First Thing Today | September 16, 2022
Good morning!
Followthrough selling overnight... Corn, soybean and wheat futures extended price losses from earlier in the week during overnight trade. As of 6:30 a.m. CT, corn futures are trading around 4 cents lower, soybeans are 6 to 7 cents lower and wheat futures are 3 to 6 cents lower. Front-month crude oil futures are around 65 cents higher and the U.S. dollar index is more than 200 points higher this morning.
Russia ready to export free fertilizer... Russian President Vladimir Putin said Europe had only “partially” removed sanctions that Moscow says block its ability to sell and send fertilizers around the world. He said Russia was ready to provide more than 300,000 MT of Russian fertilizers stuck in European ports to the developing world for free. He also said Russia was increasing grain exports, without providing any specifics.
Russian wheat export tax declines again... Russia’s wheat export tax for Sept. 21-27 will be 2,668.3 rubles ($44.45) per metric ton based on an indicative price of $311.90. That’s down from a rate of 2,962.9 rubles per metric ton the previous week and the sixth straight weekly decline.
Coceral cuts EU wheat, corn production forecasts... European grain trade association Coceral cut its 2022 EU wheat production forecast by 2.5 MMT to 143 MMT, which would be down 400,000 MT from last year. The group slashed its forecast for EU corn production by 14.1 MMT to 66 MMT previously due to hot, dry weather in key growing countries.
World has a $1 trillion La Niña problem... Weather catastrophes cost the world $268 billion in 2020, and another $329 billion in 2021, according to Aon, a data and research firm. A Bloomberg report says that if the coming period looks anything like the chaos La Niña brought in 2020 and 2021, the total during the three-year string will likely come close to, or possibly even top, $1 trillion by the end of 2023. Odds that the cooling of the equatorial Pacific will linger through January are 80%, according to the U.S. Climate Prediction Center. While some of the $1 trillion total isn’t tied directly to La Niña, the weather phenomenon, along with climate change, is what’s setting the terms.
Summers comments on Europe, China... The U.S. and Europe are both being buffeted by high inflation and both will likely slide into recessions this year or next. But the situation is far more dire there than here, according to Harvard economist Larry Summers, because of Europe’s reliance on Russian oil and gas. “We are largely self-sufficient in energy,” Summers told a Globe Summit audience at the Harvard Kennedy School on Thursday evening. Summers said Europe, especially Germany, left itself economically vulnerable by not diversifying its energy supplies. Germany relied on Russia for 55% of its gas before Russia’s invasion of Ukraine in February. Summers was asked about the impact of China’s struggles with Covid lockdowns and extreme heatwaves. He said they would reduce the country’s exports and also reduce consumption at home. “It will slow global growth,” he said of China’s economic slowdown. Summers said his biggest concern was that “a weaker China may become a more truculent China.”
Euro zone inflation confirms record inflation in August... Euro zone inflation hit another record high of 9.1% in August, EU statistics office Eurostat confirmed on Friday, driven by sharply higher energy and food prices. Consumer price inflation in the 19 countries using the euro rose 0.6% from July. Eurostat said that 3.95 percentage points of the year-on-year change came from more expensive energy and 2.25 points from food, alcohol and tobacco. But even when excluding volatile energy and unprocessed food, core inflation still jumped 5.5% from a year earlier and was up 0.4% from July.
China’s economy perks up but property sector remains a concern... China’s economy showed surprising resilience in August amid faster-than-expected growth in factory output and retail sales. Industrial output grew 4.2% in August from a year earlier, the fastest pace since March. Retail sales rose 5.4%, the largest year-over-year increase in six months. However, the property sector contracted further in August as home prices, investment and sales extended losses. Property investment last month fell 13.8%, the fastest pace since December 2021. New home prices fell 1.3% year-on-year in August, the fastest since August 2015. The Chinese economy faces more difficulties this year compared with 2020, but it is likely to maintain a recovery trend for the whole of 2022, Fu Linghui, a spokesman at the National Bureau of Statistics said.
How much ag disaster aid for 2022 crops and livestock?... USDA has reportedly informed Congress of the amount needed in the eventual omnibus spending measure, but there has been no official word yet. With $10 billion announced for a combined 2020 and 2021 crops and livestock aid package, a 2022 tally around $5 billion appears likely.
Chinese pork prices surge... China’s ag ministry says the price of pork in the country averaged 30.69 yuan ($4.43) per kilogram for the week ended Sept. 9, up 1.2% from the previous week and 69.4% higher than last year. China will release a record 200,000 MT of pork from state reserves this month to boost supplies and stabilize prices.
Cash cattle market firms... Cash cattle trade picked up on Thursday as packers raised bids from earlier in the week, with most prices steady to $1 higher than last week. Once the deal was announced to avert the railroad strike, packers got more aggressive with cash bids, seemingly confirming earlier talk they were short-bought on slaughter needs.
Cash hog index ends long string of declines... The CME lean hog index is up 19 cents to $97.77 (as of Sept. 14), ending the string of daily price declines dating back to Aug. 11. During that span, the cash index plunged $24.35 to the lowest levels since mid-February. But with the discount in October hogs now mostly wiped out, any gains in the cash index should entice more buyer interest near-term.
Overnight demand news... Exporters reported no tenders or sales.
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. Livestock, Dairy, and Poultry Outlook: September 2022 — ERS
- 2:00 p.m. Sugar and Sweeteners Outlook: September 2022 — ERS
- 2:00 p.m. Stone Fruit: World Markets and Trade — FAS
- 2:00 p.m. Hop Stocks — NASS
- 2:00 p.m. Peanut Prices — NASS
- 2:30 p.m. Commitments of Traders — CFTC
