Good morning!
Varied price tone overnight... Soybeans traded higher overnight, while wheat faced pressure and corn was caught in the middle. As of 6:30 a.m. CT, corn futures are trading fractionally to a penny higher, soybeans are 8 to 9 cents higher, SRW wheat is mostly 8 cents lower, while HRW and HRS wheat are mostly 4 cents lower. Front-month crude oil futures are more than $1.00 higher and the U.S. dollar index is modestly lower.
Russia faces grain shipping challenges... Russian ports are overflowing with grain despite record shipments. Port capacity is being stretched with some terminals on the Azov Sea reportedly not accepting grain due to a lack of storage. These smaller ports are more overloaded than the main Black Sea grain port of Novorossiysk, SovEcon said. But any escalation in the Black Sea could have a big impact global grain trade. Meanwhile, insurance for ships heading to Russia’s Black Sea ports currently costs tens of thousands of dollars in additional premiums daily, three sources told Reuters. One shipping source familiar with the matter said even before insurance, ship operators were charging up to $10,000 more daily for Russian cargoes than for cargoes leaving nearby ports in Bulgaria and Romania.
Turkey seeks ‘expanded’ Black Sea grain deal... Turkish President Recep Tayyip Erdogan said he aims to revive the Black Sea grain deal with an “expanded scope,” calling on western countries to help turn the initiative into the basis for peace between Russia and Ukraine. Erdogan said contacts to restart the initiative “with an expanded scope” are ongoing but a solution depends on western countries “fulfilling their promises,” he added, without specifying which commitments had been broken.
China warns of crop, animal disease outbreaks in flood-hit areas... Northern China warned of crop and animal diseases breaking out as flood waters retreated from rural areas. Local authorities must step up measures to prevent and control major disease outbreaks caused by dead animals, pests and insects, Ag Minister Tang Renjian said. He noted, “ Agricultural and rural departments at all levels should accurately assess the disaster situation of farmers, help the affected farmers solve practical difficulties, and prevent disaster-caused poverty or return to poverty.”
Aussie exporters cleared to ship barley to China... Two Australian exporters, including the largest bulk grain exporter CBH Group, have been cleared to resume barley shipments to China, the Australian government said. CBH Grain and Emerald Grain Australia will be able to resume barley trade with China immediately after the country re-registered the two exporters, the Australian trade and agriculture ministers said.
India to release wheat, rice stocks... Indian will offer 2.5 MMT of rice and 5 MMT of wheat to bulk consumers, the country’s ag minister announced, as the government has adequate stocks of both. He also said the Indian government expects domestic rice and wheat prices to stabilize soon.
China deflation worries build... China saw a decrease in both consumer and producer prices in July for the first time since November 2020. China’s consumer price index (CPI) dropped 0.3% versus last year in July, the first year-over-year decline since February 2021. The cost of food fell 1.7% after rising in the prior 15 months amid a plunge in pork prices. China’s producer price index (PPI) declined for a 10th consecutive month, down 4.4% amid weakening demand and moderating commodity prices. Mounting concerns with deflation and other economic concerns are increasing pressure on Beijing to deliver more direct stimulus. Anxiety is rising that China is entering an era of much slower economic growth akin to the period of Japan’s “lost decades.”
U.S. to ban some investments in China... The U.S. government is planning to impose restrictions on private-equity and venture-capital investments into certain Chinese tech companies, according to a new executive order that will be issued today by President Joe Biden’s administration. This step represents an escalation in the U.S. strategy to hinder Beijing from advancing military-grade technology. The forthcoming executive order is predicted to include prohibitions on direct investments in three specific technological sectors: semiconductors, quantum computing and artificial intelligence.
Settlement clarifies new regs to Massachusetts Question 3... A federal judge on Monday approved a compromise joint motion between Massachusetts state regulators and industry groups, who had challenged the voter-approved law, that allows enforcement of most pork-related regulations to begin Aug. 24. Products that pass through Massachusetts on their way to final sale destinations in other states, however, will not immediately be subject to the new requirements. As part of the deal, Attorney General Andrea Campbell’s office and the Massachusetts Department of Agricultural Resources (MDAR) will not enforce any new restrictions on “transshipped” pork meat for at least six months. In that span, MDAR will explore a regulatory carveout explicitly exempting products that traverse the state but are neither produced nor sold there. Terms of the settlement state the Q3 regulations won’t apply to whole pork meat that’s already in the supply chain as of Aug. 23, nor will they apply to whole pork meat that was raised and sold to an out-of-state consumer. Also, if pork destined for out-of-state restaurants passes through distribution centers in Massachusetts, it will not be subject to Q3, even if a sale occurs in the state. The outcome allows impacted stakeholders more time to avoid supply disruptions. A request has been made to a federal court judge to approve this settlement agreement.
Strong rebound for wholesale beef but packer margins still negative... Wholesale beef prices have struggled to find a seasonal bottom amid selective retailer demand. But prices posted solid gains on Tuesday, with Choice boxes up 90 cents and Select $1.15 higher, while movement improved to 120 loads. Packer margins remain in the red, which will likely make them reluctant to bid up for cash cattle after raising prices last week and buying more cattle than recent weeks.
More signs of seasonal top in hog market... The CME lean hog index is down another 46 cents to $104.58 (as of Aug. 7). The cash index has declined six of the last eight days and is $1.42 below its July 28 peak. The pork cutout value dropped $3.22 on Tuesday to $112.09, down $5.12 from its late-July peak. While pressure on the cash and product markets hasn’t been sharp, there are increasing indications seasonal tops have been posted.
Overnight demand news... South Korea passed on a tender to buy up to 140,000 MT of optional origin corn. Japan tendered to buy 60,000 MT of feed wheat and 20,000 MT of feed barley. Jordan tendered to buy up to 120,000 MT of optional origin milling wheat. Algeria tendered to buy up to 80,000 MT of corn to be sourced from Argentina.
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Today’s reports
- 9:30 a.m. Weekly Ethanol Production — EIA
- 10:00 a.m. Livestock and Meat International Trade Data — ERS
- 2:00 p.m. Broiler Hatchery — NASS