First Thing Today | August 3, 2023

Good morning!

Some modest corrective buying overnight... Corn, soybeans and wheat initially extended Wednesday’s losses overnight but some contracts have firmed amid mild corrective buying early this morning. As of 6:30 a.m. CT, corn futures are trading fractionally to a penny lower, soybeans are mostly 5 to 6 cents higher, winter wheat futures are steady to 3 cents higher and spring wheat is 3 to 7 cents higher. Front-month crude oil futures and the U.S. dollar index are both trading near unchanged.

StoneX forecasts record corn crop... Commodity brokerage firm StoneX estimates the U.S. corn crop at 15.274 billion bu. on an average yield of 177 bu. per acre. Both the corn yield and production figures would be records. The firm estimates the U.S. soybean crop at 4.173 billion bu. on a yield of 50.5 bu. per acre. The corn and soybean production figures assume USDA’s harvested acreage estimates.

Ukraine considers insuring ships going through ‘grain corridor’... Ukraine is considering the possibility of insuring ships going through the “grain corridor,” news agency Interfax-Ukraine reported, citing Prime Minister Denys Shmyhal. “Now we are discussing in the government and, I am sure, we will make a decision on insurance of ships and relevant companies that will go via the ‘grain corridor,’” Shmyhal was quoted as telling a conference of Ukrainian ambassadors.

Exporters union raises Ukraine crop forecast... Ukrainian grain traders union UGA increased its 2023 combined grain and oilseed crop forecast for Ukraine by almost 8 MMT to 76.8 MMT. UGA says production will likely include 26.9 MMT of corn, 20.2 MMT of wheat, 5.2 MMT of barley, 13.9 MMT of sunflower seeds, 3.9 MMT of rapeseed and 4.8 MMT of soybeans. UGA attributed the rise to “favorable weather conditions and better-than-expected crop yields.” UGA expects Ukraine to export 48 MMT of grains and oilseeds in 2023-24, down from 58 MMT in 2022-23. Wheat exports could total 15 MMT, down from 16.8 MMT in 2022-23, while corn shipments could fall to 22 MMT from 29.5 MMT.

Weekly Export Sales Report out this morning... For the week ended June 27, traders expect:

China cracks down on some commodity transactions... Chinese authorities are intensifying a crackdown on some commodities transactions they view as offering little economic benefit, Bloomberg reported, leading to a pullback by industry participants that’s poised to reduce both trading volumes and volatility in the domestic market. Authorities have escalated probes into trades they suspect are being used to obtain cheap financing or government subsidies rather than serving the real economy, according to traders and officials with knowledge of the investigations. The investigations have made some Chinese firms more hesitant to initiate new contracts in metals, chemicals and coal and have led to the termination of some existing supply deals.

Rice damage in Philippines from flooding being assessed... World Weather Inc. notes up to 38 inches of rain fell on the “rice bowl” of Luzon Island, Philippines, from July 27 through Aug. 2, causing flooding and damage to the rice crop. That will further tighten the global rice supply situation, especially after India’s recent ban on much of its exports. World Weather says other areas expected to suffer lower rice production this year include Thailand and nearby locations in mainland Southeast Asia, which will be influenced by El Niño conditions that are expected to intensify and lead to less-than-average rainfall later this year and into early 2024.

India’s parboiled rice export prices hit record high... India’s parboiled rice prices hit a record this week as demand shifted toward the grade after New Delhi banned exports of non-basmati white rice two weeks ago. India’s 5% broken parboiled variety was quoted at a record $450 to $455 per metric ton, up $5 from the previous week. There is no restriction on exports of non-basmati parboiled rice.

What about eRINS?... The watch is on for an electric renewable identification numbers (eRINs) plan after EPA removed it from the RFS final rule for 2023-2025. The timeline is murky because EPA has yet to send anything to the Office of Management and Budget (OMB) for review. EPA will continue to examine the comments provided on its proposed rule, which included provisions for eRINs. EPA will also seek additional input from stakeholders to inform potential next steps. EPA has acknowledged the “complexity” of the issues raised by those commenting on the proposed package. Bottom line: It is unclear where EPA will end up on this topic but there will be additional input sought as the agency seeks to develop the rules for eRINs.

British interest rates raised to 15-year high... The Bank of England (BOE) raised interest rates 25 basis points to a 15-year high of 5.25%. This marked the 14th consecutive hike. BOE said its monetary policy will remain “sufficiently restrictive for sufficiently long” to bring inflation back to its 2% target. BOE revised its inflation forecast and now expects a faster decline, down to 4.9% by the end of the year.

Euro zone PPI continues to decline... The euro zone producer price index (PPI) fell for a sixth straight in June to an annual gain of 3.4%. Core PPI, excluding food and energy costs, was up 2.5% from last year.

Macros trump fundamentals in cattle... Cattle futures faced heavy selling Wednesday amid broad risk aversion in the marketplace. While no technical damage was done, the price action put bulls on alert. They must defend support at Monday’s low to avoid potential heavy chart-based selling. Meanwhile, cash cattle negotiations remained expectedly slow.

More hints of potential seasonal top in hogs... The CME lean hog index is down another dime today. While losses have been mild, that’s the third decline in four days. The pork cutout dropped $3.63 amid losses in all cuts except loins. Despite the cash market weakness, the selling in lean hog futures yesterday was tied mostly to the broader selloff across most risk-based markets.

Overnight demand news... Japan purchased 86,290 MT of wheat in its weekly tender, including 51,220 MT U.S. and 35,070 MT Canadian.

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