Good morning!
Grains under pressure to open the week... Corn, soybeans and wheat traded lower overnight in continuation of price pressure from late last week. Corn and wheat futures posted contract lows, while soybeans held above their mid-August low. As of 6:30 a.m. CT, corn futures are trading 4 to 5 cents lower, soybeans are mostly 8 cents lower, winter wheat markets are 4 to 5 cents lower and spring wheat is mostly 6 to 7 cents lower. The U.S. dollar index is about 135 points higher and front-month crude oil futures are around $2.00 higher this morning.
Warm, mostly dry week ahead... Forecasts call for seasonal to above-normal temperatures across the Plains, Corn Belt, Delta and Southeast for most of this week. World Weather Inc. says rains will be restricted in these regions, but not totally absent. Cooler temps are expected to gradually develop by the weekend and last into next week, though rains will remain limited.
Canadian railways resume operations, but union will appeal... Over 9,000 railway workers from Canadian National Railway (CN) and Canadian Pacific Kansas City Railway (CPKC) will return to work today following a Canada Industrial Relations Board (CIRB) decision. CIRB upheld the federal labor minister’s directive for binding arbitration to resolve ongoing contract disputes between the railways and the Teamsters Canada Rail Conference (TCRC) union. This ruling follows a shutdown of the Canadian rail system due to lockouts over issues like worker scheduling and compensation. CIRB’s order requires the resumption of operations by Aug. 26 and extends the terms of the previous labor agreement until new contracts are finalized through arbitration, which is scheduled to begin on Aug. 29. The Teamsters union plans to appeal the decision, citing concerns over the precedent it sets for future labor disputes.
Middle East tensions elevated... Crude oil prices spiked but there is keener risk aversion in other markets after the weekend military exchanges between Israel and Hezbollah. Israel conducted preemptive air strikes against Hezbollah installations that Israel said were poised to attack Israel, with Hezbollah then retaliating and launching missiles into Israel.
China fines Sinograin, others for cooking oil transport scandal... China fined state stockpiler Sinograin and six more firms a total of about 11 million yuan ($1.54 million) over the use of fuel tankers to transport cooking oil in a scandal that eroded confidence in food safety regulations, state-run Xinhua news reported. An official investigation in the provinces of Hebei, Tianjin, Inner Mongolia and Shaanxi found the use of unclean tankers was “extremely severe,” Xinhua said, citing the State Council Food Safety Office, which was involved in the investigation. The use of unclean tankers “violated basic common sense and tramples on moral bottom lines and legal red lines”, said the council.
China rolls over maturing loans, injects cash... The People’s Bank of China (PBOC) kept the rate on 300 billion yuan ($42.11 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions at 2.30%. Monday’s operation was delayed from its typical schedule in the middle of every month, part of PBOC’s plan to overhaul its policy rate system that gradually reduces the role of MLF rate and turns to using the short-term rate to guide markets like its global peers. With CNY 401 billion worth of MLF loans expiring on Aug. 15, the central bank drained a net CNY 101 billion of cash from the banking system. PBOC also injected CNY 471 billion through seven-day reverse repurchase operations, maintaining the seven-day interest rate at 1.7%.
PBOC starts bank stress tests to avoid bond bubble bursting... China has initiated stress tests with financial institutions on their bond investments, to make sure they can handle any market volatility should a record-breaking rally reverse, according to state-run Financial News. PBOC has made a gradual start to the tests recently, wary that a bull run might lead to one-sided bets in long-term government bonds. Financial institutions should be able to cope with large drops in bond prices, as crowded holdings in debt positions could easily turn into a “stampede” in the event of a sharp yield reversal, Financial News said. That can raise the likelihood of a liquidity crisis and threaten financial stability, it added.
The week ahead in Washington... The House and Senate are on their summer break and aren’t scheduled to return to Washington until Sept. 9. Now that both political conventions are over, the presidential and congressional elections begin their home stretch with the most significant action, including updated polls, coming after Labor Day. The economic focus will be Friday’s personal consumption expenditures (PCE) index, the Federal Reserve’s preferred inflation metric, which is expected to show a slight increase in July. Fed Chair Jerome Powell last Friday said the time has come to cut its key policy rate, affirming expectations that officials will begin lowering borrowing costs at the Sept. 17-18 monetary policy meeting. For agriculture, USDA will update its ag trade outlook on Tuesday.
Cattle on Feed Report slightly negative... USDA estimated there were 11.095 million head of cattle in large feedlots (1,000-plus head) as of Aug. 1, up 31,000 head (0.3%) from year-ago, 65,000 head more than analysts expected. July placements increased 5.8% (3.2% increase expected), while marketings rose 7.7% (8.1% increase expected).
Supportive frozen meat stocks data... USDA’s Cold Storage Report Friday afternoon showed beef stocks in frozen storage at the end of July at 407.1 million lbs., down 799,000 lbs. from June, whereas the five-year average was a 10.8-million-lb. increase during the month. Beef stocks declined 3.3 million lbs. (0.8%) from year-ago and were 36.4 million lbs. (8.2%) less than the five-year average. Pork stocks totaled 450.7 million lbs., down 24.2 million lbs. from June, far greater than the five-year average 7.2-million-lb. decline for the month. Frozen pork inventories fell 20.1 million lbs. (4.3%) from last year and were 51.5 million lbs. (10.3%) below the five-year average.
Wholesale beef prices remain elevated... Wholesale beef prices firmed $1.35 for Choice to $317.34, while Select dropped $1.57 to $300.46 on Friday. Prices are well off their summer peak, but they remain elevated amid tight market-ready supplies.
Cash hog index extends slide, pork cutout jumps... The CME lean hog index is down another 61 cents to $88.22 as of Aug. 22, extending the pullback from the early August seasonal top. October lean hog futures finished Friday at a $7.67 discount to today’s cash quote. The pork cutout value rose $2.62 Friday, rebounding from losses earlier in the week, as all cuts except ribs firmed.
Weekend demand news... Exporters reported no tenders or sales.
See ‘Policy Updates’ for late-breaking morning news updates... For updates to items in “First Thing Today” or any late-breaking morning news stories, check “Policy Updates” on www.profarmer.com.
Today’s reports
· 10:00 a.m. Export Inspections — AMS
· 2:00 p.m. Peanut Stocks and Processing — NASS
· 3:00 p.m. Crop Progress — NASS