First Thing Today | August 7, 2023
Good morning!
Widely varied price tone overnight... Soybean futures were pressured overnight by weekend rainfall across the Corn Belt, while wheat rallied amid mounting tensions in the Black Sea. Corn was caught in the middle and traded on both sides of unchanged. As of 6:30 a.m. CT, corn futures are trading a penny lower to fractionally higher, soybeans are mostly 22 to 25 cents lower, winter wheat markets are 10 to 13 cents higher and spring wheat is mostly 2 cents higher. Front-month crude oil futures are around 75 cents lower and the U.S. dollar index is around 275 points higher this morning.
Black Sea tensions mount... Ukraine’s State Hydrographic Service warned on Friday the Russian Black Sea ports of Taman, Anapa, Novorossiysk, Gelendzhik, Tuapse and Sochi should now be considered subject to “military threat.” The statement came just hours after a naval drone struck vessel was stationed outside Novorossiysk on Friday. On Saturday, another sea drone hit a Russian-flagged oil tanker that supplies fuel to Moscow’s forces in Syria. Ukraine’s defense ministry confirmed it struck key bridges on one of two roads that connect Crimea to the Ukrainian mainland on Sunday. The attacks put at risk Russia’s commodity exports via the Black Sea, a route that accounts for most of the grain and 15% to 20% of the oil that Russia sells daily on global markets.
Kpler: Freight rates to ‘balloon’... Significantly higher insurance and shipping costs are likely to follow the increased attack in the Black Sea. “Freight rates will be ballooning,”said Viktor Katona, head crude analyst at market intelligence firm Kpler Ltd. The cost of shipping Russian crude from Novorossiysk to the west coast of India could rise by as much as 50%, he said.
Ukraine grain exports running ahead of last year... Ukrainian grain exports since July 1 totaled 2.56 MMT, up 560,000 MT (28%) from the same period last year, according to ag ministry data. The volume included 1.27 MMT of corn, 977,000 MT of wheat and 329,000 MT of barely.
Heavy weekend rainfall with more expected this week... Rains fell across much of the Corn Belt, along with areas of the Southern and Central Plains, Delta and Southeast during the weekend. World Weather Inc. says more rains are expected over the next 10 days, including in the Midwest, central and northeastern Plains, Delta and Southeast.
Heavy rains pound China’s northeast grain belt... Heavy rains caused flooding across northeastern China, the country’s grain basket, including top producer Heilongjiang province. The rains are expected to continue this week as typhoon season continues to wreak havoc, raising the risk that more agricultural land will be flooded, according to the National Meteorological Center. The northeastern region, which also includes the provinces of Liaoning and Inner Mongolia, produces almost 30% of China’s grains, accounting for 45% of the national corn harvest, 60% of soybeans and 20% of rice.
Foreign ministers hold Ukraine peace talks... Senior officials from some 40 countries including the U.S., China and India held talks in Saudi Arabia during the weekend that Kyiv and its allies hope will lead to agreement on key principles for a peaceful end to Russia’s war in Ukraine. Russia, who was not part of the talks, denounced the efforts, with its foreign ministry saying the meeting was “a reflection of the West’s attempt to continue futile, doomed efforts” to mobilize the Global South behind Ukraine’s position. The participation of China, which stayed away from an earlier round of talks in Copenhagen and has shunned Western calls to condemn Russia’s invasion, signaled a possible shift in its stance but not a major change, analysts said. China’s foreign ministry said the international talks helped “to consolidate international consensus.”
The week ahead in Washington... Congress is on its long summer recess, but the wheels are still turning relative to getting a new farm bill, with staff and some lawmaker work continuing. By far the biggest potential change is the push led by some South Dakota lawmakers and groups for a mandatory base acreage update, despite opposition from Sen. John Boozman (R-Ark.), the ranking member on the Senate Ag panel, who tried to deep-six the issue with a minority staff report last week. Key U.S. inflation data will be released this week, with the consumer price index out Thursday and the producer price index on Friday. The focus for agriculture will be Friday’s USDA August crop reports, including the first survey-based estimates for corn, soybeans and cotton.
Fed watch... Federal Reserve governor Michelle Bowman expressed the potential need for further increases in interest rates to successfully lower inflation to the Fed’s target of 2%. Despite recent data suggesting a slow inflation trend, Bowman recommends consistent evidence proving inflation is significantly moving towards the 2% target. Additionally, Fed officials Raphael Bostic and Austan Goolsbee analyzed recent jobs data and suggested the labor market is improving, which might prompt the Fed to reconsider how long they should maintain the current elevated rates.
Cash cattle strengthen... Traders will have to wait until later this morning to get the official average cash cattle price from last week, but cash sources reported higher prices in the northern market last Friday, which should have pulled the overall price up from the previous week. Given tight supplies, traders generally expect the cash market to strengthen again this week.
Cash hog index drops... The CME lean hog index is down 39 cents to $105.47, marking four of the last six days with declines. Hog futures rolled over last week amid signs the cash market has posted a seasonal top. As of Friday’s closes, August hogs stood $4.445 below today’s cash quote, while the October contract was more than $22 below the cash index and December hogs held more than a $30 discount.
Weekend demand news... Egypt tendered to buy an unspecified amount of optional origin 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
- 3:00 p.m. Crop Progress — NASS
