First Thing Today | July 7, 2022
Good morning!
Bargain buying overnight... Corn, soybean and wheat futures traded sharply higher overnight as markets rebounded from recent hefty losses. As of 6:30 a.m. CT, corn futures are trading 10 to 12 cents higher, soybeans are 30 to 37 cents higher and wheat futures are 27 to 32 cents higher. Front-month U.S. crude oil futures are around 85 cents higher and the U.S. dollar index is down around 200 points.
Shanghai back on Covid alert amid new outbreaks... Millions of people in Shanghai braced for a third day of mass Covid-19 testing as authorities there and other Chinese cities scrambled to stamp out new outbreaks. Unless local officials succeed in preventing the virus from spreading, they could be compelled to invoke strict restrictions on residents’ movement, under China’s “dynamic zero Covid” strategy. Having just emerged from a two-month lockdown, Shanghai was again on high alert as it raced to isolate infections linked to karaoke services that had been taking place illegally. The resurgence in Covid cases and potential lockdowns rekindled worries about growth in the world’s second-largest economy.
Beijing considering pulling forward bond sales to shore up economy... Chinese authorities are considering another play to shore up its economy by allowing local governments to sell 1.5 trillion yuan ($220 billion) of bonds in the second half of this year. Proceeds from the sales, which were originally scheduled to begin after Jan. 1, 2023, would most likely be used to fund infrastructure projects. The move comes as China’s economy continues to struggle to recover from the pandemic.
China’s trade faces uncertainties... China expects June trade growth to remain relatively high, but said the second half year brings rising uncertainties, the commerce ministry said. According to a survey, China’s foreign trade growth faces instabilities in the second half of this year and the trade situation remains complex, a commerce ministry spokesperson said, without providing specifics. The ministry said Beijing and the U.S., who agreed to maintain close communications, will strengthen the exchange of macroeconomic policies and promote pragmatic cooperation on the economy and trade.
Dr. Copper flashing recession warnings signs... Copper, used in everything from construction to electronics, has fallen to its lowest level since late 2020. The market has been given the moniker Dr. Copper because it is reputed to have a “Ph.D. in economics” with an ability to predict turning points in the global economy. The most actively traded copper futures contract finished Wednesday at $3.408 a pound, its lowest settlement since November 2020 and on pace for a fifth consecutive weekly decline. Copper hit record highs earlier this year partly because of supply concerns related to the war in Ukraine and sanctions on Russia, a metals producer. Copper has since retreated by about 30%.
Ukraine wants Turkey to explain letting Russian grain ship sail... Ukraine will summon Turkey’s ambassador to seek clarification after a Russian-flagged cargo ship suspected of carrying stolen Ukrainian grain left a Turkish port, Ukraine’s foreign ministry said. It was “unacceptable” for the ship to have been allowed to leave, the ministry said. “We regret that Russia’s ship Zhibek Zholy, which was full of stolen Ukrainian grain, was allowed to leave Karasu port, despite criminal evidence presented to the Turkish authorities,” foreign ministry spokesperson Oleg Nikolenko wrote on Twitter.
India tightens wheat flour export regulations... Effective July 12, India will require firms to secure permission before exporting wheat flour. After India banned wheat exports in mid-May, demand for wheat flour jumped. By requiring permission to export wheat flour, New Delhi seeks to better control domestic supplies before exports are allowed.
Indonesia may cut palm export tax to spur shipments... Indonesia is considering cutting its palm oil export levy to encourage more shipments, a cabinet minister said on Thursday. To jumpstart exports, the government needs to make extra effort to quickly cut domestic stocks and prop up palm fruit prices for farmers that have slumped since a three-week ban on exports in May, Senior Minister Luhut Pandjaitan said at an industry event. “For shipments to flow we may have to lower the export levy to provide incentives for businesses to export,” Luhut said, without providing further details.
Treasury examines climate effect on insurance availability... “The Treasury Department is growing increasingly concerned that climate change is making property insurance scarce in disaster-prone areas and is looking at launching the first nationwide assessment of insurers’ financial exposure to climate risk. The Federal Insurance Office sent a preliminary email Thursday to insurance regulators in all 50 states asking what data they have that would show insurance coverage, liabilities and losses for each ZIP code in their state over the past five years,” E&E News’ Thomas Frank reports.
Senate Democrats release updated plan on stalled social safety net, climate and tax bill... Top Senate Democrats on Wednesday released an updated plan aimed at lowering the cost of prescription drugs, signaling progress on a crucial piece of their bid to salvage some of President Joe Biden’s stalled social safety net, climate and tax bill. It would be paid for in part by the prescription drug proposal that is projected to save the government tens of billions of dollars in the coming years and rolling back some 2017 GOP tax cuts. Centrist Sen. Joe Manchin (D-W.Va.) wants to put half of that $1 trillion into deficit reduction. That would leave around $500 billion for public and social spending. The proposal under discussion could include as much as $300 billion in clean-energy tax incentives that the House initially approved in November. That would leave around $200 billion for expanded Affordable Care Act/ObamaCare subsidies. Under the new measure, Medicare would for the first time be allowed to directly regulate prescription drug prices. The bill has been given to the Senate parliamentarian to ensure that it meets the requirements of reconciliation to allow circumvention of the filibuster so it can pass with a simple majority. Because Democrats plan to use the fast-track budget process known as reconciliation, the measure must adhere to the strict limits enforced by the Senate’s top rules official.
Export sales pushed back to Friday... Due to Monday’s holiday, export sales data for the week ended June 30 will be released Friday morning.
China’s pork prices surge... For the week ended July 1, the pork price in China was 26.25 yuan ($3.91) per kilogram, up 14.9% from the previous week, according to the ag ministry. The ministry attributed the jump in price to declining hog supplies in the northern part of the country and “reluctance to sell” by producers. The National Development and Reform Commission said earlier this week it will take timely measures and tighten market oversight to prevent sharp increases in pork prices.
Slow cash cattle negotiations... Cash cattle negotiations hadn’t even started on Wednesday as packers had yet to establish bids and feedlot asking prices were limited, especially in the northern market. With the wide Choice/Select beef price spread confirming tight market-ready supplies, packers may have to again pay up to get many cattle bought this week.
Cash hog index continues to slide... The CME lean hog index is down another 65 cents to $109.93 today (as of July 5), the fifth straight daily decline. While the cash index is slipping, summer-month hog futures have been rallying. July hogs finished Wednesday $3.22 above today’s cash quote and the August contract has erased most of its discount. Futures price action suggests traders sense the cash index is going to firm, but further upside potential will be limited if that doesn’t happen soon.
Overnight demand news... Japan purchased 122,420 MT of wheat from its weekly tender, including 66,370 MT U.S. and 56,050 MT Canadian. Egypt purchased 63,000 MT of German wheat. The Philippines tendered to buy at least 50,000 MT of optional origin feed 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
