First Thing Today | July 29, 2022

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Good morning!

Soybeans continue to surge... Soybean futures sharply extended this week’s price surge overnight amid forecasts calling for hot and dry conditions in early August. Corn and wheat also posted strong gains. As of 6:30 a.m. CT, soybean futures are trading mostly 22 cents higher, corn is 9 to 10 cents higher, winter wheat futures are 21 to 24 cents higher and spring wheat is around 16 cents higher. Front-month U.S. crude oil futures are around $2.50 higher and the U.S. dollar index is down more than 400 points.

Ukraine awaits all-clear signal on grain shipments... Ukraine is ready to start shipping grain from two Black Sea ports but no date has been set for the first shipment, Ukrainian Infrastructure Minister Oleksandr Kubrakov said. Ukrainian President Volodymyr Zelenskyy said his country is awaiting a signal from the United Nations and Turkey to start exports. Zelenskyy today visited the Black Sea port of Chornomorsk. “The first vessel, the first ship is being loaded since the beginning of the war. This is a Turkish vessel,” Zelenskyy said. “We sent all the signals to our partners – the UN and Turkey, and our military guarantees the security situation. The infrastructure minister is in direct contact with the Turkish side and the UN. We are waiting for a signal from them that we can start.”

Euro zone inflation surges to new high... Euro zone inflation rose to another record high in July and its peak could still be months away. Consumer prices accelerated at an 8.9% annualized rate in July, up from an 8.6% jump in June. Fallout of Russia’s war in Ukraine has caused energy and food prices to surge. Core inflation, which strips out food and energy prices, jumped 5.0%, up from 4.6% in June. An even narrower measure, which excludes alcohol and tobacco, rose 4.0% from 3.7% last month.

Euro zone economy grows, Germany stagnates... The European Union’s statistics agency Friday said the combined gross domestic product of the euro zone’s members was 0.7% higher in the three months through June than in the first quarter and 4% higher than a year earlier. The stronger GDP reading came despite stagnation in the bloc’s biggest economy Germany, as growth in other countries expanded. But cuts to supplies of natural gas threaten to push the euro zone into contraction over coming months.

Weekend work schedule for Senate... Senate Majority Leader Chuck Schumer (N.Y.) told fellow Democrats at a caucus meeting Thursday to prepare to work through next weekend, according to Sen. Tim Kaine (D-Va.). That would cancel at least the first few days of the August recess as Democrats push to pass a tax, climate and health care bill via the budget reconciliation process before leaving town until September.

Chief ag trade negotiator nominee pressed on Biden trade policy... Members of the Senate Finance Committee Thursday challenged Doug McKalip, President Joe Biden’s nominee to be chief agricultural negotiator at the Office of the U.S. Trade Representative (USTR), over the administration’s lack of pursuing new free trade agreements (FTAs), especially ones without market access or measures to address tariffs. They also pressed him on specific ag trade issues including Mandatory Country of Origin Labeling (MCOOL) that was repealed for pork and beef after the U.S. lost a case at the WTO. McKalip said his priority, if confirmed, is to arrive at a policy that can withstand a future challenge and be “more permanent” for consumers. McKalip told panel members he would work hard on issues under the U.S.-Mexico-Canada Agreement (USMCA) such as Canadian dairy and biotechnology with Mexico. McKalip is expected to be confirmed.

Fertilizer fracas in Canada... Canadian Prime Minister Justin Trudeau’s push to accelerate the fight against climate change is sparking a showdown with the nation’s farmers, who say it’s threatening food supplies and their profits. One estimate signals accumulated losses of C$10.4 billion ($8.08 billion) by 2030 due to reduced output. The government is proposing to cut emissions from fertilizer use 30% by 2030 as part of a plan to get to net zero in the next three decades. But growers say to achieve that, they may have to shrink grain output significantly. Production losses could be significant, according to an analysis commissioned by Fertilizer Canada. The country could lose over 160 MMT of canola, corn and spring wheat between 2023 and 2030 due to the plan, according to the report. That’s nearly double Canada’s expected grain production this season.

Sharp drop in Russian wheat export tax... Russia’s wheat export tax for Aug. 3-9 will be 4,626.8 rubles ($74.28) per metric ton based on an indicative price of $371.90, down from 4,951.7 rubles the previous week. The tax is well below levels when it was pegged to the U.S. dollar.

Rains aid some of Argentina’s wheat crop... Rainfall in recent days helped ease drought conditions in some areas of Argentina, the Buenos Aires Grains Exchange said in its weekly report. The exchange reported wheat area classified as being in drought dropped nine percentage points to 35% following rains over central and southern areas of Buenos Aires and La Pampa provinces.

Armyworms spreading northward in China... China’s ag ministry said outbreaks of fall armyworms in several provinces this year is more serious than the last, as the pests’ northward expansion has accelerated since the end of June. The ministry named Yunnan, Hunan, Anhui, Sichuan, Guizhou, Henan, Shaanxi and seven other provinces as seeing more serious fall armyworm occurrences. The ministry didn’t identify fall armyworm outbreaks in China’s northeast region, which produces about half of the country’s corn crop.

China soybean auctions continue... China will auction another 500,000 MT of imported soybeans from its state reserves on Aug. 5. Beijing continues to hold weekly soybean auctions to boost supplies in the domestic market.

Wholesale beef trade softens... After a strong performance on Wednesday, wholesale beef trade slumped yesterday. Choice beef dropped 22 cents and Select fell $1.00, while movement slowed to 99 loads. With one to two weeks until retailers start ramping up purchases for Labor Day features, wholesale beef trade may be relatively sluggish.

Strong cash hog rally continues... The CME lean hog index is up another 85 cents to $120.58 (as of July 27), now only $2.10 below last year’s peak that came in mid-June. It appears the cash hog market will top year-ago levels — something we originally expected but then questioned when the normal seasonal rally was delayed. While it took the cash hog market longer than normal to start its rally to a midyear high, the seasonal strength is lasting deeper into the year than normal. Packers are actively competing for hogs even as slaughter rates start to build, suggesting market-ready supplies are lighter than expected.

Overnight demand news... South Korea purchased 40,000 MT of Canadian milling wheat. The Philippines passed on tender to buy 100,000 MT each of feed wheat and feed barley.

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

 

Latest News

dry crack drought
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Exports
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Two-sided trade was seen in a relatively quiet overnight session, but corn, soybeans and wheat are firmer and near their session highs this morning.

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Corn and soybean basis inched lower over the past week but remained historically strong.