Good morning!
Grains face corrective selling overnight… After explosive trade yesterday, corn, soybeans and wheat traded lower overnight. As of 6:30 a.m. CT, corn futures are trading 10-11 cents lower, soybeans are 12-15 cents lower, SRW wheat is 10 cents lower, HRW and HRS wheat are 2-5 cents lower. Front month crude oil futures are posting mild gains while the U.S. dollar index continues to show strength.
Cordonnier lowers corn yield… Crop consultant Dr. Michael Cordonnier lowered his expected corn yield 1 bu. per acre to 174 bu. per acre due to limited rainfall over the past week and continued limited rainfall in the forecast. Temperatures have turned hot as well, further pressuring the crop, especially in areas both hot and dry. The analyst kept his soybean estimate unchanged at 50.5 bu. per acre, though retains a neutral to lower bias in both crops. He estimates corn production at 15.01 billion bu. and soybean production at 4.17 billion bu.
Corn, soybean and spring wheat CCI ratings fall… 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 fell 1 point to 349, still 8.17 points (2.3%) below a year ago. Conditions worsened in 11 of the top 18 corn production states. The soybean CCI fell 1 point to 338.3, still 12.4 points (3.5%) below a year ago. Conditions worsened in 9 of the 18 top soybean production states. The top two production states, Iowa and Illinois, saw conditions improve despite the falling national average. Spring wheat conditions gave up recent improvements, falling 2.8 points to 336.4. This is still 36.1 points (9.7%) below a year ago. Top producer North Dakota fell slightly, but conditions in each of the six states fell.
Crop progress highlights… Following are the highlights from USDA’s crop progress and condition update as of July 23.
· Corn: 68% silking (65% average); 16% dough (14% average); 57% good/excellent (57% last week).
· Soybeans: 70% blooming (66% average); 35% setting pods (31% average); 54% good/excellent (55% last week).
· Cotton: 78% squaring (79% average); 37% setting bolls (39% average); 46% good/excellent (45% last week).
· Spring wheat: 94% headed (93% average); 49% good/excellent (51% last week).
· Winter wheat: 68% harvested (77% average).
Senate voting on land purchase restrictions… The Senate is set to vote on an amendment to the National Defense Authorization Act that would restrict foreign investors from certain countries — specifically those belonging to China, Russia, Iran, or North Korea — from purchasing land in the United States. Sens. Mike Rounds (R-S.D.) and Jon Tester (D-Mont.) originally proposed this bill in February, aiming to broaden the authority of the Committee on Foreign Investment in the U.S. (CFIUS), thereby allowing it to prevent land purchases by individuals associated with foreign adversaries. The proposed amendment excludes U.S. citizens and lawful permanent residents from such restrictions.
Gas prices likely to continue higher… Crude oil futures are hovering near a 3-month high at $79 per barrel. Increased demand and tightened supplies from recent OPEC+ cuts are seen as the drivers for the recent price move. Exxon shut down a gasoline unit at its Baton Rouge facility- one of the largest U.S. refineries- for unexpected repairs, adding fuel to the recent surge in gas prices.
Kremlin insists that Russia won’t return to grain deal… Russia continues to maintain that they will not return to the grain deal unless restrictions are lifted on Russian grain and fertilizer exports. Kremlin spokesman Dmitry Peskov said a letter from U.N. Secretary General Antonio Guterres to Russian President Vladmir Putin was not enough to get Russia back into the grain deal. A U.S. senior Treasury official will highlight Washington’s efforts in facilitating Russian exports during a visit to Kenya and Somalia in an effort to convince Russia that it’s departure from the grain deal will hurt African states, though Russia has been strengthening ties with African ally Mali by supplying wheat to the nation.
Chinese yuan continues to strengthen… The Yuan has jumped to a one month high as China is trying to enhance policy support for its slowing economy through promoting domestic demand and aiding the struggling real estate market. The nation’s state-owned banks have also been exchanging dollars for yuan in the offshore spot market in an effort to avert further depreciation of their currency. This move comes despite the recent push to have more trade without the dollar in a recent push to “dethrone” the world’s currency, the U.S. dollar. The International Monetary Fund has hinted that it may accept the Yuan as a currency for countries to settle their obligations following Argentina’s recent debt payment in yuan.
WOTUS demands are made... In a recent letter dated July 24, voiced by the Waters Advocacy Coalition, demands are made for the final Biden administration to exclude ditches from the definition of federal waters, include wetlands only when they can’t be distinguished from navigable waters, and erase the independent interstate waters and wetlands category. The Coalition represents numerous sectors including energy, forestry, real estate, and transportation. The Coalition’s letter petitioned the agencies to not merely strike the “significant nexus” language or the definition of “adjacent waters” in the final rule. The Coalition believes such an approach would neither be a defendable response to the Supreme Court decision in Sackett v. EPA nor would it be a suitable course for this particular rulemaking process.
Odds of recession seen as dropping… A recent survey from the National Association for Business Economics indicated that 71% of economists see a 50% or less probability of a U.S. recession in the coming year. In April, a similar survey had about half of the surveyed economists expecting a recession occurring. The strong labor market and recent decline in consumer price metrics are attributed to the improving attitudes.
German business climate index falls for third consecutive month… The Ifo Business Climate Index falls to an eight-month low as companies are not satisfied with their current business. This signals a potential delay in the anticipated recovery of the largest European economy. Lasting inflationary issues and increased borrowing costs are leading contributors to the bleak outlook.
South Korea’s economy growing more than expected… The nation’s economy rose by .6% between April and June, a faster quarterly rate than expected. The fourth largest Asian economy is a key trading partner for the U.S. Their exports fell 1.8% amid a downturn in the chip sector as competition ramps up.
Cold Storage Report also out this afternoon... USDA will detail frozen meat stocks at the end of June. The five-year average is a 5.6-million-lb. decline in beef stocks and a 21.4-million-lb. drop in pork stocks during the month.
Pork prices remain strong… Bellies continue to lead the cash market higher with a $9 jump on Monday. That marks a nearly $115 jump from the start of July in bellies with overall carcass values rising $8. Consumer demand has picked up in the latter half of the summer grilling season and has sustained the seasonal cash index rise far beyond the normal ending point, shown by an additional 56 cent rise to $104.60 as of Friday, July 21.
Cash cattle prices jump… Last week’s cash cattle trade averaged $186.19, up $1.92 from the prior week. The limited supply of market ready cattle should keep a bid under the cash market and the steep discount in August futures to the cash market will limit the downside seen in futures this week.
Overnight demand news... Algerian state agency ONAB has issued an international tender to purchase up to 120,000 metric tons of animal feed corn to be sourced from Argentina or Brazil. Iranian state-owned animal feed importer SLAL has issued international tenders to purchase about 120,000 metric tons of animal feed corn and 120,000 metric tons of soymeal.
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 Price Outlook — ERS
· 2:00 p.m. Cold Storage — NASS
· 2:00 p.m. Poultry Slaughter — NASS