First Thing Today | August 15, 2023

Good morning!

Grains weaker overnight... Corn and soybeans traded lower overnight after USDA raised crop condition ratings more than anticipated Monday afternoon. Wheat faced followthrough selling amid a lack of supportive news. As of 6:30 a.m. CT, corn futures are trading 3 to 4 cents lower, soybeans are 6 to 7 cents lower, SRW wheat is 5 to 7 cents lower, HRW wheat is steady to fractionally lower and HRS wheat is 1 to 2 cents lower. Front-month crude oil futures are around 80 cents lower and the U.S. dollar index is more than 150 points lower.

Consultant raises corn, soybean estimates... Crop consultant Dr. Michael Cordonnier raised his corn and soybean yield and production estimates amid recent favorable weather and improved crop conditions. Cordonnier raised his corn yield 1 bu. to 175 bu. per acre, increasing his production estimate to 15.1 billion bushels. Cordonnier raised his soybean yield 0.5 bu. to 51 bu. per acre and he now forecasts the crop at 4.21 billion bushels. He has a neutral to slightly higher bias toward both crops, noting yields and acreage could increase a little for both crops.

Corn, soybean CCI ratings improve, spring wheat slips... 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 improved 3.9 points to 352.5 and was now 3.7 points (1.1%) above last year at this time. The soybean crop jumped 9.2 points to 349.2, which was 0.1 point better than last year on this date. The spring wheat crop slipped 0.9 points to 320.7, which was 47.7 points (12.9%) below last year. Click here for details.

Crop Progress Report highlights… Following are highlights from USDA’s crop progress and condition update as of Aug. 13.

• Corn: 96% silking (96% average); 65% dough (63% average); 18% dented (18% average); 59% good/excellent (57% last week).
• Soybeans: 94% blooming (92% average); 78% setting pods (75% average); 59% good/excellent (54% last week).
• Cotton: 96% squaring (97% average); 72% setting bolls (77% average); 13% bolls opening (14% average); 36% good/excellent (41% last week).
• Spring wheat: 24% harvested (28% average); 42% good/excellent (41% last week).
• Winter wheat: 92% harvested (92% average).

Rise in NOPA soybean crush expected... Analysts expect members of the National Oilseed Processors Association (NOPA) to report they crushed 171.3 million bu. of soybeans in July. If realized, that would be up 3.8% from June and 0.7% above last year. It would also be the second largest July crush on record behind 2020. Soyoil stocks at the end of July are expected to total 1.687 billion pounds.

Backlog of ships in Black Sea waters... Russia’s actions involving a cargo vessel bound for a Ukrainian Danube port have caused a ripple effect in the Black Sea’s maritime traffic. Following Russia’s warning shots and boarding of the vessel last weekend, approximately 30 merchant ships have been forced to halt their progress, anchoring around Musura Bay in the Black Sea. This area leads to a channel connecting to the Ukrainian Izmail port, where another 20 ships are currently stationed. Data from MarineTraffic revealed there are at least 35 commercial ships waiting near the Romanian port of Constanta, which is a notable increase of 15 ships compared to the previous week. This situation underscores the impact of the incident on maritime traffic in the region, causing congestion and delays for commercial vessels navigating the affected areas.

China unexpectedly cuts key rates to add liquidity... China’s central bank unexpectedly cut key policy rates for the second time in three months on Tuesday, in a fresh sign authorities sense a greater urgency to support the struggling economy. The People’s Bank of China (PBOC) lowered the rate on 401 billion yuan ($55.25 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions by 15 basis points to 2.50% from 2.65% previously. With 400 billion yuan of MLF loans set to expire this month, the operation resulted in a net 1 billion yuan fresh fund injection into the financial institutions. PBOC also injected 204 billion yuan through a seven-day reverse repurchase operation while cutting borrowing costs by 10 bps to 1.8%. These actions will have short-term impacts on China’s economy and many economists fear the worst is yet to come.

China’s major state banks try to support the yuan... China’s major state-owned banks were seen selling U.S. dollars to buy yuan in the onshore spot foreign exchange market on Tuesday, three people with direct knowledge of the matter told Reuters, in a bid to stem rapid declines in the currency. State banks usually act on behalf of China’s central bank in the country’s foreign exchange market, but they could also trade on their own behalf or execute their clients’ orders. The dollar selling came after the unexpected cut to key monetary policy rates.

More dour Chinese economic news... Chinese industrial output grew 3.7% annually in July, slowing from the 4.4% pace seen in June. Retail sales rose 2.5%, down from a 3.1% increase in June. China’s fixed-asset investment grew 3.4% from last year to 28.59 trillion yuan in the first seven months of 2023, easing from a 3.8% rise in the January to June period. All three figures grew less than anticipated.

Japan’s economy grows at 6% pace in second quarter... In the second quarter of 2023, the Japanese economy expanded 1.5% compared to the previous quarter and an annualized 6%. This marked an acceleration from the revised 0.9% growth experienced in the first quarter and was the fastest quarterly growth in Japan since 2015, not counting a period of pandemic-induced gyrations in 2020. Growth was largely propelled by the favorable impact of net trade, as exports rebounded strongly, increasing by 3.2%. In contrast, imports registered a decline for the third consecutive quarter, with a contraction of 4.3%. One notable trend was a 0.5% decline in private consumption, which constitutes over half of the Japanese economy.

Russia sharply raises interest rates... Russia’s central bank called an extraordinary meeting after the ruble crashed through the level of 100 to the dollar for the first time since March of 2022, shortly after Vladimir Putin launched his war on Ukraine on Feb. 24 of that year. In response, the central bank increased its key interest rate from 8.5% to 12%, aiming to stabilize the ruble and counter the economic consequences of the war. Despite a partial recovery before the decision, the ruble remains down nearly 25% for the year, positioning it as one of the weakest performing currencies globally. The situation is complex with Russia grappling with surging inflation, the need for government borrowing to fund the war effort, sanctions and a shortage of labor. 

ERP Phase 2 payment clear $5 million... Payments under Phase 2 of the Emergency Relief Program (ERP) totaled $5.28 million to 3,800 recipients as of Aug. 13, up from $4.41 million the prior week. The payments thus far are at an average of $1,388 per recipient. Total ERP payments for both Phase 1 and 2 remained at $7.44 billion.

Packers trying to manage tight supplies... Packers slaughtered only 603,000 head of cattle last week, the smallest weekly August total since 2016. They purchased only 72,000 head of cattle, of which 16,000 head were bought “with time,” meaning another slow week of kills and beef production. Until packers improve their margins with higher wholesale prices, they will be meticulous in trying to control tight market-ready supplies by limiting cash cattle bids.

Volatile wholesale pork trade... The pork cutout value surged $7.70 Monday morning, fueled by a $32.74 surge in primal bellies and an $11.91 jump in picnics. But as is often the case when there are big morning moves, the cutout value was unable to sustain the strength and finished $1.00 lower for the day. Bellies finished $2.56 lower, meaning prices swung $35.30 from morning to afternoon.

Overnight demand news... Thailand purchased 55,000 MT of Canadian milling-grade spring 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

• 11:00 a.m. Monthly Soybean Crush — NOPA
• 11:00 a.m. Cotton and Wool Outlook: August 2023 — ERS
• 11:00 a.m. Oil Crops Outlook: August 2023 — ERS
• 2:00 p.m. Feed Outlook: August 2023 — ERS
• 2:00 p.m. Rice Outlook: August 2023 — ERS
• 2:00 p.m. Wheat Outlook: August 2023 — ERS