Good morning!
Grains sharply higher overnight… Corn, soybeans and wheat are trading near last week’s highs on heightened risks in the Black Sea that will continue to pressure Ukrainian grain exports. As of 6:30 a.m. CT, corn futures are trading 20-22 cents higher, soybeans are 16-22 cents higher, wheat is mostly 30-35 cents higher. Front-month crude oil futures are trading at a three-month high and the U.S. dollar index is trading near unchanged this morning.
Russia attacks additional grain terminals… For the first time since the onset of the war, Moscow expanded their missile strikes to attack Danube River port infrastructure. These are near the western coast of the Black Sea and are currently the most important route for Ukrainian grain. One of the terminals struck is on the other side of the Danube River from NATO backed Romania. Shipments have already stalled out of Odesa and increased risk for Danube terminals will likely cease shipments there as well.
Ukraine’s agricultural exports seen as falling… Following last week’s end of the Black Sea Grain Initiative doubts have surfaced over the future of grain exports from Ukraine. Southern Ag Today found Ukraine’s corn exports will fall from 15% to 9.6% of global exports, which would drop them one spot to the fourth largest exporter in the 2023-24 crop year. Wheat exports are expected to fall from 7.5% to 5% of global exports. The expected record corn crop in the U.S. and back-to-back record years in Russian wheat exports have kept a lid on prices thus far.
Saudi Arabia opposing G20 push for decreased fossil fuel use… Saudi Arabia, as well as several unnamed nations, blocked a proposition to lessen the use of fossil fuels. Various nations support different means of lessening the impact of fossil fuels, including use without emissions capture and using other technology in capturing greenhouse gasses, such as the carbon capture pipeline that is set to cross portions of the Midwest into the northern Plains.
Euro zone private sector contracts… The HCOB Eurozone Composite PMI (Purchasing Managers’ Index) dropped to 48.9 in July, down from 49.9 in June, and below the anticipated figure of 49.7. This reading marks the largest contraction in business output since the previous November. The downturn primarily was attributed to significant declines in the manufacturing sector, which experienced its largest drop in over three years, as well as a continual loss of momentum in the services sector.
Federal Reserve decision week… The Fed is expected to raise short-term borrowing rates 25 basis points up to a 5.25% to 5.50% window. Continued policy is likely going to require difficult decisions as inflation has proved sticky and heightened interest rates have already caused the failure of multiple banks this spring. If the Fed continues to pursue a 2% inflation goal, it may take additional tightening, but it would not be unprecedented for a shift in the goal.
Cattle Inventories tighter than expected… Friday’s USDA report showed most categories tightening more than expected, with cattle in feedlots down 700,000 (2.6%) from year-ago. With inventories of steers down 3.5%, other heifers down 5.2% and calves under 500 lbs. down 2.6%, feedlot inventories will continue to shrink. This gave the report a bullish tone and could signal a run to new all-time highs in cattle futures this week.
Cattle on Feed Report: Marketings higher than expected... USDA estimated there were 11.204 million head of cattle in large feedlots (1,000-plus head) as of July 1, down 201,000 head (1.8%) from year-ago. June placements increased 2.7% from last year, while marketings declined 5.0%. As a result, the feedlot inventory didn’t drop quite as much as anticipated, but this still marked the 10th consecutive month of year-over-year-declines. While this report had a bearish tone overall, the tightening inventory report should limit any price pressure.
Russia blames Ukraine over drone attack in Moscow… Overnights, two drones were downed by Russian defenses in what Moscow called a Ukrainian attack overnight. This comes after eight drones that were downed in the month of May, causing Russia to increase air defenses around the capital.
Seven Republican presidential candidates have qualified for the upcoming debate… According to polling data from Fox Business in Iowa and South Carolina, the candidates who meet the requirement of achieving 1% or higher in at least two separate national and state polls are Former President Donald Trump, Florida Governor Ron DeSantis, entrepreneur Vivek Ramaswamy, former Vice President Mike Pence, former South Carolina Governor Nikki Haley, South Carolina Senator Tim Scott and former New Jersey Governor Chris Christie. The inaugural debate is set to take place in August.
Chinese leaders easing debt policy… The communist state’s Politburo, its top decision-making body led by President Xi Jinping, supports easing property policies and is going to attempt to boost the economy by supporting the real estate market. This comes after last week’s report of the World’s second largest economy slowing more than expected as demand continues to falter from the nations Zero Covid Policy. The meeting did not provide any indication of major fiscal or monetary loosening.
Social Security Cost of Living Adjustment (COLA) rising… COLA is forecast to rise 3% this year for the year 2024. This is down from an 8.7% jump in 2023, the biggest since adjustment since 1981. Adjustment rates are closely tied with the Consumer Price Index for Urban Wage Earners and Clerical Workers.
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Today’s reports
· 10:00 a.m. Export Inspections — AMS
· 2:00 p.m. Chickens and Eggs — NASS
· 3:00 p.m. Crop Progress — NASS