First Thing Today | August 2, 2022

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Good morning!

Followthrough selling overnight... Corn, soybeans and wheat extended Monday’s declines in overnight trade. Soybeans fell below Monday’s lows, while corn held that support and wheat pivoted around yesterday’s lows. As of 6:30 a.m. CT, corn futures are trading 7 to 8 cents lower, soybeans are around a dime lower in most contracts and wheat futures are 15 to 20 cents lower. Front-month U.S. crude oil futures and the U.S. dollar index are both trading modestly above unchanged this morning.

Consultant again cuts corn, soybean yield forecasts... Amid forecasts calling for heat and dryness across the central U.S., which will zap soil moisture that’s already lacking in some areas, Crop Consultant Dr. Michael Cordonnier cut his corn and soybean yield estimates. He now estimates yields at 174 bu. per acre for corn and 50.5 bu. per acre for soybeans, down 1 bu. and 0.5 bu., respectively, from last week. Cordonnier has a neutral to lower bias toward both yields.

Corn CCI rating slips, soybean rating improves... 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 1.3 points to 355.8, despite the unchanged good/excellent national ratings, as both Iowa and Nebraska declined slightly more than one point each. The corn CCI rating is now 11.2 points below the five-year average. The soybean crop improved 3.1 points to 353.9, which was still 2.7 points below average. The spring wheat crop improved 2.9 points to 375.4, though that was slightly below ratings for this point in the growing season for 2018, 2019 and 2020. Click here for details.

Crop Progress Report highlights… Following are highlights from USDA’s crop progress and condition update for the week ended July 31.

  • Corn: 80% silking (85% average), 26% dough (31% average), 61% rated good/excellent (61% last week)
  • Soybeans: 79% blooming (80% average), 44% setting pods (51% average), 60% rated good/excellent (59% last week)
  • Spring wheat: 97% headed (99% average), 70% rated good/excellent (68% last week)
  • Winter wheat: 82% harvested (85% average)
  • Cotton: 89% squaring (87% average), 58% setting bolls (50% average), 38% rated good/excellent (34% last week)

Turkey expects regular daily departures of grain ships from Ukrainian ports... Turkey expects roughly one grain ship to leave Ukrainian ports each day as long as an agreement that ensures safe passage holds, a senior Turkish official said on Tuesday. “The plan is for a ship to leave... every day,” the senior Turkish official told Reuters. “If nothing goes wrong, exports will be made via one ship a day for a while.” The first ship carrying 26,527 MT of corn to Lebanon was expected to anchor at the Joint Coordination Center (JCC) in Istanbul Tuesday night and be inspected on Wednesday.

Tensions with China rise as Pelosi expected to visit Taiwan... Taiwanese media reported House Speaker Nancy Pelosi (D-Calif.) had plans to arrive in Taiwan on Tuesday night and meet with Taiwan’s president Tsai Ing-wen on Wednesday. President Joe Biden’s aides also said they expected Pelosi to proceed with what would be the highest-level visit to the island by an American official in 25 years. A spokesman for the National Security Council, warning China not to turn the visit into “some sort of crisis,” said the Biden administration was concerned China would potentially fire missiles into the Taiwan Strait, send warplanes into Taiwan’s air defense zone or stage activities that cross the Strait’s median line. “The Chinese People’s Liberation Army will not sit back,” China’s foreign minister spokesperson Zhao Lijian said on Monday. China has repeatedly warned against Pelosi going to Taiwan. Meanwhile, a senior Russian official called Pelosi’s expected visit to Taiwan a “provocation” aimed at pressuring Beijing and said the country backs China.

Indonesia lowers crude palm oil reference price for the first half of August... Indonesia lowered its crude palm oil reference price to $872.27 per MT, effective August 1-15, a senior economic ministry official said Tuesday. The reference price would place crude palm oil export duty for the first half of August at $33 per MT, while export levy is waived until the end of August. The July reference price was at $ 1,615.83 per MT. The lower reference price and export duty, along with the higher export limits we reported on Monday pressured Malaysian palm oil futures overnight.

China says 5.5% GDP growth is guidance, not a hard target... Chinese leaders told the government that this year's economic growth of about 5.5% is a guidance and not a hard target in a meeting last week, Bloomberg News reported on Tuesday, citing people familiar with the matter. At the meeting, the top leaders told officials from the ministerial and provincial level the target will not be used to evaluate their performance, neither will there be any penalty for failing to meet the target. The leaders acknowledged that the chances of achieving the set goal are thin, the report added. As we reported last week, China will strive for the “best possible results” for its economy this year.

OPEC+ and oil prices... The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, have their regular meeting this week to decide whether to increase supply. BP forecasts oil prices will “remain elevated in the third quarter” due to reduced levels of spare capacity, with inventory levels significantly below the five-year average and “ongoing disruption to Russian supply.”

Strong start for wholesale beef trade... Choice boxed beef firmed $1.36 and Select was 65 cents higher Monday. Movement wasn’t spectacular at 99 loads, though that was up 10% from sales volume the previous Monday. Even if the wholesale beef market continues to show strength, we doubt it would have much if any impact on this week’s cash trade. Cash cattle sources expect a weaker price tone for a fifth consecutive week.

Seller interest limited in hog futures... Lean hog futures posted mild corrective losses on Monday but finished near their daily highs amid firming cash fundamentals. While the national direct cash hog price dropped 94 cents, the CME lean hog index is up another 45 cents (as of July 29) and the pork cutout value firmed 36 cents. As long as cash fundamentals are supportive, the downside will be limited for hog futures, especially the lead August contract.

Overnight demand news... Japan is seeking 122,103 MT of wheat in its weekly tender. South Korea tendered to buy 50,000 MT each of milling wheat from the U.S. and Australia. Tunisia tendered to buy 100,000 MT of soft wheat and 50,000 MT of feed barley – both optional origin. The Philippines tendered to buy 150,000 MT each of wheat and feed barley – both optional origin.

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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