First Thing Today | August 11, 2022

Good morning!

Firmer price tone this morning... Two-sided trade was seen in a relatively quiet overnight session, but corn, soybeans and wheat are firmer and near their session highs this morning. As of 6:30 a.m. CT, corn futures are trading 2 to 4 cents higher, soybeans are 9 to 11 cents higher, winter wheat futures are 5 to 6 cents higher and spring wheat is 2 to 4 cents higher. Front-month crude oil futures are around 75 cents higher and the U.S. dollar index is more than 200 points lower this morning.

First Ukrainian wheat shipments expected next week... The first shipments of wheat should start flowing from Ukrainian ports next week under the new export deal, a top UN official said on Wednesday. The first 12 shipments that have left three Black Sea ports designated by the deal were carrying corn or oilseed products. Frederick Kenney, interim UN Coordinator at the Joint Coordination Center (JCC) in Istanbul, said: “The silos were full of corn and the ships that were there have been loaded with corn. We’re actually transitioning to wheat.” Ships are inspected coming into and out of the Bosphorus by JCC representatives. “We’re seeing steady progress in the number of ships coming in and out,” he said. “We’re off to a good start.” The Turkish defense ministry said two grain ships had been inspected in Istanbul on Wednesday and were on their way to Ukraine but gave no further details.

Firm slashes EU corn production forecast... Consultancy Strategie Grains slashed its European Union corn production forecast by 10 MMT to a 15-year low of 55.4 MMT due to severe drought across Europe. “The outlook for the 2022 crop grain maize [corn] harvests across Europe has deteriorated drastically,” Strategie Grains said in its monthly report. “This would be the smallest harvest since 2007.” The sharply lower production forecast caused the consultancy to increase its forecast for 2022-23 EU corn imports by nearly 3 MMT to 20 MMT, which would be up from 17.8 MMT this year. Strategie Grains lowered its 2022-23 EU wheat export forecast by 1.4 MMT to 29 MMT as more will be used domestically for feed and amid strong export competition from Russia.

Exchange expects fewer Argentine corn acres, more soybeans... The Rosario Grain Exchange expects Argentina’s corn planting area to fall by 4.7% to 8 million hectares for 2022-23, while soybean acres are anticipated to rise by 4.3% to 16.8 million acres. The exchange cited producers’ preference for soybean production given the “not very encouraging weather forecasts and high possibilities” of La Niña in a year of “high uncertainty.” The exchange projects 2022-23 production at 55 MMT for corn, 47 MMT for soybeans and 17.7 MMT for wheat.

Weekly Export Sales Report out this morning... For the week ended Aug. 4, traders expect:

U.S. will operate around Taiwan, despite China’s pressure... In response to Chinese military drills around Taiwan, the U.S. said it would continue operating in the Taiwan Strait. Within a few weeks, officials said, the U.S. Navy is planning to run ships through the Taiwan Strait, ignoring China’s recent claim that it controls the entire waterway. However, officials said they would not send the Ronald Reagan, the Japan-based aircraft carrier, because it would be too provocative. Meanwhile, the threat of force from China has not decreased, according to Taiwanese President Tsai Ing-wen, even though Beijing’s largest ever military drills around the island seemed to be scaling down. She said Taiwan will not escalate conflict or provoke disputes. Taiwan rejects the “one country, two systems” model proposed by Beijing in a white paper published this week, the self-ruled island’s foreign ministry said.

Pelosi defends Taiwan visit... House Speaker Nancy Pelosi (D-Calif.) delivered a defense of her Taiwan trip and seemed to contradict President Joe Biden’s earlier claim that the military “thinks it’s not a good idea” for her to visit the self-governing island. “I don’t remember them ever telling us not to go,” Pelosi said during a press conference with the other CODEL members. “Their preparation actually, I think, minimized the impact of the Chinese on our trip.” Pelosi went on to accuse Beijing of using her trip as a “pretext” to create a “new normal” through its provocative military drills, adding: “We just can’t let that happen.” The speaker also laughed off China’s new sanctions targeting her and her family.

Inflation watch: Fed officials remain hawkish... While U.S. inflation decelerated in July by more than expected, reflecting lower energy prices, which may take some pressure off the Federal Reserve to continue aggressively hiking interest rate, Federal Reserve officials said the softening inflation data does not change the U.S. central bank’s path toward even higher interest rates. Minneapolis Fed President Neel Kashkari, who prior to the pandemic was the central bank’s most dovish policy maker, said Wednesday he wants the Fed’s benchmark interest rate at 3.9% by the end of this year and at 4.4% by the end of 2023. “I haven’t seen anything that changes that,” Kashkari said, responding to a question about a Labor Department report published Wednesday that showed consumer prices rose at a slightly slower rate in July.  Chicago Fed President Charles Evans said inflation remains “unacceptably high.” He expects “that we will be increasing rates the rest of this year and into next year to make sure inflation gets back to our 2% objective.” San Francisco Fed President Mary Daly told the Financial Times (FT) it was too soon to declare victory on inflation and would not rule out another 75-basis-point increase at the September Fed meeting. But she also said a 50-basis-point increase was her “baseline” for the September meeting. She said core inflation, stripping out food and energy, remains unacceptably high and shows little sign of moderating. “This is why we don’t want to declare victory on inflation coming down,” she told FT. “We’re not near done yet.”

Average U.S. gas prices have dropped below $4 a gallon for the first time since March... The national average price for regular unleaded gasoline fell to $3.99 a gallon on Thursday, according to AAA. Gas prices hit a record high of $5.02 in June. Despite the 21% drop, they remain 25% higher than this time last year. “Despite steadily falling gas prices during the peak of the summer driving season, fewer drivers fueled up last week,” the AAA said. “It’s another sign that, for now, Americans are changing their driving habits to cope with higher pump prices.”

IEA raises global oil supply outlook... The International Energy Agency (IEA) revised up its outlook for global oil supply, partly because Russia has continued to pump more oil than expected. “While Russia’s exports of crude and oil products to Europe, the U.S., Japan and Korea have fallen by nearly 2.2 [million barrels per day] since the start of the war, the rerouting of flows to India, China, Turkey and others, along with seasonally higher Russian domestic demand has mitigated upstream losses,” the Paris-based agency said. By July, Russian oil production was only 310,000 barrels per day below pre-war levels while total oil exports were down just 580,000 barrels per day, it added. The release of 180 million barrels of oil from the U.S. Strategic Petroleum Reserve has also helped bump up supply.

Trickle of cash cattle trade... Cash cattle sales were light through Wednesday, though the limited trade that did occur was around $1 higher in the northern live market and $2 to $3 higher for the dressed market. Cash sources didn’t indicate any activity in the Southern Plains, though the initial sales up north suggests prices are headed higher. Expectations for firmer cash prices helped fuel buying in live cattle futures on Wednesday, though additional gains could be tempered until more active trade is reported.

Cash hog index turns choppy... The longer-term trend remains solidly higher for the CME lean hog index, though the short-term pattern has been choppy with prices so far unable to push above last year’s peak. The index is down 16 cents today (as of Aug. 9) to $122.09. October hogs, which assume lead-month status after the August contract’s expiration on Friday, finished Wednesday more than $21 below that level.

Overnight demand news... Exporters reported no tenders or sales.

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