Good morning!
Soybeans lead overnight price gains... Soybeans posted strong gains overnight, while corn and wheat followed to the upside. As of 6:30 a.m. CT, corn futures are trading mostly 6 cents higher, soybeans are 20 to 29 cents higher, winter wheat futures are 2 to 4 cents higher and spring wheat is 5 to 6 cents higher. Front-month crude oil futures are around 50 cent lower and the U.S. dollar index is about 135 points higher.
Generally favorable weather expected this week... Multiple waves of rain are expected to move across the central U.S. this week, favoring central and southern areas of the Corn Belt. Northern areas will likely see only sporadic rains. Temps are expected to remain seasonal to below normal for much of the Corn Belt. HRW wheat areas in Oklahoma and Kansas will get rains, which could hamper crop quality and harvest activity, while Texas will be hot and dry.
Turkey seeks extension of Black Sea grain deal but Russia isn’t showing signs of compromise... Turkish President Recep Tayyip Erdogan said he was “hopeful” the Black Sea grain deal, which expires on July 17, could be extended for three months. Erdogan met with Ukrainian President Volodymyr Zelenskyy on Saturday. Erdogan wants to talk with Russian President Vladimir Putin this week, though the Kremlin says there are currently no plans for a meeting. Russia’s RIA news agency reported “there is no optimism” for the extension of the deal – a position that Moscow has reiterated frequently in recent weeks – citing a source familiar with the negotiations.
China increases soybean inspections process... China’s customs agency will now require importers to stage imported soybeans at specific warehouses before they get quarantine permission for the shipments to enter the domestic market. The increased inspections process will slow clearing times on soybeans arriving at Chinese ports.
Chinese deflation concerns mount... China’s producer prices fell at their fastest pace in over seven years in June, while consumer prices were the lowest since February 2021. China’s producer price index dropped 5.4% annually in June. It was the ninth consecutive month of producer deflation and the fastest fall since December 2015 amid weakening demand and moderating commodity prices. China’s consumer price index was unchanged from year-ago in June. Food prices rose for the first time in three months due to a rebound in the cost of both fresh vegetables and eggs despite a sharp fall in pork prices. China’s deflation risks spur speculation about increased stimulus measures. China should shift the focus of its stimulus from investment to consumption and further loosen urban residency curbs to boost migrant workers’ spending power, a central bank policy adviser said.
China urges ‘practical’ U.S. actions on sanctions after Yellen visit... China called on the U.S. to take “practical action” in response to its “major concerns” about sanctions on Chinese firms following the visit to Beijing by Treasury Secretary Janet Yellen. While there was no major breakthroughs from the meetings, both sides described their talks as “productive” and agreed to keep channels open “at all levels” for talks on the economy. China’s finance ministry said it “requires” the U.S. to “cease the suppression of Chinese enterprises, lift bans on Xinjiang-related products and take concrete steps to respond to China’s major concerns in economic relations between the two countries.”
The week ahead in Washington... The Senate is in today, while the House returns tomorrow. There are just 12 legislative days left until the August recess starts. Congress is preparing to process the National Defense Authorization Act, which has passed annually for over 60 years. They’ll need to manage more than 1,400 amendments, approve the bill and reconcile it with the Senate’s version. Some hardline House Republicans are balking at voting for the measure if it contains continued funding for Ukraine’s battle against Russian aggression, spending that Senate Minority Leader Mitch McConnell (R-Ky.) sees as an imperative. Senators from both parties have expressed support for a supplemental stipend to bolster the Ukrainian counteroffensive. This month, other government spending bills may also proceed, but it is unlikely all will pass by the Sept. 30 deadline. If negotiations fail, a stopgap spending measure may be implemented to prevent a government shutdown. Behind-the-scenes work continues on getting a draft completed for a new farm bill, with a timeline of late August or September. One of the primary points of contention usually boils down to the food-stamp program. Key economic data this week includes the U.S. consumer inflation on Wednesday and producer prices on Thursday. The key data for agriculture this week will be Wednesday’s Supply & Demand Report and USDA’s first all-wheat production estimate, including the first survey-based look at the other spring wheat and durum crops.
Progress on reducing U.S. inflation... Dr. Vince Malanga, president of LaSalle Economics, Inc., says: “Overall inflation is currently running at about half its peak rate of last year, and in June calendar effects alone will make the improvement even better. This is progress; the published price indexes may well be understating the degree to which inflation is dissipating; and annualizing the past several months’ price changes shows the rate is approximating the Fed’s 2% target. Favorable calendar effects will end with publication of June data, and it is possible the yearly rate could then actually tick up because last summer’s rates of change were very slow. This we suspect is one reason the FOMC feels it must stay the course with further policy tightening being more likely than not. However, this could be dangerous if underlying inflation is fundamentally dissipating, which is our view. Price changes further back in the production pipeline are easing, and China for one is most recently exporting deflation rather than inflation. Oil struggles to exceed $70 per barrel, and with weather improving agricultural prices are moving down measurably.”
Driving force behind IRA/Climate Bill... A research group at Princeton University, led by Prof. Jesse Jenkins, is playing a crucial role in directing U.S. government spending to address climate change. Last year, the group’s estimate that such spending could reduce emissions by 43% by the end of the decade — with significant improvements of the power grid being vital — was widely acknowledged. A Wall Street Journal (WSJ) article notes the group was key in developing the climate-oriented Inflation Reduction Act (IRA) using their Rapid Energy Policy Evaluation and Analysis Toolkit (REPEAT) project. However, they proclaimed this Act would fail without significant upgrades to the power grid, a sentiment echoed by John Podesta, the White House’s clean energy advisor. The team’s new analysis suggests a possible reduction in carbon emissions of 37% to 41% by 2030 from 2005 levels. However, Jenkins warns that unless improvements to the power grid accelerate significantly, emissions could worsen by 2030. He highlights that increased power demand from the incentives on electric vehicles and other electronic devices will need substantial improvements in transmission capacity. Without it, much demand could still be powered by fossil fuel plants. Of note: The WSJ item says: “The lasting impact of Jenkins’s research may be the importance of upgrading the power grid.”
Mixed cash cattle outlook... Packers had to get more aggressive with cash cattle bids in the northern market late Friday due to tightness of market-ready supplies in that region. With packers thought to need more near-term supplies, cash cattle prices are expected to strengthen in the northern market this week. But prices may again weaken in the Southern Plains where supplies are more plentiful.
Another big jump in cash hog index... The CME lean hog index is up $1.36 to $97.43 (as of July 6). That follows a jump of $1.39 the previous day and signals the seasonal rally in the cash index is gaining steam. July lean hog futures, which expire a week from today and will be cash settled on July 19, finished Friday at a $1.57 premium to the cash index while August hogs held a $2.28 discount.
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. U.S. Agricultural Trade Data Update — ERS
- 3:00 p.m. Crop Progress — NASS