First Thing Today | July 20, 2022
Good morning!
Wheat rallies, soybeans fall amid followthrough selling... Wheat futures posted strong gains overnight, while soybeans faced followthrough selling, though they are well off their lows this morning. Corn was caught in the middle and posted two-sided trade. As of 6:30 a.m. CT, corn futures are trading 1 to 2 cents lower, soybeans are 10 to 12 cents lower and wheat futures are 20 to 24 cents higher. Front-month U.S. crude oil futures are around $2 lower and the U.S. dollar index is about 200 points higher.
Ukraine grain talks advance but ‘not all issues resolved’... Russian President Vladimir Putin met Recep Tayyip Erdogan of Turkey, who has taken on a role of middleman in Ukraine diplomacy and has been working to overcome a Russian blockade of Ukrainian grain. “Thanks to your mediation, we have moved forward,” Putin told Erdogan in televised remarks at the beginning of their meeting. “Not all issues have been resolved yet, but the fact that there is movement is already a good thing.” Last week, Russian and Ukrainian negotiators met in Istanbul for talks on the grain crisis, which the United Nations (UN) said yielded progress but no resolution. There is a framework agreement now with Russia to shift wheat from silos out through the Black Sea by the end of this month. Putin also called for what he said were remaining restrictions on Russian grain exports to be removed after the U.S. had largely removed preventions on Russian fertilizer shipments. The U.S. has repeatedly said there are no sanctions on Russian grain or fertilizer shipments. Putin also indicated the Kremlin believes they do not see a desire from Ukraine to hold to a preliminary peace deal that was reached in March.
Russia will honor its natural gas commitments to Europe... Putin said Gazprom will restart gas supplies to Europe via the Nord Stream 1 pipeline on schedule Thursday — but at a drastically reduced capacity. Officially the pipeline is closed for maintenance. Some suspect Russia is manipulating gas flows as a political tool in retaliation for the EU’s support of Ukraine. Long-time Pro Farmer Economic Consultant Vince Malanga said, “From a purely economic vantage point it makes no sense for Russia to curtail gas supplies to Europe. But if it does, it would be a serious negative wild card affecting the global economy. We are hopeful weaponizing energy does not come to fruition.”
Europe rolls out emergency gas plan... Europe unveiled a plan to ration natural gas if Russia tightens taps. Guidelines from the European Union are expected to limit indoor heating to 66 degrees Fahrenheit and include criteria for energy-intensive industries to get priority gas access.
UK inflation rises more than expected, bets on big rate hike increase... The United Kingdom’s annual consumer price inflation surged 9.4% in June, the highest since February 1982 and up from May’s 9.1% jump. The latest increase means Britain had the highest rate of inflation seen in any Group of Seven advanced economy since 1985. The data bolstered bets the Bank of England (BOE) will opt for a 50-basis-point rate hike next month, which would be the biggest since 1995. BoE has raised rates five times since December in its fight against inflation, though those were smaller increases. Odds are also rising the European Central Bank will raise interest rates 50 basis points on Thursday.
Biden climate emergency declaration likely, though not this week... President Joe Biden is considering declaring a climate emergency, though he is not expected to do so this week, despite the Washington Post earlier this week reporting that would be the case. Biden will make a climate announcement today, but will not declare a climate emergency at this time, White House press secretary Karine Jean-Pierre said on Tuesday. Biden will announce executive action to confront climate change today in a speech at a shuttered coal-fired power plant in Massachusetts, vowing that he won’t allow a congressional impasse on climate legislation to prevent urgent work to slow rising global temperatures, according to people familiar with the matter. White House officials are still weighing a separate declaration that climate change is a national emergency — a step that would unlock broad executive authority to propel clean-energy construction. It could also allow Biden to use the Cold War-era Defense Production Act and the federal procurement budget of $650 billion per year to manufacture clean transportation technologies.
Kissinger warns Biden against endless confrontation with China... Former U.S. Secretary of State Henry Kissinger, 99, said geopolitics today requires “Nixonian flexibility” to help defuse conflicts between the U.S. and China as well as between Russia and the rest of Europe. While warning that China shouldn’t become a global hegemon, the man who helped re-establish U.S./China ties in the 1970s said President Joe Biden should be wary of letting domestic politics interfere with “the importance of understanding the permanence of China… Biden and previous administrations have been too much influenced by the domestic aspects of the view of China,” Kissinger said in an interview Tuesday in New York with Bloomberg News Editor-in-Chief John Micklethwait. “It is, of course, important to prevent Chinese or any other country’s hegemony.” But “that is not something that can be achieved by endless confrontations,” he added. He’s previously said the increasingly adversarial relations between the U.S. and China risk a global “catastrophe comparable to World War I.”
Reuters: China seeks to stop UN from releasing Xinjiang human rights report... China is asking the UN human rights chief to bury a highly-anticipated report on human rights violations in Xinjiang, according to a Chinese letter seen by Reuters and confirmed by diplomats from three countries who received it. UN High Commissioner Michelle Bachelet has pledged to publish a report into the western Chinese region of Xinjiang. Rights groups accuse Beijing of abuses against Xinjiang’s Uyghur inhabitants, including the mass use of forced labor in internment camps. The letter authored by China expressed “grave concern” about the Xinjiang report and aims to halt its release, said four sources – three diplomats and a rights expert, according to Reuters.
Pork checkoff rate to drop by five cents, a 12.5% decline... USDA today has formally proposed reducing the pork checkoff rate from 40 cents to 35 cents per $100 value for live animals, in line with a vote by National Pork Producers Council delegates. Revenue from the checkoff is anticipated to fall $13.5 million. The amount raised for promotion and marketing in 2021 was $103.6 million, a 41% increase from the year before due to a 47% increase in live hog prices.
China’s sow herd increased again in June... China’s sow herd at the end of June rose for the second consecutive month, reaching 42.8 million head, according to the country’s ag ministry. While that was up 2% from May, it was still down 6.3% from last year. Current live hog production is at a “normal and reasonable” level, an ag ministry official said. “Live hog and pork production will increase steadily in July and August... the supply of large hogs is guaranteed in the second half of the year,” the official noted.
Big day for wholesale beef trade... Wholesale beef prices jumped $2.02 for Choice and $1.07 for Select on Tuesday. But just as importantly, movement improved to 133 loads. That’s the strongest daily movement since July 12 and it came amid the highest Choice price since April 15. While there have been some demand concerns with beef, wholesale trade signals those have been overstated.
CME lean hog index picking up steam... The CME lean hog index not only extended its recent string of price strength, but today’s $1.02 gain (as of July 18) is the biggest daily advance in nearly a month. With the cash index and the pork cutout value, which was up $3.16 on Tuesday, strengthening, there’s strong fundamental support for lean hog futures, especially the lead-month August contract.
Overnight demand news... Jordan tendered to buy 120,000 MT of optional origin 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
- 9:30 a.m. Weekly Ethanol Production — EIA
- 2:00 p.m. U.S. Bioenergy Statistics — ERS
- 2:00 p.m. Agricultural Chemical Usage - Fruits — NASS
- 2:00 p.m. Broiler Hatchery — NASS
- 2:00 p.m. Catfish Production — NASS
