Market Commentary

July corn up 1 ¾ at $3.7125
July beans up 3 ¼ at $9.515
USD is weaker
Crude oil down $.23 at $51.23

Good morning,

U.S. stocks continue to trade near all-time highs as very little seems to rattle investors. Just yesterday Moody’s Investors Service cut its rating on China’s debt for the first time since 1989. Making this the first time a major ratings agency has downgraded the country in more than 25 years. Moody’s cited the likelihood of a “material rise” in economy-wide debt and the burden that will place on the state’s finances.

The corn market kept ‘em guessing, putting in a classic “Turnaround Tuesday” reversal that more than erased Monday’s modest gains. Managed Money were viewed net sellers of over 10,000 corn, which would put them back short well over 200,000 contracts.

There really wasn’t much new to talk about yesterday. Traders continue to fret over the last ~10-15% of the crop to plant. Dry’ish weather due later this week for the Western Belt may have given bears some confidence to press the market today. The East remains quite soggy, which will wreak havoc with any remaining acres left – not to mention re-plantings and re-re-plantings! While later seedings do not directly influence yields, they can expose the crop to a longer period of summer, which tends to become warmer and dryer the longer it progresses. This only gets worse given the cooler temps we have seen, which can delay development. It also remains to be seen whether farmers stick with corn, or whether they switch to lower-cost beans.

Ethanol gained a little ground on corn Tuesday, though we still see the Midwest average spot profitability leaning toward small losses of about 10-15 c/bu (5 c/gal) processed. Today’s weekly EIA report should show a modest pullback in production (off recent two month highs) and steady/lower inventories. Livestock markets were a little lower.

Even in the face of strong first quarter U.S. beef and pork exports, there is plenty of trade policy uncertainty to worry about, warned U.S. Meat Export Federation officials at a news conference. While U.S. beef and variety meat exports were up 15 percent in the first quarter from a year ago, USMEF officials pointed to the dip in the Australian cattle cycle as the main contributor, which could evaporate in the coming months. While Australian beef exports are currently down 12 percent, their forecast for the year is a decline of only 3 percent and as their cattle cycle starts to turn, they will return to the market with competitive pricing. Additionally, with the U.S. withdrawal from the Trans-Pacific Partnership, Haggard and USMEF President Phil Seng both warned that 18 to 24 months from now when Australia can offer beef volume and competitive prices at duty rates that are “double-digit lower than ours,” U.S. exporters will be handicapped. As for pork exports to China, Haggard said while first quarter numbers were strong, even against last year’s strong exports, “We don’t think they are going to have that bump in imports we saw last year, but we think 2017 will still be second-largest import year for China for pork.” (Source: MeatingPlace)

The Wall Street Journal reports that commodities trader Glencore Plc has approached U.S. agribusiness group Bunge about a takeover. It was unclear where discussions between the companies stand and there may not be any deal, sources familiar with the matter told the newspaper. The report comes amid heightened expectations of consolidation among large grain traders as a global oversupply and thin trading margins have squeezed the core grain trading operations of Bunge and rivals Archer Daniels Midland Co, Cargill Inc. and Louis Dreyfus Co. Bunge Chief Executive Officer Soren Schroder said earlier this month that the sector was ripe for consolidation and that Bunge is prepared to take the lead in any dealmaking. A deal would make Glencore, the Swiss mining and trading giant, a major player in the U.S. agriculture market, the Journal reported.

Chinese state-owned Sinochem and ChemChina are in merger talks to create the world's biggest industrial chemicals firm, to be headed by Sinochem chief Ning Gaoning, four people with knowledge of the negotiations said. A deal could be announced by the end of the year, the people said, potentially just months after ChemChina completes its own $43 billion purchase of Switzerland's Syngenta, China's biggest overseas deal to date. A consolidation of Sinochem and ChemChina would be worth around $120 billion, one of the people said, topping companies like industrial chemicals giant BASF. Talks to create a Chinese chemicals powerhouse were first reported last year, but were dismissed by both companies as rumor. The two companies have accelerated negotiations after regulators last month cleared ChemChina's acquisition of Syngenta, the people said. Beijing sees a Sinochem/ChemChina deal as a blueprint for streamlining and consolidating its sprawling, debt-heavy state-owned enterprises, the people said, leaving fewer, but more powerful, national champions. (Source: Reuters)

Iowa Gov. Terry Branstad is set to resign from his post today, according to an NBC affiliate in Des Moines, after the Senate confirmed him on Monday to serve as ambassador to China. The 82-13 vote makes Branstad just the fifth confirmed ambassador in the Trump administration. Various groups with a stake in U.S.-China trade were quick to hail the vote and hopeful Branstad's farm-state background will pay dividends back home when he sets to work in Beijing. The National Cattlemen's Beef Association called Branstad "an ideal person to help facilitate the U.S. beef industry's return to the Chinese market for the first time in 13-plus years." And the American Soybean Association said it hopes the governor will create efficiencies in China's decision making on biotech crops and "ensure that agricultural trade remains a top priority between our two countries."

Have a good day,

Brady, Darren and David

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