First Thing Today | August 18, 2022

Good morning!

Wheat pulls corn and beans lower overnight... Active followthrough selling weighed on wheat overnight, while corn and soybeans faded amid spillover pressure and favorable weather forecasts. As of 6:30 a.m. CT, corn futures are trading 3 to 4 cents lower, soybeans are mostly 8 to 9 cents lower and wheat futures are 13 to 19 cents lower. Front-month crude oil futures are around 90 cents higher and the U.S. dollar index is just above unchanged this morning.

China bristles as U.S, Taiwan start trade talks... The U.S. and Taiwan agreed to start trade talks under a new initiative to reach agreements with “economically meaningful outcomes,” with a Taiwan official saying China’s “economic coercion” would also be discussed. The office of the U.S. Trade Representative said the two sides had “reached consensus on the negotiating mandate” and it was expected that the first round of talks would take place early this fall. The negotiating mandate released along with the announcement said the U.S. and Taiwan had set a robust agenda for talks on issues like trade facilitation, good regulatory practices, and removing discriminatory barriers to trade. The announcement comes as tensions between the U.S. and China over the status of the self-governing island — which China regards as a breakaway territory — are at their highest in decades. China’s foreign ministry said Beijing will take resolute measures to defend its territorial integrity and urges the U.S. not to make a wrong judgement regarding Taiwan.

UN expert says there is forced labor in Xinjiang... The United Nations’ special rapporteur on contemporary forms of slavery said in a new report that there is forced labor in Xinjiang. China’s foreign ministry slammed the report and accused the special rapporteur of “serving certain countries’ political scheme to suppress and contain China by abusing the UN platform.” Still ahead is the Xinjiang report from UN Human Rights High Commissioner Michelle Bachelet. Says a China-watcher: “The PRC [People’s Republic of China] is working very hard to suppress it, which likely means it is damning.”

Another ship leaves Ukrainian ports... Another ship carrying corn left Ukraine’s Chornomorsk port, Turkey’s defense ministry said on Thursday, bringing the total number of vessels to leave Ukraine’s Black Sea ports to 25. An additional four vessels are expected to arrive at Ukrainian ports today to be loaded with grain.

Port congestion continues to haunt global trade... Fresh fear is spreading among exporters and importers over whether massive amounts of cargo will be delivered on time for the busy, year-end shopping season, the Wall Street Journal reports. Supply chains never fully recovered from the pandemic shock when goods transported by sea were delayed and shipping prices soared. Now freight rates are falling, but cargo is still delayed at choked European and American ports. In Europe, ports are backed up because dockworkers are on strike or on vacation as ships queue up, and there is an acute shortage of truck drivers. In the U.S., a shortage of rail capacity and warehouse space means boxes remain in ports for too long.

East Coast, Gulf ports backing up as importers shift arrivals... U.S. importers seeking relief from bottlenecks at West Coast gateways are triggering new backups at East Coast and Gulf Coast ports, adding to strains on the country’s troubled supply chains. Backups of dozens of container ships have formed off ports in New York, Houston and Savannah, Georiga, authorities said, even as the lineup of vessels waiting to get into the ports of Los Angeles and Long Beach has dwindled from an armada that once counted more than 100 ships.

Weekly Export Sales Report out this morning... For the week ended Aug. 11, traders expect:

China’s Yangtze River basin faces water shortages... Chinese officials warned on Wednesday the severe dry spell along the Yangtze River could last well into September as local governments race to maintain power and find fresh water to irrigate crops. Normal water flows in the region could be months away, with rainfall expected to remain low until the end of this month and beyond, said Liu Zhiyu, an official at the Ministry of Water Resources. “It is expected that in September, water inflows in the middle and lower reaches of the Yangtze will still be low, and the drought in Anhui, Hubei, Hunan and Jiangxi could develop further,” Liu said, referring to four major provinces on the middle reaches of the river. China’s finance ministry said on Thursday it would make 420 million yuan ($61.83 million) of emergency funds available to help local governments provide flood and drought relief. Controlling water resources is seen as a crucial part of government in China as it tries to guarantee food security.

Sinograin, COFCO collaborate on China’s state grain reserves... China’s state stockpiler Sinograin and top state-owned grains trader COFCO have formed a joint venture to operate the country’s grain reserves, state media reported on Thursday. The venture, called the China Enterprise United Grain Reserve Co. Ltd, will be 51% owned and controlled by Sinograin. The move is part of the Beijing’s efforts to reform the grain reserve system and better ensure food security.

Euro zone consumer inflation reaches another record... Euro zone inflation rose to a record 8.9% annualized rate in July. Eurostat said that of the total, 4.02 percentage points came from energy and 2.08 percentage points from food, alcohol and tobacco. But even when these most volatile components are excluded, so-called core inflation stood 5.1% above year-ago in July.

EPA begins 60-day comment period on dicamba risk assessment... EPA has published in the Federal Register a notice (link) seeking comments on its revised human health and draft ecological risk assessments for the registration review of dicamba. The comment period runs through Oct. 17. After EPA reviews the comments, it “may issue a revised risk assessment, explain any changes to the draft risk assessment, and respond to comments and may request public input on risk mitigation before completing a proposed registration review decision for dicamba.”

China’s pork imports unchanged in July but well below year-ago... China imported 120,000 MT of pork in July, unchanged from June but down 65.1% from last year. Through the first eight months of this year, China imported 930,000 MT of pork, also down 65.1% from the same period last year.

Cash cattle trade starts at higher prices... Light cash cattle trade started at $141 in Texas and $150 in the northern market on Wednesday. The wide variance in the two markets continues and makes it difficult to gauge the final price for the week. But those initial levels suggest prices will rise roughly $1 from last week’s average of $144.39.

Hog futures bounce back... Lean hog futures followed up Tuesday’s sharp losses with moderate gains yesterday, suggesting the pullback was corrective in nature and not a shift in attitudes. Tuesday’s lows now stand as key near-term support. A drop through those lows would be a stronger sign of a seasonal top and suggest an extended pullback, despite futures’ big discounts to the cash index.

Overnight demand news... Taiwan purchased 34,025 MT of U.S. 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

• 7:30 a.m. Weekly Export Sales — FAS
• 7:30 a.m. Extended Weather Forecasts — NWS
• 10:00 a.m. Fruit and Tree Nuts Data — ERS
• 10:00 a.m. Vegetables and Pulses Data — ERS
• 2:00 p.m. Livestock, Dairy, and Poultry Outlook: August 2022 — ERS
• 2:00 p.m. Sugar and Sweeteners Outlook: August 2022 — ERS