First Thing Today | August 1, 2022

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Good morning!

Grains, soybeans under pressure to start the week... Corn and wheat futures were pressured overnight by news the first ship carrying Ukrainian grain left the port of Odesa. Soybeans followed those markets lower. As of 6:30 a.m. CT, corn futures are trading 13 to 14 cents lower, soybeans are 17 to 21 cents lower and wheat futures are 11 to 15 cents lower. Front-month U.S. crude oil futures are nearly $2 lower and the U.S. dollar index is around 350 points lower this morning.

Hot, mostly dry conditions this week... A cluster of rains is moving across the northern half of Illinois this morning but is expected to dissipate as it moves into northern Indiana. A wider band of rains is moving across the Mid-South this morning. A high-pressure ridge will bring hot and dry conditions to the Plains and Midwest this week before retreating over the Rocky Mountains after the weekend. World Weather Inc. believes the Plains and western fringes of the Corn Belt will experience a drier biased scenario during the next two weeks, but the central and eastern Midwest will get timely rain to maintain a favorable outlook for crop development.

First ship carrying Ukrainian corn leaves Odesa... The first ship to depart the port of Odesa under a four-way grain deal will pass through the Bosphorus on Tuesday, carrying 26,000 MT Ukrainian corn to Lebanon, Ukrainian Infrastructure Minister Oleksandr Kubrakov said on Monday. Kubrakov said Ukraine would start consultations to try to open up the port of Mykolaiv if the grain deal holds in full. Ukrainian officials have said there were 17 ships docked in Ukraine’s Black Sea ports with almost 600,000 MT of cargo. Of them, 16 held Ukrainian grain with a total volume of about 580,000 MT. Ukraine expects to reach full throughput capacity for transporting agricultural goods within weeks.

Russian strikes kill Ukrainian grain tycoon... Ukrainian grain tycoon Oleksiy Vadatursky, founder and owner of agriculture company Nibulon, and his wife were killed in their home by a missile strike on Sunday. Headquartered in Mykolaiv, Nibulon specializes in the production and export of wheat, barley and corn, and has its own fleet and shipyard.

Rains impact Russian wheat areas... Recent rains in several regions of Russia have hurt the quality of winter wheat but improved yield prospects for spring wheat, SovEcon ag consultancy said. “There was too much rain for winter wheat at this stage which hits the quality – as farmers typically say, ‘gluten and protein have been washed away.’ However, it is improving the set-up for spring crops, including spring wheat,” SovEcon said in a note.

Firm cuts EU sunseed crop forecast... Strategie Grains lowered its forecast for this year’s European Union sunflower seed crop to 10.35 MMT from 10.87 MMT a month ago, citing impacts of drought. At that level, production would be equal to last year. Strategie Grains had previously projected the sunflower seed crop would surpass last year’s record volume, helped by a sharp increase in planting this year. However, drought conditions hurt yield prospects for sunflowers.

June soy crush expected to decline from May, corn-for-ethanol use likely rose... USDA is expected to report June soybean crush totaled 174.6 million bu., according to a Bloomberg survey, which would be down 6.3 million bu. (3.5%) from May but up 7.9% from last year. Corn-for-ethanol use is expected to total 449.9 million bu., which would be up 3.8 million bu. (0.9%) from May and 2.3% above year-ago.

Indonesia keeps domestic palm oil sales rules, raises allowed export amount... Indonesia will retain its domestic sales requirement for palm oil to keep local cooking oil prices affordable, a senior official told Reuters on Monday, noting that a quota for export shipments would be relaxed further. Palm oil industry participants have sought the removal of the so-called Domestic Market Requirement (DMO) under which exporters must sell a portion of production locally before being granted export permits. To reduce high palm oil stocks, the government will allow exporters to ship nine times the amount sold locally under the DMO, up from seven times previously.

China’s factory activity slows... China’s official manufacturing purchasing managers index (PMI) unexpectedly fell to 49.0 in July, down from a 50.2 reading in June and marking contraction in larger, state-owned factories. The Caixin/Markit manufacturing PMI declined to 50.4 in July from a 13-month high of 51.7 in June. While the gauge of activity at smaller, privately owned factories didn’t reflect contraction, the reading was well below expectations.  

The week ahead in Washington... The House departed Friday for an extended summer recess, though it will return later this month if the reconciliation measure comes to a vote. Senate Majority Leader Chuck Schumer (D-N.Y.) told fellow Democrats at a caucus meeting last Thursday to prepare to work through this weekend on the reconciliation measure. Another big topic: fiscal year (2023) spending, which will very likely see a stop-gap spending bill that extends spending until after the Nov. 8 elections and a lame-duck session of Congress. The economic focus this week will be Friday’s employment data, which is expected to show jobs growth slowed to an estimated 250,000 in July.

Pelosi starts Asian trip... House Speaker Nancy Pelosi (D-Calif.) is in Singapore today on the first leg of her Asia trip. Pelosi is expected to visit Taiwan during her travels this week, according to a senior Taiwanese government official and a U.S. official, though the stop is not currently on Pelosi’s public itinerary. The Taiwanese official added that Pelosi is expected to stay in Taiwan overnight. It is unclear when exactly she will land in Taipei. The U.S. official added that defense department officials are working around the clock on monitoring any Chinese movements in the region and securing a plan to keep her safe. She was warned against traveling to Taiwan by both the Chinese government and U.S. military officials. Chinese officials earlier threatened “strong and resolute measures” should she stop on the island.

GAO: USDA failed key step in updating Thrifty Food Plan... Congressional watchdog the Government Accountability Office in a report said USDA should have filed a formal report with Congress before adjusting the Thrifty Food Plan, which resulted in a $145-per-month increase in Supplemental Nutrition Assistance Program (food stamp) benefits.

Limited packer demand for cash cattle likely to continue... With the flip of the calendar to August, packers will have access to a fresh batch of contracted cattle. We expect that will lead to another week of limited packer demand in the negotiated market, which points to further weakening of cash cattle prices. But it’s important for feedlots to stay current so they have leverage in cash negotiations when packer demand for cattle improves.

Cash hog index continues to rise... The CME lean hog index is up another 84 cents to $121.41 (as of July 28), just $1.26 below last year’s mid-June peak. August lean hog futures finished last Friday 76 cents below today’s cash index quote, which should limit selling in the lead contract since the index continues to rise. Traders may also continue to narrow the bigger-than-normal seasonal cash decline built into fall- and winter-month hog futures.

Weekend demand news... Taiwan tendered to buy up to 65,000 MT of corn to be sourced from the U.S., Brazil, Argentina or South Africa. Algeria tendered to buy a nominal 50,000 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

 

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