First Thing Today | September 6, 2023

Good morning!

Soybeans lead overnight price gains... Corn and soybeans were supported by deteriorating crop condition ratings during overnight trade, while wheat also traded higher. As of 6:30 a.m. CT, corn futures are trading mostly 2 cents higher, soybeans are 11 to 13 cents higher, winter wheat markets are 4 to 7 cents higher and spring wheat is fractionally to 6 cents higher. Front-month crude oil futures are modestly weaker, while the U.S. dollar index is about 175 points lower.

Corn, soybean CCI ratings deteriorate... 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 dropped 7.7 points to 337.1, which was 2.9 points (0.9%) below last year at this time. The soybean crop fell 8.5 points to 335.5, down 8.1 points (2.3%) from last year. Illinois led declines for both crops, though most of the top production states saw some deterioration. Click here for details.

Crop progress report highlights… Following are highlights from USDA’s crop progress and condition update as of Sept. 3.

• Corn: 93% dough (92% average); 67% dented (65% average); 18% mature (16% average); 53% good/excellent (56% last week).
• Soybeans: 95% setting pods (94% average); 16% dropping leaves (13% average) 53% good/excellent (58% last week).
• Cotton: 94% setting bolls (95% average); 33% bolls opening (32% average); 31% good/excellent (33% last week).
• Spring wheat: 74% harvested (77% average).
• Winter wheat: 1% planted (3% average).

El Niño threatens global crops... An unusually dry August has taken a toll on cereal grain and oilseed crops in Asia as El Niño intensified, and forecasts for lower rainfall this month are further threatening to disrupt supplies. “We are in full-blown El Niño weather in several parts of the world and it is going to intensify towards the end of the year,” Chris Hyde, a meteorologist at U.S.–based Maxar, told Reuters. “The weather pattern in Asia will correlate with dry El Niño conditions.” Australia and India have both received below-normal rainfall, lowering production prospects. Southeast Asia has also received lower-than-normal rainfall, with Indonesia and Thailand the worst hit.

Record global heat during summer... The past three months have been the hottest ever recorded, according to the Copernicus Climate Change Service, an EU-funded program. August, in particular, marked the warmest August on record and the second hottest month ever, following July 2023. During August, temperatures were estimated to be approximately 1.5°C (34.7°F) above preindustrial averages. Additionally, sea-surface temperatures in August reached a monthly average of 20.98°C, (69.76°F), setting a new high. The global average surface temperature for June through August was about 1.17°F above the 1991-2020 average. This beat the previous record-hot summer of 2019 by nearly 0.54°F. June and July were each record-hot. July ranked as the warmest month since the dawn of the instrument era in the 19th century.

Corn demand from Mexico only partially offsets smaller shipments to other markets... Mexico is poised to register a new record for corn imports from the U.S., in contrast to declines in the other main markets. In the first half of 2023, U.S. corn sales to Mexico totaled $3.027 billion, a 15.1% annual increase. Corn sales to Japan and China totaled $1.536 billion and $1.242 billion, respectively, in the first half of this year, annual declines of 32.9% and 59.7%. There were also year-on-year declines in corn shipments to Colombia ($576 million, -34.8%) and Canada ($407 million, -62.7%).

Argentina launches new ‘soy dollar’ program... The Argentine government launched a new so-called “soy dollar” scheme through Sept. 30, which allows exporters to obtain an exchange rate higher than the official rate to encourage them to move inventories. The fourth “soy dollar” program allows exporters to enter 75% of the foreign currency at the official wholesale exchange rate of 350 pesos per dollar, while the remaining 25% will be “freely available.” This implies an exchange rate of around 450 pesos per dollar because the 25% of free availability would be traded at the financial exchange rate called “contado con liquidación,” currently around 770 pesos per dollar.

China’s big banks continue moves to support yuan... China’s major state-owned banks were seen mopping up yuan liquidity in the offshore foreign exchange market and actively selling U.S. dollars onshore on Wednesday, Reuters reported, citing people with knowledge of the matter. The goal of the state banks’ actions was to control the pace of yuan depreciation, one of the sources said.

Spending bill update... Senate Democratic leadership will likely combine three fiscal year (FY) 2024 spending bills into a minibus that they will bring to the floor next week, according to reports. The three bills include the MilCon-VA, Agriculture and State and Foreign Operations measures. These are usually some of the most bipartisan bills considered every year and all cleared the Senate Appropriations Committee with wide support.

Packer beef margins remain positive... Wholesale beef prices were mixed Tuesday, with Choice up 99 cents and Select 75 cents lower. Packer margins are down a little from this time last week but remain in the black. That should give packers incentive to more actively bid for cattle if they decide to ramp up slaughter rates. While packers would normally be processing as many cattle as possible when margins are positive, they have slowed rates to manage tight market-ready supplies.

Pork cutout value jumps... The pork cutout value firmed $5.17 on Tuesday, driven largely by an $18.06 jump in primal bellies, though all cuts showed strength. While wholesale pork prices are hinting at a short-term bottom, the cash market continues to decline. The CME lean hog index is down another $1.21 to $86.56 (as of Sept. 1).

Overnight demand news... South Korea purchased 55,000 MT of feed wheat likely to be sourced from the Black Sea region. Japan is seeking to buy 60,000 MT of feed wheat and 20,000 MT of feed barley.

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

• 2:00 p.m. Broiler Hatchery — NASS