Good morning!
Corn and beans firmer, wheat lower to open the week... Corn and soybean futures were supported overnight by crop concerns amid expectations for a poor finish to the growing season, while wheat futures slumped. As of 6:30 a.m. CT, corn futures are trading 4 cents higher, soybeans are 9 to 12 cents higher, SRW wheat is 3 to 4 cents lower, HRW wheat is 9 to 10 cents lower and HRS wheat is around a penny lower. Front-month crude oil futures are modestly lower, while the U.S. dollar index is trading just above unchanged.
Warm, dry weather after some weekend relief... Some parts of the Midwest received welcome rain during the weekend, but areas to the north were dry. Cooling occurred in both the Northern Plains and Midwest during the weekend. Midwest weather will trend warmer than usual again during the latter part of this week into next week, while conditions are expected to be drier than normal for the next 10 days to two weeks, according to World Weather Inc.
China halves stamp duty on stock trades to boost slumping market... China halved the stamp duty on stock trading effective today in the latest attempt to boost the struggling market. The finance ministry said on Sunday it was reducing the 0.1% duty on stock trades “in order to invigorate the capital market and boost investor confidence.” Along with the finance ministry move, the China Securities Regulatory Commission (CSRC) is rolling out measures to shore up market confidence in investing in listed companies. CSRC said China will slow the pace of initial public offerings (IPOs) and further regulate major shareholders’ share reductions. Meanwhile, stock exchanges in China have lowered their margin financing requirements, according to CSRC’s announcement. Economists expect the measures to have limited, short-term impacts.
China’s industrial profits drop persists as economy weakens... China’s industrial profits dropped 6.7% in July compared to last year. This is a slight improvement from June, which saw a larger decrease of 8.3%. Looking at the cumulative figures for the first seven months of 2023, profits fell 15.5%. The decrease followed a 16.8 % slump in the prior period and a 4% fall in 2022
Kremlin plays down significance of second vessel passing through Ukraine’s Black Sea corridor... The passage of a second ship from Ukraine along a temporary Black Sea corridor has nothing to do with the prospects for a new grain deal involving Russia, Kremlin spokesman Dmitry Peskov said. A vessel carrying steel products to Africa left Ukraine’s port of Odesa on Sunday through a temporary Black Sea corridor, the second ship to do so since Russia withdrew from the Black Sea export deal. Peskov reiterated the prospects of reviving the grain deal would depend on whether the West delivered on promises it gave Moscow regarding Russia’s grain and fertilizer exports.
Ukraine trying to encourage more grain shipments... Ukrainian authorities are engaging in conversations with both commodity traders and global insurance companies to establish a government-supported initiative that facilitates ship travel to the country’s ports. This move comes as they search for alternative commercial routes following the collapse of the Black Sea Grain Initiative. The emerging plan involves Ukraine’s government assuming the initial losses in the event of a grain ship being damaged. This arrangement is expected to encourage more insurance companies to offer coverage to ships servicing Ukrainian ports, thereby leading to reduced insurance premiums. Although a few insurers do provide coverage for this route, the costs are currently extremely high.
Ukraine’s farmers detail cost of grain deal’s collapse... Russia’s actions to obstruct Ukraine’s grain exports, including withdrawing from the Black Sea grain deal and attacking port facilities, have severely impacted Ukrainian farmers, according to a detailed Wall Street Journal article. Highlights:
- Around three-quarters of Ukraine’s grain exports have been hindered due to these actions.
- Ukrainian farmers are facing difficulties in selling their grains, leading to increased transport costs and decreased income.
- The collapse of the Black Sea agreement caused global grain prices to rise, but in Ukraine, prices fell due to excess supplies trapped in the country.
- Ukrainian farmers are now paid less for their wheat compared to before the collapse, causing financial strain.
- The restrictions on exports might lead to difficulties in financing the next crop planting, potentially limiting grain production in one of the world’s major grain suppliers.
- Some farmers are already reducing their winter wheat planting or shifting to more lucrative crops like sunflowers.
- The war and port disruptions have forced Ukraine to rely on alternative export routes, leading to higher transportation costs.
- Exporting through land or the Danube River is costlier compared to the Black Sea route.
- Farmers are concerned about profitability, with rising logistics costs and elevated fertilizer and chemical prices.
- The challenge of land mines in previously occupied areas further complicates farming.
- The situation’s impact on Ukrainian farmers could have broader economic consequences, given the significance of agriculture in the country’s exports.
Raimondo: ‘Profoundly important’ for U.S., China economic ties... Commerce Secretary Gina Raimondo opened talks with Chinese government officials on Monday, saying it is “profoundly important” for the world’s two largest economies to have a stable economic relationship. “It’s a complicated relationship. It’s a challenging relationship. We will of course disagree on certain issues,” Raimondo said. “I think we can make progress if we are direct, open and practical.” Raimondo, who is holding three days of talks with Chinese officials and business leaders to boost ties, met with Commerce Minister Wang Wentao on Monday. He said China was ready to work together to “foster a more favorable policy environment for stronger cooperation between our businesses to bolster bilateral trade and investment in a stable and predictable manner.”
India sets floor price for basmati rice after restricting non-basmati... India has imposed a $1,200 per ton minimum export price (MEP) on basmati rice shipments, the government said on Sunday, as the world’s biggest exporter tries to calm local prices ahead of state elections. Last week, India imposed a 20% duty on exports of parboiled rice.
The week ahead in Washington... Lawmakers remain on their long summer recess, but staffers continue to work on drafting a new farm bill. As Sen. John Boozman (R-Ark.) told us last week, funding is still an issue and work is still not completed on trying to improve farm safety net provisions in Title 1. Federal Reserve Chair Jerome Powell’s recent speech at the annual symposium in Jackson Hole, Wyoming, highlighted his stance on interest rates and the economy. Powell argued for maintaining steady interest rates for now but indicated the possibility of raising them later in the year if the economy does not slow enough to control inflation. He emphasized the delicate balance he seeks to strike between curbing inflation without causing unnecessary economic slowdown. August employment data will be released on Friday. Key agricultural data includes Canadian production estimates on Tuesday and USDA’s farm income forecasts and ag trade outlook on Thursday.
PARP update... USDA needs to finalize the 2020-2021 ERP Phase 2 first (provides additional 2020 revenue to be considered for PARP) before it can calculate a payment factor for Pandemic Assistance Revenue Program (PARP). Sources say the CBA in the rule was a high estimate (doesn’t include other revenue factors that would decrease the overall demand) and stress it was an estimate. It is unclear what USDA received regarding claims under PARP. Some sources estimate that final payment factors for PARP will be determined this fall (likely in October).
FSA updates LIP payment rate for Midwest livestock producers... USDA’s Farm Service Agency (FSA) is updating the Livestock Indemnity Program (LIP) payment rate to support livestock producers in the Midwest who have lost cattle to the extreme heat and humidity experienced this summer. To help indemnify ranchers to reflect a trend towards higher cattle weights in feedlots, the 2023 LIP payment rate for beef calves over 800 lbs. will increase from $1244 per head to $1618. LIP provides benefits to livestock owners and some contract growers for livestock deaths exceeding normal mortality from eligible adverse weather events, certain predation losses and reduced sales prices due to injury from an eligible loss. Indemnity payments are made at a rate of 75% of the prior year’s average fair market value of the livestock. The updated LIP payment rate is effective immediately and will be applied retroactively starting Jan.1, 2023, for all eligible causes of loss including excessive heat, tornado, winter storms and other qualifying adverse weather. Producers who have already received LIP payments for 2023 losses will receive an additional payment, if applicable, commensurate with this updated rate.
China’s sow herd inches lower in July... China’s sow herd in July fell 0.6% against the prior month to 42.71 million head, ag ministry data showed. The sow herd was also 0.6% smaller than last year. Hog slaughter in July jumped 26.7% from last year.
Wholesale beef prices continue to rise... Choice boxed beef prices firmed 27 cents on Friday, while Select rose 76 cents. The recent climb in wholesale prices has pushed packer margins into the black, which should encourage them to more actively bid for cash cattle in the negotiated market.
Cash hog decline accelerates... The CME lean hog index is down $1.22 to $95.18, marking an acceleration of the seasonal drop in prices as market-ready supplies build. The index has dropped nearly $11.00 from its late-July peak, with the string of daily declines persisting since Aug. 2.
Weekend demand news... South Korea purchased 55,000 MT of optional origin feed wheat.
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. Livestock and Meat Domestic Data — ERS
- 2:00 p.m. Peanut Stocks and Processing — NASS
- 3:00 p.m. Crop Progress — NASS