First Thing Today: Hot, Dry Conditions Stoke Crop Concerns on Northern Plains

Get your day started with a brief rundown of key news.

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November 10, 2020 10:15 PM

Good morning!

Choppy to lower trade overnight... Corn futures are steady to fractionally lower after a quiet overnight session. Old-crop soybeans are narrowly mixed, with new-crop marginally higher. HRW wheat futures are 2 cents lower, SRW is fractionally lower, and HRS is posting losses of 1 to 3 cents. The U.S. dollar index is off to a firmer start, while crude oil futures are down slightly.

Hot, dry conditions add to drought concerns in Northern Plains... Temps were warm across the nation’s midsection over the weekend, topping the 100-degree mark in South Dakota. And rainfall was erratic, with the heaviest precip falling in Texas and the Gulf Coast area. This raises concerns about the spread of drought across the Dakotas impacting the spring wheat crop. More dry conditions are expected for much of the Midwest this week, with the exception of a few showers from central Illinois to Ohio. The National Weather Service forecast for June 10-14 calls for warm temps across the Plains and the Midwest. The Upper Midwest is expected to be wet, with dry conditions likely for the rest of the Plains and Corn Belt.

U.S. may also face competition from Argentine corn this fall... Rains have slowed harvest efforts and wiped out roads in Argentina, which is working to bring in its biggest corn crop on record. This may push back the country’s corn export season past August, adding to what is already expected to be a fierce export battle between the U.S. and Brazil. Typically, Argentina ships the bulk of its corn crop between March and July. Pablo Adreani, an Argentine farmer and crop analyst cited by Reuters, estimates that around “8 MMT of Argentine corn will compete with Brazil and the U.S. in the July through October period.”

U.S., Mexican trade officials close to agreement on sugar trade... A U.S./Mexico accord could be announced today, the deadline for current trade talks, Mexican Sugar Chamber President Juan Cortina told told several media outlets. Any deal would hold back antidumping and countervailing duties in exchange for restrictions on what Mexican producers can export to the U.S. Recent talks have been limited to government officials, with regular talks between Commerce Secretary Wilbur Ross and Mexican Economy Secretary Ildefonso Guajardo Villarreal. If U.S. tariffs are imposed, Mexican sugar producers have been pressuring their government to put in place steep retaliatory duties on imports of U.S. corn syrup. Guajardo late last week said the positions between the two countries have moved closer.

Congress returns with White House infrastructure plans being major focus... Lawmakers return from their Memorial Day recess, with budget-related hearings the primary congressional topic. It is infrastructure week at the White House, starting with “legislative principles” President Donald Trump will sign today outlining his vision for Congress to split air traffic control operations away from the FAA. The document states that “the new entity “must maintain access and services to rural communities and general aviation users” but doesn’t provide details. Trump will highlight his vision for other transportation modes like roads, rail and inland waterways throughout the week in trips to Ohio and Kentucky. He will speak on rural infrastructure Wednesday along the Ohio River and will visit Department of Transportation headquarters on Friday to talk about the federal permitting process.

USDA Secretary Sonny Perdue travels to Canada today... The trip is the ag secretary’s first international trip in his new post. He will be in Toronto, Canada and will meet with Canadian Minister of Agriculture and Agri-Food Lawrence MacAulay and other Canadian officials to discuss priority agricultural issues regarding Canada and the U.S. In 2016, the U.S. exported $20.2 billion of ag products to Canada, making it our second-largest ag export market, while Canada exported $21 billion of farm products to the U.S.

Global growth forecasts unchanged... The World Bank kept its outlook for the global economy unchanged, forecasting a modest pickup in growth despite uncertainty about monetary policy and the risk of trade conflicts. The lender projects the world economy will grow by 2.7% this year and 2.9% in 2018, the same as its January forecast.

OMB meets today with farm, other groups on WOTUS rule... Office of Management and Budget officials today will meet with representatives of the American Farm Bureau Federation and other groups to discuss the Environmental Protection Agency’s plan to replace the Obama administration’s “waters of the United States” (WOTUS) rule. OMB is conducting a federal interagency review of the EPA’s rule-making process. OMB last week met with a coalition of conservation groups about the topic.

CFTC data reflects bearish attitudes... Bearish attitudes are quite bearish across many grain and oilseed markets, according to the latest Commodities Futures Trading Commission data. Money managers extended their record short position in the soy complex (soybeans, soymeal, and soyoil) to 156,123 futures and options contracts the week ending May 30. When considering the seven grain and oilseeds markets, hedge funds now have the second most bearish stance on record at 462,667 futures and options contracts, due primarily to a boost in bearish corn positions.

Market hopeful China will lift ban on U.S. poultry... Upcoming visits by Chinese officials to the U.S. have raised hopes the country will cancel its ban on U.S. poultry imports. The ban has been in effect since 2015, when the U.S. dealt with its worst bird flu outbreak on record. Jim Sumner, president of the USA Poultry & Egg Export council, said that representatives with China’s ag ministry and animal quarantine and inspection service will visit U.S. poultry facilities and learn how producers fight avian flu next month. Another Chinese delegation will come in September, he added. Besides the obvious benefits a resumption of trade would have for the poultry sector, this would also support feed demand.

Canada surpasses the U.S. in pork shipments to China for first quarter... Canadian pork exports to China at 93,000 MT topped the U.S.'s 87,500 MT in shipments for the first quarter of 2017, according to data from both nations. This has happened just a few times over the past 20 years. Chinese demand for pork is on the rise, plus stricter environmental rules in China have reduced pork production there and increased demand for cheaper imports. Canada has nearly removed the growth drug ractopamine from pigs’ diet because the substance is banned in China. In contrast, only around half of the U.S. herd is produced without ractopamine.

Cattle futures overbought, but more upside possible... While the trend in the cattle market is pointed higher, futures have climbed into overbought territory, signaling some profit-taking may lie ahead. That said, futures remain at a discount to to last week’s $135 to $137 cash cattle trade and marketings are extremely current, which has boosted feedlots’ bargaining power.

Hogs still pointed higher... Momentum remains on the side of market bulls in the lean hog market based on its technical posture. Plus, strong profit margins, seasonally tightening supplies and gains in the pork cutout value have helped keep the cash market pointed higher.

Weekend demand news... There is no business to report.

Today’s reports: