First Thing Today | July 27, 2023

Good morning!

Grains firming this morning... Corn, soybeans and wheat traded on both sides of unchanged overnight but have firmed early this morning. As of 6:30 a.m. CT, corn futures are trading fractionally to a penny higher, soybeans are mostly 3 to 4 cents higher, SRW wheat is a nickel higher, HRW wheat is 16 to 17 cents higher and HRS wheat is 14 to 16 cents higher. Front-month crude oil futures are around 75 cents higher and the U.S. dollar index is about 200 points lower.

Weekly Export Sales Report out this morning... For the week ended July 20, traders expect:

Tour finds spring wheat yields down from last year but above average... Crop scouts on Day 2 of the Wheat Quality Council’s HRS tour found an average yield of 45.7 bu. per acre in north-central and northwest North Dakota, down from 47.7 bu. in those areas last year but above the five-year average of 38 bu. per acre. On Day 1, the tour’s average yield was 48.1 bu. per acre in southern and east-central North Dakota, down from 48.9 bu. last year but above the five-year average of 40.2 bu. per acre. Scouts will sample fields in northeastern North Dakota today.

Putin nixes return to Black Sea grain deal... Russian President Vladimir Putin stated at the Russia-Africa Economic and Humanitarian Forum that his country will not rejoin the Black Sea grain deal. Putin accused Western nations of being the primary beneficiaries of Ukrainian exports while maintaining sanctions on Russia, insisting Moscow would move towards “a fairer system of resource distribution.” He said Russia was prepared to provide 50,000 MT of grain each to Burkina Faso, Zimbabwe, Mali, Somalia, the Central African Republic and Eritrea in the next three to four months, with promises of free shipping. The African Union pleaded earlier on Thursday for the reinstatement of the Black Sea grain deal, which ensured Ukrainian and Russian agricultural products could reach international markets despite the ongoing war affecting Black Sea shipping routes.

Russia continues to attack Ukraine’s Odesa region... Local officials said missiles from a Russian submarine hit port infrastructure in the Odesa region overnight, damaging a cargo terminal and killing a security guard. Meanwhile, Russia’s Federal Security Service (FSB) said it found traces of explosives on board a foreign vessel enroute from Turkey to Russia that had previously entered a Ukrainian port. It was the second such announcement this week involving a foreign ship heading to Russia to pick up grain. FSB said on Monday it had found traces of explosives on another ship travelling from Turkey.

Fed reduces recession expectations... Federal Reserve Chair Jay Powell said the central bank’s economists are not predicting a recession to occur this year, overturning their previous expectations. Prior to this, the Federal Reserve has forecast at least a mild downturn resulting from its rapid pace of interest rate hikes, which was anticipated to slow growth and significantly increase unemployment. However, Powell said there is now an expectation for growth to slow in the latter part of this year. Despite this, due to the economy showing significant resilience lately, the economists have discarded their earlier forecasts of a possible recession. This marks a significant shift in the U.S. economic outlook.

U.S. mulls ‘soft enforcement’ as Russia oil prices top G7 cap... Due to Russian oil prices surpassing the $60-per-barrel cap set by G7 countries in December on ocean-going exports of Russian crude, the Biden administration is planning to use “soft enforcement” methods to encourage compliance. Early indications suggest the U.S. will not take a severe approach to the matter with tankers and tanker owners, opting instead for subtle methods such as letters and phone calls. The aim is to influence trading houses, tanker owners, insurers and others, without sacrificing the delicacy of the balance sought to avoid further elevation of global oil prices by disrupting crude shipments. This approach has reportedly been in practice since the implementation of the price cap and will continue.

Some bans on U.S. poultry exports remain in place... China and some smaller importers have kept trade bans on U.S. poultry despite months without new cases of highly pathogenic avian influenza (HPAI). China, South Africa and the Dominican Republic each maintain bans on poultry from 37 states that previously reported HPAI infections, USDA records show. Mexico, the top overall market for American poultry meat, has largely lifted trade bans, though shipments from Colorado, Washington state and counties in a few other states remain blocked. Export losses from the outbreak total $895 million, the USA Poultry and Egg Export Council said.

Slow developing cash cattle market... Packers have shown little willingness to raise cash cattle bids given negative margins and feedlots are in no hurry to move animals at lower prices. So far, only light cash cattle trade has been reported at higher prices. We don’t expect trade to turn more active until packers get more aggressive with cash bids.

Cash hog index continues to climb... The CME lean hog index is up another 53 cents to $105.79 (as of July 25), extending the prolonged seasonal rally. August lean hog futures finished Wednesday’s session $4.14 below today’s cash quote. While the cash market is showing no signs the seasonal rally is running out of steam, traders are likely to keep front-month futures well below the cash index.

Overnight demand news... Taiwan purchased 108,000 MT of U.S. milling wheat. Algeria purchased an unspecified volume of Brazilian or Argentine corn from a tender for up to 120,000 MT. Bangladesh tendered to buy a nominal 50,000 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

• 7:30 a.m. Weekly Export Sales — FAS
• 2:00 p.m. Livestock and Meat Domestic Data — ERS
• 2:00 p.m. Citrus: World Markets and Trade — FAS