AgriVisor Morning Marketwatch

Thursday, July 06, 2017
   ***Good Morning***

 ***** Grains were mostly sharply lower in the overnight trade; soybeans are 4-5 lower, corn 6-7 lower, and Chi and KC wheat 20-23 lower, with Minn 28 lower. *****

   # Weather, crop condition ratings, and/or a short term exhausted speculative environment all contributed to the weaker trade.  Amid fears that the move up might have ended, keep in mind that all weather markets are volatile. 
   # The weekly crop condition ratings were notable.  Spring wheat’s g/e dropped 3 points to 37%; the trade was looking for 38%.  Corn’s rating increased 1 point to 68%; the trade was looking for a 1 point drop. Soybean’s rating fell 2 points to 64%; the trade was looking for 65%. But it’s what is ahead, not behind that the market dwells on.
   # Yesterday, there were some good rains in the eastern Dakotas, along with other locations across the Corn Belt.  The one in the Dakotas moved across Minn, and is now in Wisc.  There are some other systems from Cent Ill to the east, providing some relief as well.  But there is not big general “rain maker.”
   # The longer range outlooks remain much the same.  The 6-10 day keeps the Midwest warm, with dryness mostly confined to the Great Plains.  The 8-14 day is still warm, but the dryness slips southeast into the heart of the Corn Belt.  Longer range outlooks, although still uncertain, tend to suggest dryness will persist in the Midwest, maybe not enough to have a significant drought, but they don’t point to a repeat of last year’s weather.
   # There’s starting to be more talk about the potential corn yield.  So far, we are hearing more discussion of something in the 165-170 range this year.  Our crop condition model yield is just over 170, but it is early. There’s not as much talk about soybeans, but there’s not as much focus until August.  Our crop model points to something just over 48 bu.  
   # Chinese conditions are garnering attention, although they don’t’ mean much to the world picture because of the inventories they are trying to pare down.  Still, they have some psychological implications.  Conditions in the north remain stressful, with the veg index maps worse than last year.  And floods in the south have destroyed some crops, along with disrupting transportation. 
   # Egypt bought 410,000 tons of wheat on a tender yesterday; all from Russia/Romania.  As far as out markets, the talk focused on how much higher our wheat was priced than the other offers.
   # Yesterday afternoon’s EPA announcement was a bit of a disappointment in regards to advanced biofuels.  They lowered the mandate slightly to 4.24 bln. gals. Instead of raising it.  That weighed on soyoil.  The ethanol number for 2018 was left at 15 bln. gals. 
   # Traders are mindful of the short term overbought condition in spring wheat in particular.  But few are willing to press the short side given the situation, and with a report coming next Wednesday.  They are watching the gaps left Monday in the KC and Chicago wheat markets(see wheat advice).
   # Malaysian palm oil is up for the 4th day in a row.  The market is following the lead of other vegoil markets(especially the Dalian soyoil market), but talk of production not growing as fast as expected is supportive too. 
   # Soybean and corn inventories are causing a problem in Brazil.  Low prices are discouraging sales, causing farmers to have to store soy and/or corn in silo bags in Mato Grosso, with a preference to store soybeans.
   # Soybean inventories have gotten a little high at Chinese ports too.  It’s estimated port stocks and that in ships waiting to unload could be as large as 7 mmt.  One issue is that tougher inspections have slowed the movement of cargoes through the ports. 
   # The financial industry is still assessing Fed intentions in the wake of yesterday’s release of the June minutes. Analysts noted the lack of consensus on inflation, clouding prospects for future interest rate increases. The ECB will release their latest minutes later today.  The trade is generally now focused no economic reports the next 2 days. 

***** Cattle should start the day mixed/lower; lean hogs steady/strong. *****  

   # Wholesale beef is slightly lower with choice at $222.58. The cash cattle market should continue to have a weak undertone with the sliding wholesale market.  Asking prices are $120-$122, but there has been a light trade so far near $117. 
   # Wholesale pork is slightly higher at $104.41. Cash hog prices should be firm today, with packers wanting inventory to fill out the week’s slaughter, including a big Saturday slaughter.  Packer margins remain good. Hog prices could nudge $90 this week.