First Thing Today | July 8, 2022

Good morning!

Followthrough buying in corn and wheat, soybeans mixed... Corn and wheat futures built on Thursday’s strong corrective gains during overnight trade. Soybeans traded higher initially but failed to sustain the firmer tone. As of 6:30 a.m. CT, corn futures are trading 5 to 7 cents higher, soybeans are fractionally to 6 cents lower, winter wheat futures are 12 to 20 cents higher and spring wheat is 23 to 27 cents higher. Front-month U.S. crude oil futures are near unchanged and the U.S. dollar index is around 130 points higher this morning after earlier marking a fresh 20-year high.

Global food prices ease for third consecutive month but still elevated... The UN Food and Agriculture Organization (FAO) global food price index dropped 2.3% in June – the third straight monthly decline after hitting a record high in March but was still 23.1% above year-ago. Declines in the price of cereal grains, vegoils and sugar more than offset increases in meat and dairy. Compared to year-ago, prices surged 12.6% for meat, 24.9% for dairy, 27.6% for cereal grains, 34.3% for vegoils and 8.9% for sugar. Meanwhile, FAO raised its 2022 global cereal grain production forecast by 7 MMT from last month to 2.792 billion MT, though that would still be down 0.6% from last year.

Ukraine grain export saga update... Russia is ready to negotiate with Ukraine and Turkey about grain exports, but it is unclear when such talks might take place, Foreign Minister Sergei Lavrov said on Friday. U.S. Secretary of State Antony Blinken addressed Russia directly at a G20 foreign ministers meeting in Bali, Indonesia, on Friday and called on Moscow to let Ukrainian grain be exported. A Western official said Blinken’s message directly to Russia was, “Ukraine is not your country. Its grain is not your grain. Why are you blocking the ports? You should let the grain out.” However, Russian President Vladimir Putin continued to blame the West for the situation, warning that Russia’s military operations in Ukraine had barely started and prospects for negotiation would grow dimmer the longer the conflict dragged on.

Biden to meet with advisers to discuss cutting China tariffs... President Joe Biden will discuss possible reductions in U.S. tariffs on Chinese goods in a meeting with his advisers set for today, Bloomberg reports, citing people familiar with the matter, as his administration nears a closely watched decision on trade with China. Not attending the meeting: Treasury Sec. Janet Yellen, Commerce Secretary Gina Raimondo and U.S. Trade Representative Katherine Tai. The extended indecision on tariffs on China “underscores that President Biden essentially has no trade policy while the rest of the world moves ahead with new trade deals,” the Wall Street Journal said in an editorial. “While Mr. Biden dithers, Pacific nations continue to strengthen trade with each other,” it adds.

Weekly Export Sales Report out this morning... For the week ended June 30, traders expect:

Slower jobs growth expected for June... Economists polled by Reuters expect the Labor Department to report the U.S. economy added 268,000 non-farm payrolls in June, which would be down from an increase of 390,000 in May. The unemployment rate is anticipated to hold at 3.6%. Hourly earnings are expected to rise 0.3% from May.

U.S. ag trade deficit builds in May... The U.S. exported $17.1 billion of ag goods against imports of $17.8 billion for a deficit of $656 million in May. The deficit increased from $19 million in April. Through the first eight months of fiscal year (FY) 2022, ag exports totaled 136.5 billion against imports of $128.2 billion for a surplus of $8.3 billion. USDA forecasts FY 2022 ag exports at $191 billion and imports at $180.5 billion, which would leave a surplus of $10.5 billion. To meet USDA’s forecast, exports need to reach $13.63 billion over the next four months and imports of $13.08 billion. In the final four months of FY 2021, U.S. ag exports were under $13 billion each month, while imports topped $14 billion in all but September when they were $13.97 billion.

Euro, dollar almost to parity... The euro is moving toward parity with the U.S. dollar for the first time since its early years of existence. Investors are betting it could get a lot worse for the euro the Wall Street Journal reports. The descent adds to the euro zone’s inflation woes and complicates the European Central Bank’s plans for unwinding its pandemic stimulus.

Russian wheat export tax rises... Russia’s wheat export tax for July 13-19 will be 5,558.9 rubles ($90.94) per metric ton based on an indicative price of $401.60, up from 4,635 rubles ($85.80) the previous week. The tax, however, is well below levels when it was pegged to the U.S. dollar.

French wheat crop continues to deteriorate... France’s ag ministry rates 63% of the country’s wheat crop as being in good or excellent condition, down one percentage point from the previous week. Crop ratings have plunged 26 percentage points since the beginning of May. The ag ministry says 14% of this year’s crop has been harvested.

Indonesia to raise palm oil blend in biodiesel... Indonesia will implement 35% palm oil mix in biodiesel, known as B35, by the end of the month to help absorb excess palm oil supply, CNBC Indonesia reported, citing senior energy ministry official Dadan Kusdiana. Indonesia currently has a mandatory 30% blend of palm oil-based fuel in its biodiesel.

China to sell more soybean reserves... China will sell 500,000 MT of imported soybeans from its state reserves on July 15. Beijing has been holding weekly auctions of soybean stockpiles to boost domestic supplies.

Light cash cattle activity... Light cash cattle trade was reported through Thursday, with prices steady/weaker in the Southern Plains and steady/firmer in the northern market. The price spread between the two markets was about $11, favoring northern locations where supplies are tighter. Unless there’s a dramatic shift in the cash tone, it appears the northern market will continue to support the overall market and lead to a firmer average cash price.

Bellies lead pork cutout rebound... Primal pork belly prices rebounded enough from Wednesday’s sharp losses to push the pork cutout value 69 cents higher yesterday. Wholesale trade this week suggests demand is solid as retailers stock up for mid-summer features. Meanwhile, the CME lean hog index firmed 23 cents today (as of July 6), though followthrough buying in summer-month hog futures may be limited by their relationship with cash (July at a $3.09 premium and August at a 66-cent discount).

Overnight demand news... South Korea purchased 65,000 MT of corn expected to be sourced from South America.

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
• 10:00 a.m. Livestock and Meat International Trade Data — ERS
• 2:00 p.m. U.S. Agricultural Trade Data Update — ERS
• 2:00 p.m. Peanut Prices — NASS
• 2:30 p.m. Commitments of Traders — CFTC