Good morning!
Grains rebound to start September... The new month kicked off with corrective price gains in the grain markets overnight, led by soybeans. As of 6:30 a.m. CT, corn futures are trading 4 to 5 cents higher, soybeans are 13 to 14 cents higher, winter wheat markets are 5 to 9 cents higher and spring wheat is mostly 1 to 5 cents higher. Front-month crude oil futures are nearly $1.00 higher and the U.S. dollar index is trading just below unchanged.
Slowdown in jobs growth expected... Economists polled by Reuters expect the Labor Department to report non-farm payrolls increased 170,000 during August, which would be down from 187,000 jobs added in July and the lowest monthly increase in more than two and a half years. The unemployment rate is expected to hold at 3.5%.
Big jumps expected in monthly soy crush, corn-for-ethanol use... Traders expect USDA to report soybean crush totaled 184.0 million bu. in July, based on a Bloomberg survey. That would be up 9.5 million bu. (5.4%) from June and 2.6 million bu. (1.4%) greater than July 2022. Corn-for-ethanol use is expected to total 462.7 million bu., up 21.2 million bu. (4.8%) from the previous month and 16.9 million bu. (3.8%) more than last year.
Grain shipping costs on Mississippi River rise amid falling water levels... The cost of shipping grain from the Midwest to global markets is experiencing a sharp increase due to dwindling water levels on the Mississippi River. This has resulted in elevated barge freight rates, and the forecast for below-average rainfall provides no relief, according to Bloomberg. As of Aug. 29, barge spot rates in St. Louis have surged 49% compared to the previous week and 42% compared to the same time last year, reaching $23.34 per ton. This marks an 85% increase from the three-year average, based on USDA data. Since June, water levels on the river have been decreasing, leading to restrictions on the amount of grain that can be carried on each barge. This has tightened the supply of available barges, as a greater number of them are needed to transport the same volume of grain. To manage this situation, transportation companies are being proactive by reducing draft levels on barges to mitigate the challenges caused by heavier loads during periods of low water levels.
Additional disaster aid request... The White House announced its intention to request an extra $4 billion in emergency disaster aid from Congress. This funding is intended to assist in responding to the consequences of a series of natural disasters that have occurred across the United States. This new request is in addition to the $12 billion the administration had previously sought. The White House has suggested these funds be included as part of a broader supplemental funding package, which they have encouraged lawmakers to attach to an upcoming short-term spending bill.
How USDA will likely handle 2022 disaster aid... Sources signal USDA plans to offer farmers a choice between the failed Phase 2 approach or the Phase I approach but using a “progressive factor,” meaning the more losses you suffered, the more you are dinged. Normally, USDA just applies a uniform factor on all benefits, so everyone shares equally in cuts to fit within the budget. But USDA appears to be upending this. Of note: USDA has $3.7 billion to work with. The American Farm Bureau Federation estimated losses at around $20 billion, with about $11 billion covered by crop insurance, etc. Thus, you can see what a uniform factor would look like. But if you do a “progressive factor,” that means the first portion of the payment is high (maybe 100%) but steadily declines.
West Coast dockworkers ratify labor contract at major U.S. ports... Members of the International Longshore and Warehouse Union voted Thursday to approve a new six-year labor contract covering cargo handling operations at 29 ports along the West Coast.
Philippines curbs rice prices... The Philippines announced price ceilings for rice, as the rising cost of the national staple probably caused August inflation to accelerate for the first time in seven months. President Ferdinand Marcos Jr. has approved a maximum price of 41 pesos ($0.72) a kg for regular-milled rice, below the 42 pesos to 55 pesos market rate. The maximum price for well-milled rice was set at 45 pesos a kg, below the range of 47 pesos to 56 pesos offered by retailers. The ceilings will stay until Marcos lifts them.
China ramps up support for weakening yuan... The People’s Bank of China (PBOC) will reduce the amount of foreign exchange that financial institutions must hold as reserves for the first time this year, a move seen aimed at slowing the pace of recent yuan declines. Starting Sept. 15, PBOC said it would cut the foreign exchange reserve requirement ratio (RRR) by 200 basis points to 4% from 6%. That would effectively free up $16.4 billion worth of foreign exchange. China’s major state-owned banks have been repeatedly selling dollars in both onshore and offshore markets to stem rapid yuan losses.
China to take more actions to revive property sector... China is set to take further action including relaxing home-purchase restrictions as it scrambles to tackle a deepening crisis in its massive debt-riddled property sector, four people familiar with the matter told Reuters. Regulators including the housing ministry, central bank and financial regulator in coming weeks will implement measures they have been working on over the past few months under State Council guidance, two of the people said. Proposed measures include lifting home-purchasing curbs in non-core districts of major cities such as Beijing, Shanghai and Shenzhen, Reuters reported. Another proposed measure is to gradually remove price caps on new homes, widely in place for local governments to control home prices. On Thursday, the central bank and financial regulator lowered mortgage rates for first-time homebuyers. They also reduced the downpayment ratio to no lower than 20% for first-home buyers and no lower than 30% for second-home purchases.
China’s August factory activity unexpectedly perks up... China’s Caixin/S&P Global manufacturing purchasing managers index (PMI), which gauges smaller, privately owned factories, rose to 51.0 in August from 49.2 in July, marking the first expansion in the sector since February. Both output and new orders expanded while employment gained for the first time in six months. But foreign sales remained weak. As we reported on Thursday, the official manufacturing PMI, which gauges larger, state-owned factories, increased in August though it remained in contraction territory.
Steady/lower cash cattle trade... Cash cattle trade got started at steady prices in the Southern Plains on Thursday, while the northern market traded as much as $3.00 lower. While the northern market continued to trade at solid premiums to the Southern Plains, the weekly price trend was a reversal from the recent patterns. Trading volume remained relatively light so there could be some movement from those levels today.
Hog futures discounts continue to narrow... October lean hog futures dropped $1.05 on Thursday, but today’s cash index quote is down another $1.41 (as of Aug. 30). That narrowed the discount the October contract held to the cash index to $6.71 as of yesterday’s close, but that’s still a bearish stance as the five-year average is a $1.72 increase from now until mid-October when the contract will be cash settled.
Overnight demand news... South Korea purchased 55,000 MT of corn expected to be sourced from South America or South Africa and tendered to buy up to another 69,000 MT of optional origin corn.
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
- 2:00 p.m. Cotton System Consumption and Stocks— NASS
- 2:00 p.m. Fats & Oils: Oilseed Crushings, Production, Consumption and Stocks — NASS
- 2:00 p.m. Grain Crushings and Co-Products Production — NASS
- 2:00 p.m. Peanut Prices — NASS
- 2:30 p.m. Commitments of Traders — CFTC