Good morning!
Bulls in control of grains to start the week... Corn, soybean and wheat futures traded solidly higher overnight on support from Russia halting the Black Sea grain deal and weather concerns. As of 6:30 a.m. CT, corn futures are trading 4 to 5 cents higher, soybeans are 12 to 14 cents higher, SRW wheat is mostly 18 cents higher, HRW is 13 to 14 cents higher and HRS is 7 to 9 cents higher. Front-month crude oil futures are nearly $1.00 lower and the U.S. dollar index is trading modestly weaker.
Rains favor central, southern growing areas... Weekend weather was dry from the eastern Dakotas into Minnesota and from much of Iowa into central Missouri. Rains fell on other areas of the Corn Belt. Weather should be similar over the next 10 days to two weeks with timely rainfall in many Midwestern, Delta and Southern, according to World Weather Inc., however, rains may be restricted from the eastern Dakotas through northeastern Iowa and southern Minnesota to northern Illinois and northern Missouri. Temperatures will be cooler than usual in the Corn Belt and Northern Plains this week and then warmer next week with near to above-normal readings expected.
Russia terminates Black Sea grain deal... Russia formally notified Ukraine, Turkey and the United Nations it was suspending its participation in the Black Sea grain deal, according to Russian officials. The Kremlin said the halting of the Black Sea grain deal had nothing to do with a Ukrainian attack on the Crimean Bridge over the weekend. Kremlin spokesman Dmitry Peskov said, “Unfortunately, the part of these Black Sea agreements concerning Russia has not been implemented so far, so its effect is terminated.” Moscow said it would return to the agreement as soon as the Russian part of the agreement is fulfilled. Russia’s decision to suspend its participation in the Black Sea grain deal will have a “positive effect” on the country’s domestic grain market, TASS news agency reported, citing the Russian Grain Union. Ukraine previously said it has a “Plan B” for exporting grain if the deal ended.
Russian grain exports will continue... Russian grain exporting union Rusgrain said on Monday its members planned to continue supplying customers with Russian grain at competitive prices, despite Moscow pulling out of the Black Sea grain export deal. “Russia is the largest supplier of wheat to the world market... All contractual obligations of Russian grain exporters will be fulfilled,” it said. Turkish President Tayyip Erdogan said on Monday that he believes Russian President Vladimir Putin wants the continuation of the grain export deal, despite the suspension. Erdogan said he would discuss the deal, including the export of Russian grains and fertilizer, with Putin when they meet in person during an expected meeting next month.
Record June NOPA crush figure expected... Analysts expect the National Oilseed Processors Association (NOPA) to report June soybean crush totaled 170.6 million bushels. While that would be down 4.1% from May, it would be up 3.6% from June 2022 and a record for the month. Soyoil stocks are expected to total 1.816 billion pounds.
China’s wheat output falls 0.9%... China’s wheat production fell 0.9% from last year to 134.53 MMT, according to official data. Wheat acreage increased 0.4% but yields fell 1.3%, as heavy rains hit key growing regions ahead of harvest. The late-season rains also hurt crop quality.
More disappointing Chinese economic data... China’s economy grew 6.3% in the second quarter, faster than the 4.5% GDP growth in the first quarter but far shy of expectations. During the first half of this year, China’s GDP rose 5.5%. China’s retail sales growth slowed sharply to 3.1% annually in June, marking the weakest performance since last December. However, industrial output beat expectations, rising 4.4% from year-ago last month, up from 3.5% growth the previous month.
China keeps rates unchanged... The People’s Bank of China (PBOC) maintained the one-year medium-term lending facility (MLF) rate at 2.65% after a 10 basis points cut in June. However, the central bank injected a total of 103 billion yuan ($14.37 billion) in MLF loans to provide liquidity support to the banking system. Despite no cut to interest rates this month, market participants expect China will need to implement additional stimulus measures to bolster the slowing economy.
EPA denies 26 SREs... On Friday, EPA denied 26 small refinery exemptions (SREs), which were sought by refiners to mitigate their responsibilities under the Renewable Fuel Standard (RFS). These applications were related to quota alleviation for the compliance years of 2016-2018 and 2021-2023. In a departure from previous rulings, EPA commenced disclosing the names of refiners that submitted SREs requests from July 1, 2022, onward.
Indonesia sticking with domestic palm oil rules... Indonesia has no plan to change rules mandating palm oil exporters sell a portion of their output to the domestic market, a senior official said, as the country prepares for full nationwide implementation of its B35 program. Exporters in Indonesia can only ship palm oil four times the amount that they sell domestically. Starting Aug. 1, Indonesia will fully implement a mandatory 35% palm oil blend in biodiesel.
The week ahead in Washington... The House is bracing for another party-based clash over the funding of the government for the fiscal year (FY) 2024. This follows the narrow passage of a defense authorization bill by Republicans last week, which ended with a bill that found no support among House Democrats and will not in the Senate. Legislators have until Wednesday to propose amendments to the FY 2024 Agriculture appropriations bill, which could lead to test votes on farm bill matters. The measure could begin debate next week. It will be relatively quiet on the economic front ahead of next week’s Fed decision on interest rates. Key agricultural reports this week include Friday’s Cattle on Feed and Cattle Inventory Reports.
Kerry in China... U.S. climate envoy John Kerry is in China for three days to meet with his Chinese counterpart — marking a potential fresh start for U.S./China climate talks, which came to a halt following former U.S. House Speaker Nancy Pelosi’s controversial visit to Taiwan in August 2022. Expectations for renewed cooperation between the two geopolitical rivals (also the world’s two carbon emitters) remain modest, with Kerry stating that “achieving stability” was the main objective for his trip. Washington will seek to engage with Beijing in a way that isolates the climate issue from other bilateral points of contention, such as Taiwan.
China’s Q2 pork output surges... China’s second-quarter pork output rose 4.6% from last year to 14.4 MMT, the highest in at least a decade for the period. Amid poor margins and concerns of weaker prices ahead, farmers culled hog herds, increasing pork production. China’s pork output in the first half of the year rose 3.2% from the same period last year to 30.3 MMT. China slaughtered 375.48 million hogs in the first six months of the year, up 2.6% from a year ago. China’s pig herd rose to 435.17 million head in the second quarter, up 4.23 million head from the end of the first quarter.
Bullish cash cattle expectations... Cash cattle prices started last week steady to lower in the Southern Plains and then strengthened as trade developed at higher prices in the northern market. We expect similar activity this week based on the availability of market-ready supplies in the two regions. Packers are thought to be short-bought on supplies, so the overall cash price should work higher.
Cash hog fundamentals extend seasonal rally... The CME lean hog index is up another 74 cents to $101.03 (as of July 13). The pork cutout value jumped $4.65 on Friday to $115.55. As of Friday’s closes, July hog futures, which expire today and are cash settled on Wednesday, held a 94.5 cent premium to the cash index, while the August contract was at a $4.83 discount.
Weekend demand news... Bangladesh tendered to buy a nominal 50,000 MT of optional origin milling 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
- 11:00 a.m. Monthly Soybean Crush — NOPA
- 11:00 a.m. Feed Grains: Yearbook Tables — ERS
- 3:00 p.m. Crop Progress — NASS