First Thing Today: Weather Concerns Remain Front and Center
Weather concerns remain front-and-center, lifting markets... Corn futures saw two-sided trade overnight, but the market is currently trading around 4 cents higher thanks to ongoing heat across the Midwest and weather models that continue to vary in terms of how soon rains will arrive in the Corn Belt and how far south they will travel. Soybeans are also being lifted by weather concerns, with most contracts currently up 2 cents. Winter wheat is mostly up a penny or two, while spring wheat is 1 to 6 cents higher. Spotty rains fell over the eastern areas of the Northern Plains yesterday, but accumulation was light and much of the region missed out on rain.
Dry weather taking a toll on three major producers of high-protein wheat... All three of the world's top suppliers of high-protein wheat -- the U.S., Canada and Australia -- are dealing with drought. In Saskatchewan and Alberta, Canada's top producing provinces, crop development is behind last year's pace and much of Saskatchewan has received less than 40% of normal precip over the past 30 days. Heat and dryness are also taking a toll on U.S. and Australian crops. This has shot up prices for high-quality wheat, cutting into profit margins for food companies and causing millers and bakers to reevaluate their protein needs. But to some extent, demand for high-protein wheat is inelastic.
House budget resolution vote... The long-awaited House budget proposal gets a markup in committee today, despite concerns from some Republicans and opposition from Democrats. Tax reform and budget cuts were included in the resolution package. The planned Republican tax system overhaul would be part of a legislative package that would also include more than $200 billion in spending cuts under the House GOP budget resolution. The Ways and Means Committee is one of 11 committees tasked with reducing the budget deficit by making changes in programs under their jurisdiction. Ways and Means’ deficit reduction directive calls for at least $52 billion in cuts over 10 years; the total cuts by all 11 committees would be a minimum of $203 billion over those years. The committees’ proposals would be compiled into a single reconciliation bill for floor consideration. They would have until Oct. 6 to send legislative text on its spending cuts to the Budget Committee.
Immigration enforcement, H-2A ag guest worker program part of panel-cleared House spending measure... The House Appropriations Committee on Tuesday approved a $44.3 billion fiscal 2018 spending bill for the Department of Homeland Security that includes funding for some of Trump’s key immigration enforcement policies. One approved amendment makes a major change in the H-2A agricultural guest worker program. The provision would allow H-2A visas to be used for year-around farmworkers. The program is now limited to seasonal employees, which is a major problem for dairy producers.
House and Senate leaders announce major action ahead... The House will take up a four-bill fiscal 2018 appropriations package focused on security before leaving for the August recess. At the urging of President Donald Trump, the Senate will take a test vote on health care "early next week."
Bill introduced to extend, phase out biodiesel blenders tax credit… Reps. Diane Black (R-Tenn.) and Ron Kind (D-Wis.) introduced legislation to extend the biodiesel blenders tax credit and phase the incentive out by 2022. Under the proposed phase-out, the value for the blenders tax credit would be $1 per gallon in 2017 to 2018, 75 cents in 2019, and 50 cents in 2020 through 2021. The tax credit would sunset Dec. 31, 2021. The National Biodiesel Board does not support phasing out the biodiesel tax incentive.
Dow pressing for answers... Dow AgriScience is pressing China to clarify its position on its Enlist soybeans, the company told Reuters yesterday. As part of its 100-day trade talks with the U.S., China pledged to review eight biotech crops awaiting approval. Earlier this week, China approved two new biotech crops for import, after giving two other products the green light earlier. Four other biotech crops, including Dow's Enlist beans, an insect-resistant corn from DuPont or two alfalfa products from Monsanto, are still in limbo.
Atypical BSE case in Alabama, but no trade threat anticipated... An 11-year-old cow in Alabama has tested positive for bovine spongiform encephalopathy (BSE, also known as mad cow disease). The cow tested positive for the atypical L-type of BSE after showing clinical signs at an Alabama livestock market, according to USDA. It emphasized that "This animal never entered slaughter channels and at no time presented a risk to the food supply, or to human health in the United States." It added that the atypical case won't change the negligible risk status of the U.S., nor should it lead to any trade issues. However, South Korea’s agriculture ministry said it will strengthen quarantine measures on U.S. beef starting today.
Light cash market test points to lower trade... A modest rise in showlist numbers (up 9,000 head, largely in Nebraska) from week-ago has traders expecting cash cattle prices to drop this week after stabilizing the past two weeks. August futures ended yesterday's session roughly $5 below last week's average cash price. But choppy boxed beef prices and solid movement could limit any slide in cash prices. So far, just a few hundred head have changed hands in the Iowa/Minnesota and Kansas markets around $117. Today's online Fed Cattle Exchange auction should provide more cash market guidance.
Mixed cash hog bids Tuesday... Cash hog prices strengthened in the eastern Corn Belt but softened elsewhere yesterday, signaling varied packer demand. They are still enjoying strong cutting margins, but this week's kill is running under week-ago levels. Meanwhile, the pork market showed signs of life yesterday, with the cutout value gaining 43 cents and movement picking up to 321.13 loads.
Overnight demand news... Egypt bought 120,000 MT of wheat from Russia, 120,000 MT of wheat from Romania and 60,000 MT of wheat from France. Taiwan purchased 105,150 MT of milling wheat from the United States.