Good morning!
Wheat prices post strong gains overnight... Wheat futures surged overnight amid news Russia is rethinking the Ukraine grain export deal. Corn and soybeans followed wheat to the upside. As of 6:30 a.m. CT, wheat futures are trading 23 to 34 cents higher, corn is 6 to 8 cents higher and soybeans are 4 to 5 cents higher. Front-month crude oil futures are marginally firmer, while the U.S. dollar index is nearly 400 points higher this morning.
Putin wants to revise ‘cheating’ Ukrainian grain export deal... Russian President Vladimir Putin said on Wednesday Russia and the developing world had been “cheated” by a UN-brokered Ukrainian grain export deal, vowing to look to revise its terms to limit the countries that can receive shipments. Putin said Ukrainian grain exports were not going to the world’s poorest countries as originally intended. “What we see is a brazen deception... a deception by the international community of our partners in Africa, and other countries that are in dire need of food. It’s just a scam,” he said. Putin wants to amend the deal to restrict which countries can receive grain shipments from Ukraine. “Almost all the grain exported from Ukraine is sent not to the poorest developing countries, but to European Union countries,” Putin told an economic forum in the eastern city of Vladivostok. Putin also said some restrictions on Russia’s fertilizer exports had been eased, but “clever sanctions” were still complicating Russian trade. “There are no direct sanctions against products, but there are restrictions related to logistics, freight, payments and insurance. Many of these elements of restrictions remain,” Putin said.
Corn, soybean CCI ratings continue to deteriorate... When USDA’s weekly condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn crop dropped 1.6 points to 340.5 while the soybean crop declined 2.2 points to 343.6. That marked the eighth straight weekly decline in the CCI rating for corn and the fifth consecutive drop for soybeans. The CCI ratings are now 5.1% and 2.4% below the respective five-year averages for corn and soybeans. Click here for more details.
Crop Progress Report highlights… Following are highlights from USDA’s crop progress and condition update for the week ended Sept. 4.
- Corn: 92% dough (93% average), 63% dented (67% average), 15% mature (18% average), 54% good/average (54% last week).
- Soybeans: 94% setting pods (96% average), 10% dropping leaves (14% average), 57% good/excellent (57% last week).
- Spring wheat: 71% harvested (83% average).
- Winter wheat: 3% planted (3% average).
- Cotton: 97% setting bolls (96% average), 39% bolls opening (32% average), 35% good/excellent (34% last week).
U.S. losing soybean export edge as Brazil closes logistics gap... U.S. farmers confronting supply-chain bottlenecks and a surging dollar are losing their competitive edge in the global market for soybeans to their biggest rival: Brazil. In most of the years through 2020, it was about twice as expensive for China — the top importer — to ship Brazilian rather than American soybeans. But logistics issues in the U.S., upgrades to Brazil’s ports and supply infrastructure, and a strong dollar have almost eliminated that gap, USDA data show. Bloomberg reports it now costs roughly the same for a Chinese buyer to transport a ton of soybeans from Brazil’s biggest-growing state of Mato Grosso as it does from Iowa, the No. 2 U.S. producer. Brazil is reaping the benefits of more than 290 billion reais ($56.1 billion) the federal government has invested in roads and maritime gateways since 2008.
China’s August soybean imports remain sluggish... China imported 7.17 MMT of soybeans in August, down 9.0% from July and 24.5% less than year-ago. That was the smallest August import tally since 2014. Soymeal demand has been weak and Chinese crush margins have been negative since mid-April, with crushers in the key processing hub of Rizhao losing 519 yuan ($74.80) for each metric ton of soybeans processed as of Sept. 5. Through the first eight months of this year, China imported 67.08 MMT of soybeans, down 8.6% from the same period last year.
China’s trade surplus expectedly declines in August... China’s trade surplus unexpectedly dropped to a three-month low of $79.39 billion in August as exports rose less than expected amid disruption in factory output following fresh Covid restrictions and historic heatwaves while foreign demand eased as inflation spiked in many countries. Chinese exports increased 7.1% versus year-ago, while imports rose 0.3%. Both were the smallest year-over-year gains since April. China’s exports to the U.S. shrank for the first time in more than two years while shipments to Russia surged as slowing economies and the war in Ukraine are shifting global trade flows along geopolitical fault lines. The larger-than-expected slowdown in export growth is raising fears the engine of the world’s second-largest economy is sputtering, as fresh Covid lockdowns in major Chinese cities are further restraining spending and the world economy edges closer to recession.
Xi, Putin to meet next week... Chinese leader Xi Jinping and Russian President Vladimir Putin are set to meet next week, according to Russian state media. This would be the first face-to-face meeting between the two leaders who have established a close relationship since Russia invaded Ukraine Feb. 24. Experts say the meeting also signals the importance of the Russian relationship for China amid international blowback for Moscow’s unprovoked military actions.
China excluded from key CHIPS Act provision... The Biden administration announced that tech firms which receive federal funding under its new CHIPS Act will not be allowed to build any “advanced technology” facilities, or factories, in China for ten years. The move was justified on national security grounds, amidst fears of China stealing such technology. The U.S. also wants to rebuild its own share of the global semiconductor market, now just 10%, down from nearly 40% in 1990.
Euro zone Q2 GDP a little better than initially estimated... The revised Euro zone second quarter GDP rose 0.8% from the first quarter, slightly better than the initial estimate of up 0.6%. On an annualized basis, second quarter Euro zone GDP showed a growth rate of 4.1%.
China meat imports up slightly from July but below year-ago... China imported 660,000 MT of meat during August, up 3.1% from July but 13.2% below last year’s tally. The preliminary data doesn’t break down meat imports by category, but the sharp year-over-year decline was due to fewer pork imports than August 2021. Through the first eight months of the year, China imported 6.69 MMT of meat, down 28.9% from the same period last year.
Cash cattle uncertainty... Showlist numbers are larger this week but packers will also be buying cattle for a full slaughter schedule next week. As a result, there’s uncertainty whether the cash market will continue to slip or rebound from weakness seen the past couple weeks. If live cattle futures are able to build on price gains the past two trading sessions it could cause feedlots to dig in their heels and trigger firmer cash cattle prices.
Lean hog futures bounce... Lean hog futures firmed Tuesday despite continued weakness in the cash hog index. While that was likely corrective trade following recent sharp losses, it’s possible the market could extend to the upside near-term given the wider-than-normal seasonal declines already built into futures. Plus, it’s not uncommon for an uptick in futures during September.
Overnight demand news... South Korea purchased 55,000 MT of feed wheat expected to be sourced from Australia. Japan tendered to buy 70,000 MT of feed wheat and 40,000 MT of feed barley.
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
- 8:00 a.m. Food Security in the U.S. — ERS
- 8:00 a.m. Food Security in the United States — ERS
- 8:00 a.m. Household Food Security in the United States in 2021 — ERS
- 8:00 a.m. Statistical Supplement to Household Food Security in the United States in 2021 — ERS
- 2:00 p.m. Broiler Hatchery — NASS
- 2:00 p.m. Citrus Fruits — NASS