First Thing Today | July 27, 2022
Good morning!
Buyer interest building this morning... Grain and soybean futures posted two-sided trade overnight but are higher and trading near session highs this morning. As of 6:30 a.m. CT, corn futures are trading 3 to 4 cents higher, soybeans are 14 to 28 cents higher and wheat futures are 6 to 10 cents higher. Front-month U.S. crude oil futures are around $1 higher and the U.S. dollar index is about 350 points lower this morning.
First Ukraine grain exports still planned for this week, but uncertainty is high... A Turkish official said all the details had been worked out for resuming Ukrainian grain exports via Black Sea ports, including a safe route for ships that will not require the clearing of sea mines. He said, “It will not take more than a few days. It looks like the first grains will be loaded this week and its export from Ukraine will take place.” But Russian attacks on the port of Odesa Saturday and again Tuesday, along with a round of air strikes at the port of Mykolaiv yesterday have raised questions about whether Russia will allow active Ukrainian grain exports. Plus, Russian Deputy Foreign Minister Andrei Rudenko warned the deal to restart Ukrainian grain exports on the Black Sea could collapse if obstacles to Russia’s agricultural exports are not promptly removed, Interfax news reported. Despite the warning, Rudenko said he was still hopeful the deal would hold.
Shippers note heightened dangers of Black Sea grain exports... The paper agreement to restart Ukrainian grain exports via the Black Sea is running up against the reality of how difficult and risky the pact will be to carry out. “We have to work very hard to now understand the detail of how this is going to work practically,” said Guy Platten, secretary-general of the International Chamber of Shipping, which says it represents national shipowners associations, accounting for about 80% of the world’s merchant fleet. “Can we make sure and guarantee the safety of the crews? What’s going to happen with the mines and the minefields, as well? So lots of uncertainty and unknowns at the moment,” he told the Associated Press. “I think it’s going to come (down) to the position of the marine insurers that provide war risk and how much they are going to be adding in additional charges for vessels to go into that area,” said Michelle Wiese Bockmann, shipping and commodities analyst at Lloyd’s List, a global shipping news publication. Bockmann said vessels carrying this kind of load typically have between 20 to 25 seafarers on board. “You can’t risk those lives without something concrete and acceptable to the shipowners and to their charterers to move grain,” she said.
Day 1 HRS wheat tour results... Scouts on Day 1 of the Wheat Quality Council’s annual spring wheat tour found an average HRS yield of 48.9 bu. per acre on routes through southern and eastern areas of North Dakota, up sharply from the five-year average of 39.0 bu. per acre on similar routes. The crop has benefited from favorable weather, the North Dakota Wheat Commission said, although high humidity has raised risk of crop diseases and grasshoppers threaten yields in spots. Scouts will sample fields in northern North Dakota today.
Fed interest rate decision coming this afternoon... The Federal Reserve will raise interest rates at the conclusion of its two-day Federal Open Market Committee (FOMC) meeting at 1 p.m. CT, though there’s a question of whether it will be a 75-basis-point hike or 100 points. Fed Chair Jerome Powell will hold a post-FOMC press conference, which will be monitored closely for indications of how much further the U.S. central bank expects to raise interest rates in its battle against inflation. Markets are currently expecting the central bank to extend its rate-rise campaign this year but reverse course in 2023.
China rejects report it tried to obtain Federal Reserve data... The report, citing an investigation by a Senate panel, adds to accusations of Chinese computer hacking and other efforts to steal U.S. commercial and government information. The report “has no factual basis,” said Chinese foreign ministry spokesman, Zhao Lijian. The Wall Street Journal said Chinese authorities tried to recruit employees of regional Fed banks by offering contracts. It said an employee who visited Shanghai in 2019 during U.S./Chinese trade tension was threatened with prison to pressure the employee to disclose data including about tariffs. “The report you mentioned is a political lie fabricated by a few Republican lawmakers who harbor ill intentions,” Zhao said in response to questions at a regular news briefing. He blamed “China-phobia and persecution mania.”
Biden, Xi to hold talks amid new tensions over Taiwan... Presidents Joe Biden and Xi Jinping will speak Thursday, according to a U.S. official first cited by Bloomberg, amid new tensions between Washington and Beijing over China’s claims on Taiwan and the possibility of a visit to the self-ruled island by House Speaker Nancy Pelosi. Beijing is warning that it will take “forceful measures” should Pelosi visit Taiwan, which China claims as part of its territory. Chinese officials are sending a message that a visit by Pelosi would be viewed as a change in U.S. policy and treated as a provocation. Officials told the Associated Press that if Pelosi goes to Taiwan the U.S. military would increase its movement of forces and assets in the Indo-Pacific region. U.S. officials say they have little fear China would attack Pelosi’s plane if she flies to Taiwan. But the U.S. House speaker would be entering one of the world’s hottest spots, where a mishap, misstep or misunderstanding could endanger her safety. So the Pentagon is developing plans for any contingency. The talks between Biden and Xi could also include discussion of North Korea’s nuclear program, differences between Beijing and Washington over Russia’s war in Ukraine, efforts by the Biden administration to revive the Iran nuclear deal and the status of the U.S. administration’s review of tough tariffs imposed on China by the Trump administration.
Indonesia tests higher biodiesel blends... Indonesia launched road tests for two types of biodiesel containing 40% palm oil, hoping to conclude by the end of the year whether they are viable for public use. The fuels to be tested over the next few months are diesel mixed with 40% fatty acid methyl esters (FAME), called B40, and B30D10, which is diesel with 30% FAME mixed with 10% green diesel made of refined, bleached and deodorised palm oil (RBDPO). Indonesia currently mandates all diesel sold in the country contain 30% palm oil – the highest compulsory blend in the world.
Railroads, unions ‘pretty far apart’ on negotiations... Union Pacific CEO Lance Fritz says freight railroads and unionized workers remain “pretty far apart” over wages in their contract negotiations. Meanwhile, both BNSF Railway and Union Pacific are now metering container volume out of the ports of Los Angeles and Long Beach.
Steady/weaker cash cattle trade expected... Sources expect cash cattle prices to trade steady to weaker compared with last week’s $141.12 average, though it might be late into the week before active trade is seen. Packers have been slow to establish bids this week as they appear content to pull from committed supplies and feedlots will be in no hurry to move more cattle at lower prices since marketings are current.
August hogs’ discount to cash index widens... August lean hog futures finished Tuesday around $2.50 below the rising cash hog index. That signals traders sense the cash index will peak soon, though it continues to rise and the widening discount should limit seller interest in lead-month futures. Traders also have more than a normal seasonal cash decline built into fall- and winter-month futures.
Overnight demand news... Taiwan tendered to buy 50,910 MT of U.S. milling wheat. 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
- 1:00 p.m. FOMC meeting concludes — Fed
