First Thing Today | Aug. 27, 2021

More rain for the Midwest, Delta producers brace for Hurricane Ida. Big jump in Russian wheat export duty. Fed’s annual Jackson Hole Symposium underway. China’s pork imports will rise in 2022.

Pro Farmer's First Thing Today
Pro Farmer’s First Thing Today
(Pro Farmer)

Good morning!

Rains weigh on corn and soybean futures… Corn futures are 3 to 4 cents lower to start the day, with soybeans down 7 to 9 cents. Winter and spring wheat futures are mixed. The greenback is just below unchanged. Crude oil futures are sharply higher as the Delta braces for Hurricane Ida.

More rain for the Midwest, Delta producers brace for Hurricane Ida… Over the past 18 hours, much of the Midwest received rain, with the heaviest showers centered over Minnesota and Iowa. More rain is expected today and flash flood watches are in effect for much of southern Minnesota and northern Iowa. Heat advisories are also in effect for the southern half of Illinois and the southeastern two thirds of Missouri. The market is keeping an eye on Ida, which is expected to move into southeastern Louisiana as a hurricane Sunday, bringing significant rain and wind to the Delta early next week. “Severe crop and property damage is expected and losses to rice and sugarcane will be greatest with some concern over cotton as well,” World Weather Inc. said in a report yesterday. But it adds that some of the heaviest rainfall is expected outside the main production areas.

Argentine exchange notes dryness, but maintains wheat crop forecast… The Buenos Aires Grains Exchange in its latest weekly update maintained its 19 MMT wheat crop estimate. “The lack of rain aggravates the water deficit situation and causes a decrease in crop growth and delays in plant development, delaying the transition to reproductive stages of later sown fields,” the exchange said in its report. But it also noted light showers are expected by week’s end. The exchange also said harvest of the country’s 50.5-MMT corn crop had wrapped up over the past week.

Rains again slow French soft wheat harvest, but finish line is nearing… French farmers pushed harvest another five percentage points ahead the week ended Aug. 23, with harvest now estimated to be 96% complete, according to the country’s ag ministry. Rain continues to slow efforts. In the northern Haute-de-France region, a major producing area, harvest was only 89% complete as of Aug. 23. FranceAgriMer reports harvest is running 11 days behind the five-year average; last year, fieldwork was finished by this point.

Big jump in Russian wheat export duty… Russia has set a grain export tax of $39.40 per metric ton for Sept. 1-7, which is a substantial $7.70 (24%) leap from the week prior. This is the highest formula-based duty since the week of July 7-13. Export prices for Russian wheat have also been tearing higher.

Ukraine’s grain exports off to a solid start… Nearly two months into the marketing year, Ukraine has exported 7 MMT of grain, which is 600,000 MT ahead of last season at this point. That tally includes 3.4 MMT of wheat, 2.4 MMT of barley and 1.2 MMT of corn. Ukraine’s government expects the country to ship 56 MMT of grain in 2021-22, including 20.7 MMT of wheat, 30.7 MMT of corn and 4.1 MMT of barley. That would be up notably from the 2020-21 season when Ukraine exported 44.7 MMT of grain, including 16.6 MMT of wheat, 23.1 MMT of corn and 4.2 MMT of barley.

Tepid demand at latest Chinese auction of corn reserves… China’s state stockpiler Sinograin reports it sold 38,709 MT of imported genetically modified corn at its latest auction of reserves, representing 37% of the total offer. None of the 23,180 MT of non-GMO imported corn was sold.

Fed’s annual Jackson Hole Symposium underway… U.S. Federal Reserve Chair Jerome Powell will signal the direction of U.S. monetary policy at a virtual speech at the Fed’s annual Jackson Hole symposium at 9:00 a.m. CT today. The central bank continues to debate how and when to begin dialing back its stimulus, including $120 billion in monthly asset purchases. Investors are looking for clues from Powell over whether the Delta variant has altered plans to begin scaling back those purchases in coming months. Ahead of symposium, three of its leading hawks came out in favor of accelerating the timeline for slowing asset purchases.

Land dedicated to agriculture continues to shrink in China… China had around 490,000 square miles of arable land at the close of 2019, a 6% decline from a decade before, according to the country’s survey of land use that’s conducted once every decade. Arable land accounts for 13% of China’s total area, which tops the state target to keep around 480,000 square miles of arable limits from urban encroachment by the end of 2020. But land dedicated to agriculture has fallen by roughly 29,000 square miles since 2009, with some arable land converted to forest and industrial and urban use. China expects that trend to continue. In fact, the country plans to plant nearly 14,000 square miles of new forest a year from 2021 through 2025, the country announced last week. China has drawn “red lines” to protect farmland from industrial encroachment and to shield its most vulnerable ecosystems.

GOP members seek extension on WOTUS deliberations… Republicans on the House Transportation and Infrastructure Committee (T&I) want the Biden administration to provide a 60-day extension to allow for more public comments and meetings on the rewrite defining the waters of the U.S. (WOTUS) regulations. “The decision to host meetings within such a short timeframe on a wide range of topics is indicative of a rushed, insincere notice-and-comment process by this Administration. A mere single month of public meetings is a woefully insufficient amount of time to collect meaningful input on a regulation that will have a profound, long-term impact on the everyday lives of American farmers, businesses, families, and our environment,” T&I ranking member Sam Graves (R-Mo.) and Water Resources and Environment Subcommittee ranking member Rep. David Rouzer (R-N.C.) wrote in a letter yesterday. If the agencies don’t provide an extension, the final public meeting will be on Aug. 31, with public comments due the following week.

Supreme Court overturns ban on U.S. evictions… The Supreme Court ruled for a group of Alabama landlords on Thursday and blocked President Joe Biden from extending for two more months a nationwide pandemic-related ban on evictions. After Congress failed to renew a federal evictions moratorium that expired on July 31, Democratic activists pressed Biden to reverse course. He did so Aug. 3, conceding he stood on shaky legal ground. The Centers for Disease Control and Prevention introduced a new extension unilaterally as an urgent measure to tackle the impact of a wave of Covid infections. The Supreme Court’s majority ruled that the CDC had exceeded its authority in imposing the evictions ban without legislation. The high court’s ruling is no surprise. In late June, four conservative justices voted to strike down the national eviction moratorium. The Supreme Court ruling did not invalidate local laws preventing evictions in many cities and states across the country.

In recent months, the U.S has overtaken Australia as the top exporter of frozen beef to China… While tensions between Australia and China have prompted the country to limit its imports of many commodities from Canberra, the Phase 1 trade deal gives China incentive to bring in more U.S. beef. Chinese customs data shows the U.S. has shipped more frozen beef to China than Australia since May, with the U.S. exporting $107 million worth of frozen beef to China during July compared with $35 million from its traditional supplier Australia. Australia is still China’s primary supplier of chilled beef, but the gap is narrowing. China is the world’s largest beef importer, but until the signing of the Phase 1 trade deal the U.S. was a minor player in the market.

China’s pork imports will rise in 2022… China’s hog and pork production will likely decline next year, according to a USDA attaché report from the country, as “government policies designed to limit price fluctuations inadvertently undermine [hog herd] expansion.” The attaché forecasts China’s hog production will fall 5% next year as “low prices and disease outbreaks in 2021 led to significant slaughter and delayed [herd] restocking.” The post expects China’s pork production to plunge 14% next year. As a result, it forecasts China’s pork imports will rise to 5.1 MMT as “consumer demand for pork exceeds domestic production.” The post forecasts beef imports will expand “at a slower rate to 3.3 MMT, as high beef prices are balanced by more diverse beef suppliers entering the market.”

USDA pre-emptively designates Puerto Rico/U.S. Virgin Islands as ASF protection zones… USDA on Thursday announced its intent to designate Puerto Rico and the U.S. Virgin Islands as a “protection zone,” a World Organization for Animal Health (OIE) designation that allows the U.S. to maintain its current animal health status should there be a detection of African swine fever (ASF) or other foreign animal disease on the island territories. That designation would enable the U.S. to continue to export pork if animals in Puerto Rico or the U.S. Virgin Islands test positive for ASF. The National Pork Producers Council applauded USDA’s efforts to gain OIE acceptance of this designation.

Beef prices show some resilience… After setting back for just two days, Choice beef firmed 38 cents on Thursday and Select rose $3.90. This adds to ideas that while a top may be in place, a pullback will likely be limited by strong demand for beef and more current marketings vs. earlier this year. Cash cattle trade picked up yesterday in Iowa at $128, in Nebraska from $125 to $128, and in Texas from $122 to $123, with some light sales in Kansas at $121. That’s steady to up a few bucks compared with last week.

Futures too far under the cash market… Slight to moderate losses on Thursday, extending the market’s sideways trading range. Hog and futures prices typically drop seasonally in the weeks ahead, but we believe futures’ have too big of a seasonal drop factored into prices. That could ring especially true if high beef prices lift demand for certain cuts of pork in the months ahead. The pork cutout value shot $6.16 higher on Thursday, with hams jumping $20.19. Movement slowed to 251.65 loads, however.

Overnight demand news… The Korea Feed Association issued an international tender to buy up to 138,000 MT of corn from optional origins. Pakistan bought around 160,000 MT of milling wheat from optional origins in an international tender for up to 400,000 MT of the grain. Tunisia bought around 50,000 MT of soft wheat and 50,000 MT of barley in a tender. Jordan’s state grain buyer bought around 60,000 MT of animal feed barley to be sourced from optional origins. An importer in the Philippines tendered to buy around 60,000 MT of animal feed wheat.

Today’s reports