First Thing Today | July 26, 2022

Good morning!

Strong price gains overnight... Corn and soybean futures gapped higher overnight after USDA’s crop condition ratings dropped more than expected. Wheat futures followed to the upside. As of 6:30 a.m. CT, corn futures are trading 13 to 14 cents higher, soybeans are 20 to 22 cents higher and wheat futures are 13 to 15 cents higher. Front-month crude oil futures are around $1.65 higher and the U.S. dollar index is more than 600 points higher this morning.

Consultant cuts corn, soybean yield forecasts... Extreme heat in some areas last week further stressed crops during corn pollination and soybean blooming and pod setting. As a result, Crop Consultant Dr. Michael Cordonnier cut his corn yield estimate by 2 bu. to 175 bu. per acre. He lowered his soybean yield by 0.5 bu. to 51 bu. per acre. Cordonnier has a neutral to lower bias toward both the corn and soybean yields with long-range forecasts calling for hotter and drier weather to return after brief relief this week.

Heat takes bite out of corn, soybean and spring wheat CCI ratings... 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 fell 6.2 points to 357.1, which is now 11.6 points below the five-year average. Much of the weekly decline was in Minnesota, Nebraska and Kansas. The soybean crop dropped 2.7 points to 350.7, which is 5.5 points below average. The spring wheat crop fell 4.6 points to 372.5, though that is still 45.1 points above the five-year average for the date. Click here for details.

Crop Progress Report highlights… Following are highlights from USDA’s crop progress and condition update for the week ended July 24.

• Corn: 62% silking (70% average), 13% dough (15% average), 61% rated good/excellent (64% last week)
• Soybeans: 64% blooming (69% average), 26% setting pods (34% average), 59% rated good/excellent (61% last week)
• Spring wheat: 86% headed (96% average), 68% rated good/excellent (71% last week)
• Winter wheat: 77% harvested (80% average)
• Cotton: 80% squaring (80% average), 48% setting bolls (38% average), 34% rated good/excellent (38% last week)

Grain inspection center launched in Turkey... The Joint Coordination Centre (JCC), established as part of the deal to resume grain exports from Ukraine, has started work in Istanbul, Russian news agencies reported, citing Russia’s defense ministry. The Russian delegation to the JCC will arrive in Turkey today and begin work in a four-way format, alongside Turkey, Ukraine and the United Nations. Cargo ships carrying Ukrainian grain are most likely to undergo inspections at the Turkeli Anchorage near the Bosphorus Strait, Russia’s TASS news agency reported. Representatives of JCC will inspect ships when they enter and exit the Bosphorus Strait.

Big increase in Kazakhstan wheat production... Kazakhstan will produce between 13 MMT and 13.5 MMT of wheat this year, up around 15% from last year’s crop, according to the country’s ag minister. He says the country will need 6 MMT for domestic consumption and the rest will be available for export.

Port of Oakland reopens after trucker protest, but backlog issues remain... Independent truckers halted their protests that blocked gates at the Port of Oakland, allowing containers to again move at the port. The truckers had protested a new California “gig economy” law (AB5). The process of clearing the backlog of containers created by the protests has started, but the Wall Street Journal said some observers believe it will take potentially weeks for operations to return to normal. 

Year-end tax package will likely include biodiesel tax credit extension and perhaps SAF... Lawmakers want to extend tax incentives for wind power, solar power, home energy efficiency, vehicles fueled with hydrogen, electric motorcycles and biofuel and alternative fuel credits. The biodiesel tax credit ends at the end of this year and Sen. Chuck Grassley (R-Iowa) has said he is interested in getting that extended and an incentive for biofuel-based airplane fuel (Sustainable Aviation Fuel). Lawmakers often combine numerous expired and/or expiring tax provisions into a major year-end legislative push.

OMB releases R&D guidance... Pandemic prevention, climate change and reducing the cancer death rate by half are among the priorities outlined in a White House Office of Management and Budget document offering guidelines on fiscal year (FY) 2024 agency budget requests. The document, dated July 22, details multi-agency research and development budget priorities for fiscal 2024, which also include national security and “technological competitiveness” as well as science, technology, engineering and mathematics education.

Mega tunnel to send water from Three Gorges to Beijing and help boost food production... Yinjiangbuhan tunnel, connecting to a canal, is expected to take 10 years to build and cost $8.9 billion and is part of a broader plan to boost food production by over 540 MMT. The Yinjiangbuhan tunnel will drain water from the Three Gorges — the world’s largest dam — to the Han River, a major tributary of the Yangtze River. China’s water resources are unequally distributed. The east and south of the country are frequently hit by flooding, while water shortages severely constrain economic development and food production in the western and northern areas.

China wants to infiltrate the Federal Reserve... That warning came from Sen. Rob Portman (R-Ohio), the ranking member on a Senate security panel. There is reportedly a campaign to get secret info from the Fed, including recruiting staffers and detaining an employee visiting Shanghai. His report said the Fed identified 13 persons of interest with connections to Chinese talent recruiters, dubbed the “P-Network.”

China’s hog herd down nearly 2%... China’s hog inventory fell 1.9% from year-ago at the end of June, according to the country’s ag ministry. It noted the sow herd dropped 6.3% from year-ago. The ag ministry didn’t provide specific numbers on herd size.

Beef prices firm, but movement limited... Wholesale beef prices were strong Monday with gains of 99 cents in Choice and $2.50 in Select, though movement totaled only 90 loads. Beef demand will likely remain in a relative lull period until retailers ramp up purchases around the second week of August for Labor Day features.

Cash hog fundamentals continue to strengthen... The CME lean hog index is up another 86 cents to $119.08 (as of July 22), continuing the string of recent price strength and the highest level since June 22, 2021. The pork cutout value firmed $1.85 on Monday to $127.82 – the highest level since 2014. Strengthening cash fundamentals should limit followthrough selling in lean hog futures after Monday’s corrective losses.

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

• 2:00 p.m. Livestock and Meat Domestic Data — ERS
• 2:00 p.m. Citrus: World Markets and Trade — FAS
• 2:00 p.m. Broiler Hatchery — NASS
• 2:00 p.m. Egg Products — NASS
• 2:00 p.m. Peanut Stocks and Processing — NASS