First Thing Today | August 10, 2023

Good morning!

Grains firmer overnight... Soybean futures extended gains from the two previous days during overnight trade, while corn and wheat rebounded amid corrective buying. As of 6:30 a.m. CT, corn futures are trading mostly 2 cents higher, soybeans are 8 to 9 cents higher, SRW wheat is 3 to 4 cents higher, HRW wheat is 8 to 9 cents higher and HRS wheat is 6 to 7 cents higher. Front-month crude oil futures are around 50 cents lower and the U.S. dollar index is down about 350 points.

Weekly Export Sales Report out this morning... For the week ended Aug. 3, traders expect:

China’s northeast grain belt braces for more rains... China’s northeastern grain belt is bracing for more rains and flooding from Typhoon Khanun, as producers struggle to recover from impacts of Typhoon Doksuri. Heavy rains are expected in parts of China’s northeast that includes the provinces of Heilongjiang, Jilin and Liaoning, and the Inner Mongolia region, in the next few days. Local governments are making urgent preparations to secure agriculture production and minimize crop losses in an area that produces almost 30% of China’s grain.

Ukraine establishes temporary ‘humanitarian corridor’ in Black Sea... The Ukrainian navy announced a temporary “humanitarian corridor” in the Black Sea is now operational. The first ships are expected to use this corridor in the coming days. A spokesperson for the Ukrainian navy told Reuters the corridor would be used by commercial ships blocked at Ukraine’s Black Sea ports to transport grain and agricultural products. The corridor would be transparent, with ships equipped with cameras to demonstrate the purely humanitarian nature of the mission, devoid of any military intent. However, the Ukrainian navy has also cautioned that despite the corridor’s presence, there remains a threat from Russian mines in the Black Sea, as well as potential for Russian military actions.

Exchange expects big rebound in Argentine soybean, corn crops... The Rosario Grain Exchange expects Argentina’s 2023-24 soybean and corn crops will rebound sharply from this year’s drought-ravaged output. It projects the soybean crop at 48 MMT, up from 20 MMT in 2022-23. The Argentine corn crop is expected to climb to 56 MMT, up from 34 MMT.

Strategie Grains expects EU wheat production to fall below year-ago... Strategie Grains cut its EU wheat crop forecast by 1.5 MMT to 124.7 MMT, which would be 600,000 MT below last year. After a period of heat and dryness that trimmed production potential, northern Europe has been hit by heavy rains that raise the risk of yield losses and cuts to crop quality. Despite the smaller production forecast, Strategie Grains raised its 2023-24 EU wheat export forecast by 700,000 MT to 30.8 MMT, though that would be down 1.3 MMT from 2022-23.

Fire at French port under control, but operations suspended... A fire broke out at France’s port of La Rochelle, one of the country’s largest grain export terminals. The fire started on a conveyor belt but was contained before reaching storage silos. Two sources told Reuters loading of grains was suspended.  

Heightened volatility the ‘new normal’ for global food prices... Analysts are warning of heightened volatility in global food prices due to a convergence of unprecedented threats, the New York Times reports. A combination of factors, including extreme weather, Russia’s interference with grain supplies in Ukraine and protectionist trade policies, has made food supplies more vulnerable to disruptions. This emerging trend of volatility is being dubbed the “new normal,” characterized by uncertainty in commodity and food prices. Russia's withdrawal from a grain deal with Ukraine and droughts in Asian food-exporting nations have impacted harvests and led to supply shortages. Governments banning critical food exports have further disrupted markets, contributing to rising prices. Labor costs and increased food producer pricing strategies have also driven up consumer food prices. The impact has been felt most acutely by small farmers and low-income individuals, exacerbating global hunger and food insecurity. The cumulative effect of recent shocks has left nations ill-equipped to manage potential future crises.

Trade downturn fuels fears of fractured global economy... The recent decline in global trade, highlighted by decreases in Chinese exports and U.S. imports, primarily mirrors a period of sluggish worldwide economic expansion, the Wall Street Journal reports. This trend also prompts considerations about potential shifts: a departure from decades of increasing global economic interconnectedness to a possible new era where Western countries and China prioritize trade with their political allies over each other.

Biden seeks more aid for Ukraine... President Joe Biden is seeking $25 billion in new funding for Ukraine, according to reports, setting up a possible showdown with Republicans. The request will include about $12 billion for U.S. disaster relief and $13 billion for defense funds.

China continues cotton sales... China continues to sell around 10,000 MT of cotton from state reserves per day. Since late July, China has sold 10 batches of state-owned cotton, with all of the auctions resulting in 100% of reserves offered being purchased.

Choice beef finding support just above $300... Choice boxed beef prices firmed $1.13 on Wednesday, while Select rose $1.98. Movement totaled 125 loads for the day. While packers have struggled to push Choice beef much above the $300.00 level, there continues to be solid retailer buying just above that level, marking it as a key price floor.

Cash hog fundamentals continue to weaken... The CME lean hog index is down another 24 cents, marking the seventh decline in the last nine days. August lean hog futures finished Wednesday $2.69 below today’s cash quote, signaling traders expect more price pressure. The pork cutout value dropped $2.97 yesterday, led down by a $9.79 drop in primal bellies.  

Overnight demand news... South Korea purchased 66,000 MT of corn expected to be sourced from the U.S., South America or South Africa. Japan purchased 93,972 MT of milling wheat in its weekly tender, including 25,998 MT of U.S. and 67,974 MT of Canadian. Tunisia tendered to buy 25,000 MT of optional origin soft 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
• 11:00 a.m. Meat Price Spreads — ERS
• 2:00 p.m. U.S. Agricultural Trade Data Update — ERS