First Thing Today | July 3, 2023
Good morning!
Soybeans extend price surge overnight... Soybean futures aggressively extended Friday’s price rally during overnight trade, finishing the session 38 to 50-plus cents higher. Corn followed to the upside with gains of 4 cents in most contracts. Wheat traded mixed, with SRW around 3 cents lower, HRW 4 to 6 cents higher and HRS mostly 2 to 3 cents higher.
Independence Day schedule... Markets and government offices are open today. Pro Farmer will run an abbreviated report schedule. Markets and government offices will be closed Tuesday, July 4, for Independence Day. Grain and livestock markets will reopen at 8:30 a.m. CT on Wednesday, July 5. Have a happy and safe Fourth of July celebration.
Central U.S. weather improving... U.S. weekend rainfall was greatest across from the Central Plains across the southern and central Corn Belt, though some damaging winds and hail accompanied the rains. World Weather Inc. says multiple waves of rain are expected across the Central and Northern Plains, Corn Belt, Delta and Southeast during the next 10 days. Temps are expected to be relatively moderate, except for the far western Corn Belt.
EU weighs concession to Russian bank over Black Sea grain deal... The European Union is considering a proposal for the Russian Agricultural Bank to set up a subsidiary to reconnect to the global financial network as a concession to Moscow, the Financial Times reported. The move aims to safeguard the Black Sea grain deal that allows Ukraine to export grain via Black Sea ports. Moscow said it remains pessimistic about prospects of renewing the deal as it has seen no progress on improving its grain and fertilizer exports.
Record May soybean crush expected... Analysts anticipate USDA will report record May soybean crush of 190.5 million bu. this afternoon, based on a Bloomberg survey. That would be up 3.5 million bu. (1.9%) from April and 9.6 million bu. (5.3%) above last year’s record. Corn-for-ethanol production is expected to total 431.3 million bu., which would be up 15.6 million bu. (3.8%) from April but 15.3 million bu. (3.4%) below May 2022.
The week ahead in Washington... The House and Senate are still out for their July 4th break. The chambers will periodically meet in pro forma session, guarding again the ability of the White House to potentially put officials in various government posts via a “recess appointment.” No business will be transacted during the week but some staffers are working on lingering budget and other issues, likely including a possible new farm bill. U.S. Trade Representative Katherine Tai will meet Wednesday and Thursday in Cancun, Mexico, for the third meeting of the U.S.-Mexico-Canada Agreement (USMCA) Free Trade Commission, with her Canadian and Mexican counterparts. Tai will hold separate bilateral meetings with the trade officials. The economic focus will be Friday’s employment data for June.
China’s factory activity slows... China’s Caixin/S&P Global manufacturing purchasing managers index (PMI) eased to 50.5 in June from 50.9 the previous month. While that indicated modest expansion for smaller privately owned factories, it signals the manufacturing sector is losing steam, slowing notably from May’s 11-month high. There was a considerable slowdown in output growth and a decrease in new orders during June.
Yellen to China this week...Treasury Secretary Janet Yellen is set to visit Beijing this week to meet senior Chinese officials. The meeting aims to discuss macroeconomic and financial issues, manage U.S-China relationships responsibly and address global challenges collectively. The underlying intent is to deepen the dialogues between the two countries and prevent miscommunication. However, the Biden administration doesn’t predict any substantial breakthroughs during this visit. Yellen clarified in an earlier speech that the U.S. won’t shy away from defending its vital interests, specifying that these measures aren’t aimed at gaining competitive economic advantage but are motivated by concerns about security and values. This meeting follows closely after Secretary of State Antony Blinken's visit to Beijing, where he recognized the significance of economic ties with China but also expressed concerns over sharing technology that could be weaponized against the U.S.
Euro zone factory sector contraction accelerates... The HCOB euro zone manufacturing PMI, compiled by S&P Global, fell to 43.4 in June, down from 44.8 in May – the twelfth straight month of contraction in Europe’s factory sector. The PMI reading fell more than originally thought as persistent policy tightening by the European Central Bank squeezed factory finances.
Tyson plans to reintroduce certain antibiotics into chickens... The Wall Street Journal (WSJ) reports Tyson Foods is set to reintroduce certain antibiotics back into its chicken supply chain, resulting in the removal of the “no antibiotics ever” label from Tyson-branded products. This shift will involve drugs called ionophores, which are not considered crucial for human health and are used to control a poultry disease called coccidiosis. This change will apply to all fresh, frozen and ready-made products sold under the Tyson brand and will take effect by the end of the year, according to WSJ.
China issues warning on hog prices, will buy more pork for reserves... China’s state planning agency issued a warning regarding declining hog prices, noting they have fallen into a critical “warning zone.” In response, the agency has outlined plans for a second round of pork purchases for state reserves this year. According to Reuters, the agency is also set to keep a close eye on hog prices, while continuing efforts to control both hog production capacity and prices. This approach is aimed at maintaining stability in a crucial sector of China’s domestic economy.
Cattle futures expected to open mostly firmer... Cattle futures surged on Friday and finished high-range. That should lead to followthrough buying, though we can’t rule out a bout of corrective selling. Cash cattle prices softened for a third straight week, but not as much as expected earlier last week. With a fresh supply of contract cattle available, packers will try to buy cattle at lower prices again this week.
Hog futures expected to trade mixed... Lean hog futures remain at a discount to the cash hog index, which could be price-supportive to open the week, though we expect two-sided trade. Seasonally, the cash market continues to firm, though traders won’t likely be willing to push futures above the index.
Weekend demand news... South Korea purchased 66,000 MT of corn expected to be sourced from South America or South Africa and bought 136,000 MT of optional origin corn but passed on another tender to buy up to 140,000 MT of optional origin corn. Algeria tendered to buy a nominal 50,000 MT of durum 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
- 2:00 p.m. Cotton System Consumption and Stocks — NASS
- 2:00 p.m. Fats & Oils: Oilseed Crushings, Production, Consumption and Stocks — NASS
- 2:00 p.m. Grain Crushings and Co-Products Production — NASS
- 3:00 p.m. Crop Progress — NASS
