaging, among other steps. Traders also note that the online Fed Cattle Exchange auction has helped improve transparency regarding cash cattle prices. Sarah Calhoun, manager of government affairs for the National Cattlemen's Beef Association says that volatility has faded over the past several months, but that more time will be needed to determine whether the problems have been solved.
Some initial cash cattle sales at steady levels... Yesterday's online fed cattle exchange auction provided little guidance regarding this week's cash action as no sales were made. Yesterday, around 100 head changed hands in Iowa at $110, steady with week-ago. But trade remained at a standstill in other locations.
Hogs trading back near recent highs... After faltering on Friday, the lean hog market has mounted a recovery and is trading back near last week's highs. The ongoing rebound in the cash hog market has been a driver to the upside, as has optimism about October pork month. Yesterday the pork cutout value climbed 24 cents and movement was decent at 332.71 loads.
Overnight demand news... Jordan made no purchase in its international tender to buy 100,000 MT of milling wheat. But it issued a new tender to buy 100,000 MT of hard milling wheat from optional origins. Tunisia tendered to buy 75,000 MT of durum wheat, 50,000 MT of soft wheat and 50,000 MT of feed barley from optional origins. Japan purchased 34,175 MT of food-quality wheat from the U.S., as well as 35,740 MT from Canada and 36,130 MT from Australia.
Today's reports:
- 7:30 a.m., Drought Monitor -- USDA/NWS
- 9:30 a.m., Weekly Ethanol Production -- EIA
- 11:00 a.m., WASDE -- ERS
- 11:00 a.m., Cotton Ginnings-- NASS
- 11:00 a.m., Crop Production-- NASS
- 11:15 a.m., Cotton: World Markets and Trade-- FAS
- 11:15 a.m., Grains: World Markets and Trade-- FAS
- 11:15 a.m., Oilseeds: World Markets and Trade-- FAS
- 11:15 a.m., World Agricultural Production-- FAS
- 2:00 p.m., Season Average Price Forecast-- ERS
