First Thing Today | July 28, 2023
Good morning!
Grains face pressure overnight... Corn, soybeans and SRW wheat extended Thursday’s losses overnight, while the HRW and HRS markets also weakened. As of 6:30 a.m. CT, corn futures are trading 6 to 7 cents lower, soybeans are mostly 8 to 11 cents lower, the winter wheat markets are mostly 9 to 10 cents lower and spring wheat is 7 to 8 cents lower. Front-month crude oil futures are modestly weaker, while the U.S. dollar index is down more than 350 points.
Risk of U.S. gov’t shutdown builds as House spending talks stall... Legislative activity in the House abruptly stalled Thursday due to escalating disputes over spending levels and contentious social matters, raising concerns about a possible government shutdown before the Sept. 30 deadline. As House and Senate members have now left Washington D.C. for the extended August recess, none of the budget disagreements have been resolved. The House’s planned return date is Sept. 12, leaving just 12 scheduled workdays that month to accomplish a significant agenda. This includes the passage of 11 out of 12 annual appropriations bills, and resolving differences with the Senate, making the threat of a shutdown at least possible.
Farm bill extension likely... Democrats and hardline Freedom Caucus members are both unhappy with House appropriators’ proposal to fund agriculture programs. The far-right-wing faction of the Republicans holds the view that recouping previously approved dollars via the current bill, known as rescissions, shouldn’t be classified as cuts. The internal conflicts within the House GOP, including a contentious abortion pill proposal, leave the Agriculture/FDA spending plan in a state of uncertainty. Rep. Victoria Spartz (R-Ind.) wants to cut off funding to USDA to operate the fee-funded research and promotion programs, known as checkoffs, though no taxpayer dollars are used to fund these programs. Freedom Caucus Chairman Scott Perry (R-Pa.) filed amendments attacking various aspects of the federal sugar program, which is regularly targeted during farm bill debates. Although the final House bill will not become law due to Democratic control of the Senate and President Joe Biden’s very likely refusal to sign, the disputes hint at future challenges when considering the farm bill this fall. Meanwhile, differences remain over the Supplemental Nutrition Assistance Program (SNAP). House Ag Committee Chair Glenn “GT” Thompson (R-Pa.) has said he isn’t interested in changing SNAP work requirements in the farm bill. It is clear there will be an extension of the current farm bill, as some provisions expire Sept. 30. The real farm bill deadline is at the end of the year. Thompson said he hopes to have a full committee markup in September.
African leaders press Putin for grain deal... African leaders pressed Russian President Vladimir Putin to renew a deal on the export of Ukrainian grain and move ahead with their peace plan to end the Ukraine war. The African leaders are fearful of the war’s impacts on food prices, especially since Russia ended the Black Sea grain deal. Putin said rising world food prices were a consequence of Western policies that predated the war in Ukraine. He said Moscow respected the African peace proposal on Ukraine and was carefully studying it.
Russia nearly triples wheat exports to Africa in H1... Russia exported 9 MMT of wheat to African countries during the first half of this year, Interfax news reported, citing Russian Agriculture Minister Dmitry Patrushev. That was nearly triple the level of the same period last year. Overall ag exports nearly doubled during the same period.
Zeihan on ‘the end of Ukrainian agriculture’... Peter Zeihan, an American author on geopolitics, writes Ukrainian agriculture is facing a severe threat after Russia exited the Black Sea grain deal and has attacked Ukrainian grain infrastructure. He says the intention behind these actions could be a bid to undermine the Ukrainian economy and potentially incite a famine in the region. As alternative paths for exporting these commodities prove challenging and inefficient due to cost and risk factors, Ukraine’s exports have already taken a significant hit, decreasing by two-thirds even prior to this deal’s collapse. The winter wheat crop, in particular, is expected to greatly suffer, with the current situation predicting it could be the last sizable harvest to make it to international markets, Zeihan notes. If Russia continues to target agricultural infrastructure in Ukraine, Zeihan says not only might the Ukrainian capacity to export crops be affected, but its potential to feed its own citizens could also be compromised. There are predictions that Ukraine could transition from an exporter to an importer of food within a year due to this situation.
Russia cuts wheat export tax... Russia’s wheat export tax for Aug. 2-8 will be 2,681.8 rubles ($29.50) per metric ton based on an indicative price of $230.50. That’s down from a rate of 2,712.1 rubles per metric ton the previous week.
House approves cryptocurrency regulations... House Ag Committee, by voice vote, approved legislation that would establish a regulatory framework for cryptocurrencies and clarify the authority of the Commodity Futures Trading Commission in regulating digital commodities. The top Democrat on the panel, Rep. David Scott (Ga.), said he couldn’t support the crypto bill in its current form. Legislation doesn’t go far enough to protect investors and prevent conflicts of interest, he said. The Senate included an amendment to the defense bill passed Thursday aimed at curbing the use of crypto in illicit transactions. The measure would require the Treasury Department to set examination standards for financial firms engaged in crypto activities. It would also mandate that the department conduct a study on combating tools used to make crypto transactions more anonymous. That would include recommendations for legislation or regulation to address the technologies and data on their usage.
Push to keep AM radios in vehicles... New legislation under consideration in the Senate could obligate automakers to continue including AM broadcast radios in all new cars, despite resistance from manufacturers of electric vehicles. On Thursday, the Senate Commerce, Science, and Transportation Committee voted to move forward with a revised bipartisan bill. This bill directs the Department of Transportation to mandate carmakers to preserve AM radio functionality in all new vehicles without imposing additional charges. This legislation could have significant implications for future car models, especially those produced by electric vehicle manufacturers.
BOJ loosens grip on bond yields... The Bank of Japan (BOJ) made its yield curve control policy more flexible and loosened its defense of a long-term interest rate cap. While BOJ kept interest rates at ultra-low levels and stressed the need to maintain support for the economy, it said the tweak to its bond yield curve control scheme (YCC) would allow it to respond “nimbly” to risks including rising price pressures. Global markets saw the move as another small step toward Japan aligning with other major central banks after decades of massive stimulus, though Governor Kazuo Ueda brushed aside the view it was a step toward policy normalization.
Cash cattle standoff continues... Packers continued to show no willingness to actively raise cash cattle bids on Thursday, while feedlots weren’t interested in moving cattle at lower prices. Unless either side changes their stance, this week’s negotiated cash cattle trade will be light.
Cash hog advance slows... The CME lean hog index is up just a nickel today (as of July 26), marking the smallest daily gain since a brief price dip in late May. But August lean hog futures still finished Thursday’s session $3.815 below today’s cash quote, which should limit any selling pressure tied to concerns the seasonal cash rally is losing steam.
Overnight demand news... South Korea purchased 68,000 MT of corn expected to be sourced from South America or South Africa.
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. Agricultural Prices — NASS
- 2:00 p.m. Egg Products — NASS
- 2:00 p.m. Farm Production Expenditures — NASS
- 2:00 p.m. Peanut Prices — NASS
- 2:30 p.m. Commitments of Traders — CFTC
