First Thing Today | September 5, 2023
Good morning!
Quiet overnight trade in grains to start the week... Corn, soybeans and wheat held in relatively tight ranges in two-sided trade overnight. As of 6:30 a.m. CT, corn futures are trading steady to fractionally higher, soybeans are mostly 6 cents lower, SRW wheat is 4 to 5 cents higher, HRW wheat is 1 to 3 cents higher and HRS wheat is mostly a nickel higher. Front-month crude oil futures are modestly weaker, while the U.S. dollar index is around 475 points higher.
Temps moderate, but conditions stay mostly dry... Temperatures are expected to moderate by midweek across the central U.S. after another heat wave baked crops during the holiday weekend. Most areas of the central U.S. will remain dry over the next week, though light rains are possible in the Ohio River basin and across the Northern Plains and upper Midwest.
Putin: No new grain deal until requests are fulfilled... Russian President Vladimir Putin said the Black Sea grain deal will not be reinstated until the West fulfills its commitments to facilitate Russian agricultural exports. Putin’s decision came after discussions with Turkish President Recep Tayyip Erdogan on Monday. Erdogan said he thought the deal could be revived “in a short time.” He also said, “Ukraine needs to especially soften its approaches in order for it to be possible for joint steps to be taken with Russia.” Ukrainian Foreign Minister Dmytro Kuleba said, “We should not continue to be hostages to Russian blackmail, where Russia creates problems and then invites everyone to solve them.”
Russia strikes Ukrainian grain export facility... Russia launched an air attack on Sunday on Ukraine’s Izmail port, one of its two major grain-exporting ports on the Danube River in the Odesa region. The strikes came just ahead of talks between Putin and Erdogan.
China’s weather bureau warns of crop impacts from heavy rains... Rainfall in eastern Heilongjiang is expected to be 20% to 50% higher than normal in September, the China Meteorological Administration said. Heavy late-season rains could slow crop maturation and harvesting, especially after two typhoons hammered the region in August. Heavy rains from Typhoon Haikui threaten rice fields in southern China, which could impact the country's rice crop. An official with the National Climate Center also said up to 50% more rainfall than normal is possible in northwestern Xinjiang, which could reduce the quality of cotton and slow harvesting.
Australia cuts wheat production forecast... The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) cut its 2023-24 Australian wheat production forecast by 800,000 MT to 25.4 MMT as dry weather associated with El Niño threatened the crop. At that level, wheat production would fall 36% from last year and be 4% below the 10-year average. Despite the building El Niño pattern, ABARES raised its barley and canola production forecasts from its prior outlook, though both would fall sharply – 26% and 38%, respectively – from last year.
September rains may boost India’s crops after dry August; supplies not worrisome... Rains predicted for September in various parts of India are expected to mitigate crop damage and ensure sufficient food supplies after a delayed monsoon and dry August. The food ministry’s top bureaucrat, Food Secretary Sanjeev Chopra, stated in an interview with Bloomberg that India’s ample grain reserves and upcoming rice harvest would prevent food security concerns. Despite recent export curbs on rice and other measures to protect the domestic market, Chopra reassured the situation is not worrisome. Government stockpiles of rice and wheat are deemed sufficient for welfare programs, and monitoring of stockpiles by traders will prevent hoarding. Local wheat supplies are also adequate, and the decision to remove import duties is under consideration. The government is prepared to take appropriate actions if needed to address potential requirements.
Malaysia taking measures to secure rice supplies... The country plans to discuss the supply situation and potential actions with industry stakeholders, including the state rice importer, farmers and the National Paddy and Rice Board. The state importer, Bernas, recently increased prices for all imported white rice by 36%, citing challenges from climate change and a weakening exchange rate, exacerbated by India’s export curbs. Malaysia imports around 30% of its rice, primarily from India, Thailand, Pakistan and Vietnam, while domestically produced rice remains price controlled. Despite sufficient supplies for now, there are calls for local prices to be raised and efforts are underway to address potential shortages.
Philippines may temporarily cut rice import tariffs... The Philippines may reduce tariffs on rice imports to help lower domestic costs, the economic planning minister said. The move would aim to “counterbalance the rise in global prices and alleviate the impact on consumers and households.”
The week ahead in Washington... The Senate returns from its long summer recess today, while the House will reconvene on Sept. 12. Focus will be on passing appropriations bills for fiscal year 2024, which begins Oct. 1. There are 12 appropriations bills that first must pass each chamber. The House has cleared only one, with none for the Senate, even though the upper chamber has passed 12 of them through the Appropriations panel. A continuing resolution will be needed to avoid a government shut down. It is unclear whether either chamber will officially release farm bill language this month. Various lawmakers have already said they want to wait to see how the funding issues unfold before starting the debate on a new farm bill. The real deadline is at the end of the year and not at the end of September when some farm bill provisions expire. That means lawmakers may wait a while before extending the current farm bill. On the economic front, the Fed Beige Book that highlights economic conditions in the 12 districts will be released on Wednesday.
New BRICS-11 will account for a major share of key global commodities... Brazil, Russia, India, China, and South Africa have invited six other countries – Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates – to join the BRICS group next year to create a geopolitical counterweight to the G7 and potentially a framework to reduce dependence on Western financial systems. Center for Strategic and International Studies (CSIS) researchers Gracelin Baskaran and Ben Cahill say the BRICS-11 group would account for:
- 42% of the world’s oil supply
- 72% of rare earth minerals, with three of the five nations having the largest reserves
- 75% of the world’s manganese
- 50% of global graphite
- 28% of nickel
Of note: “It is quite possible that a more coordinated approach” toward export restrictions to the rest of the world could now develop among the BRICS-11, the CSIS analysts wrote.
Looking for stabilization in cash cattle market... Cash cattle prices traded lower for a fourth consecutive week, though the average five-area price should have remained above $180.00 for a record 14th consecutive week. With market-ready supplies tightening and packer margins in the black, some cash sources expect packers to be more aggressive with cash bids this week, though they will have fresh contract supplies available with the flip of the calendar.
Cash hog market continues seasonal decline... The CME lean hog index extended its decline since late July as market-ready supplies are building seasonally. While hog slaughter will continue to increase, a short-term uptick in prices from early September to early/mid-October are rather typical before a sharper drop through winter.
Holiday weekend demand news... Iran tendered to buy up to 180,000 MT of corn that can be sourced from Brazil, the Black Sea region or other areas of Europe and 120,000 MT of soymeal to be sourced from Brazil, Argentina or India. Egypt’s state grains buyer GASC purchased 480,000 MT of Russian wheat in a private deal on Friday but made no purchases in direct talks with trading houses on Monday.
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. Dairy Products — NASS
- 3:00 p.m. Crop Progress — NASS
