First Thing Today | July 15, 2022
Good morning!
Mild price strength overnight... Modest corrective buying was seen in the corn, soybean and wheat markets overnight as traders continued to monitor weather and macroeconomics. As of 6:30 a.m. CT, corn futures are trading 3 to 4 cents higher, soybeans are 4 to 6 cents higher and winter wheat futures are fractionally to 2 cents higher and spring wheat is 3 to 5 cents higher. Front-month U.S. crude oil futures are around $1.35 higher and the U.S. dollar index is more than 200 points lower.
Rains falling on some areas this morning... A band of rains is pushing across the central U.S. this morning, stretching from northern Missouri to central Minnesota. The rains are expected to push into Illinois and Wisconsin later this morning before dissipating as the system moves further east.
China’s economy slowed sharply in Q2... The Chinese economy grew 0.4% versus year-ago in the second quarter, slowing sharply from 4.8% growth in the first quarter. That was the slowest economic growth since a contraction in first quarter of 2020, when Covid first emerged. For the first half of 2022, the economy grew 2.5%. Beijing has targeted the country’s GDP to grow around 5.5% this year after an 8.1% expansion in 2021. Chinese officials warned about the lingering impact of Covid outbreaks and “shrinking demand” at home, while also noting the rising “risk of stagflation in the world economy” amid tightening monetary policy overseas.
Chinese industrial production, retail sales rebound... China’s industrial production expanded by 3.9% compared with year-ago in June, much faster than a 0.7% gain in May. This was the second straight month of growth in industrial output, as the economy emerged from Covid-19 strict restrictions, but expansion wasn’t as much as economists expected. China’s retail trade unexpectedly rose by 3.1% from year-ago in June, easily beating market estimates of a flat reading and a strong shift from a 6.7% drop in May. This marked the first increase in retail trade since February, as consumption recovered following a relaxation of Covid-19 restrictions.
Russia: Document to resume Ukraine grain exports nearly ready... Russia’s proposals on how to bring about a resumption of Ukrainian grain exports were “largely supported” by negotiators taking part in talks this week in Istanbul, the Russian defense ministry said on Friday, and an agreement was close. The ministry said work on what it calls the “Black Sea Initiative” will be finalized soon. Russia, Ukraine, Turkey and the United Nations are due to sign a deal next week aimed at resuming Ukraine’s Black Sea grain exports. As we noted yesterday, there are many hurdles ahead even if an agreement is signed and experts have cautioned an agreement will not have an immediate impact. It will take time to ensure there are no mines in the Black Sea shipping channel, and then to get cargo ships to Odesa and other Black Sea ports.
Seasonal decline expected in NOPA crush data... Analysts expect members of the National Oilseed Processors Association (NOPA) to report soybean crush of 164.5 million bu. in June, according to a Reuters survey. If realized, that would be down 3.9% from May as some plants slowed processing for maintenance last month, but up 7.9% from June 2021. Soyoil stocks are expected to total 1.704 billion pounds. The NOPA data will be released at 11 a.m. CT.
French wheat harvest advancing quickly... France has harvested half of its wheat crop, according to the country’s ag ministry, far ahead of the normal pace for mid-July. Hot, dry weather not only cut wheat yields but is allowing the harvest pace to rapidly advance.
China soybean auctions continue... China will auction another 500,000 MT of imported soybeans from its state reserves on July 22. Beijing continues to sell soybean reserves onto its domestic market via the weekly auctions to boost supplies.
China to limit phosphate exports via quotas... China is rolling out a quota system to limit exports of phosphates in the second half of this year, Reuters reported. China appears to have issued export quotas for just over 3 MMT of phosphates for the second half of this year, said Gavin Ju, China fertilizer analyst at CRU Group, citing information from about a dozen producers who have been informed by local governments since late June. That would mark a 45% drop from China’s shipments of 5.5 MMT in the same period a year ago. Although China has imposed export duties on fertilizers in the past, the latest measures mark its first use of inspection certificates and export quotas, analysts said.
Manchin: No new tax hikes, climate spending in latest package... Centrist Sen. Joe Manchin (D-W.Va.) told Democratic leaders Thursday he would not support an economic package that contains new spending on climate measures or new tax increases. Manchin told Senate Majority Leader Chuck Schumer (D-N.Y.) he’s only willing to support legislation to lower prescription drug prices and extend enhanced Affordable Care Act subsidies. That was the signal from other sources earlier this week.
Chinese pork production surges... China’s second-quarter pork production climbed to 13.8 MMT, the highest level for the period since at least 2015. China’s first-half pork production jumped 8.2% from year-ago to 29.4 MMT amid an 8.4% increase in slaughter. The country aggressively rebuilt its hog herd following the African swine fever outbreak, but producers starting culling sows later last year amid poor margins. China’s overall hog herd as of June 30 contracted by 1.9% compared to year-ago to 430.67 million head.
Limited cash cattle sales... Cash sources say this week’s negotiated cash cattle activity has been slow for the third straight week amid tight market-ready supplies, especially in the northern market. Packers have pulled much of their needs from committed supplies – contracted animals or cattle that were sold “with time” weeks ago. Trade so far this week suggests the average cash price will drop slightly.
August hogs at discount to cash index... August lean hog futures will assume lead-month status when the July contract expires later today. As of Thursday’s close, the August contract was more than $3.80 below today’s cash index quote (as of July 13), which continues to climb. That’s slightly more than the five-year average decline of $2.92 for the cash index from mid-July to mid-August.
Overnight demand news... The Philippines purchased 110,000 MT of feed wheat expected to be sourced from the Black Sea region, European Union or Australia; it made no purchase in its tender to buy 50,000 MT of corn.
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
- 11:00 a.m. Feed Grains: Yearbook Tables — ERS
- 2:00 p.m. Peanut Prices — NASS
- 2:30 p.m. Commitments of Traders — CFTC
