First Thing Today | Aug. 9, 2021
Commodity trade keeping an eye on tumbling crude oil futures… Corn futures are trading midrange and down 2 to 3 cents to start the week. Soybeans are narrowly mixed, with nearby contracts favoring the upside. Winter wheat futures are 2 to 4 cents lower, while spring wheat futures are 2 to 3 cents higher. The U.S. dollar index is slightly higher. Crude oil futures are under heavy pressure, hitting their lowest level since late May. If crude continues to slide, other commodity markets may also be pulled down.
Weekend rains lighter than expected for much of the western Corn Belt… Rain over the weekend was lighter than expected for southeastern South Dakota, southwestern Minnesota, northwest and eastern Iowa, northeastern Nebraska and northern Illinois, reports World Weather Inc. But it says rains topped expectation in central Wisconsin and northeastern South Dakota. Erratic showers are expected for central and eastern areas of the Midwest this week, with net drying expected in areas that miss out. “Crop moisture will be slowly reduced and areas that failed to get rain this weekend those that continue a little dry this week will have a rising potential crop moisture stress,” World Weather Reports. No excessive heat is expected.
Chinese imports of soybeans and meat slow YOY in July… China imported 8.67 MMT of soybeans during July, a 14.1% decline from last year’s 10.09 MMT for the month, the country’s General Administration of Customs reported. A decline in hog sector profitability and increased substitution of wheat in feed rations clipped soymeal demand. Crush margins are also in the red. Seven months into 2021, the country has imported 57.63 MMT of soybeans, a 4.5% increase from the same period last year. The customs data also showed China imported 854,000 MT of meat in July, a 14.4% retreat from year-ago. Low domestic pork prices have curbed demand for meat imports. So far this year, China has imported 5.93 MMT of meat, a 3.1% increase from last year at this point.
Chinese export and import growth slowed in July… Flooding and extreme weather in China disrupted factory and port operations and constrained consumption. Despite the challenges, China’s export sector showed continued resilience, increasing 19.3% in dollar terms in July compared with a year earlier, data from the General Administration of Customs showed Saturday. That marked a retreat from June’s 32.2% year-over-year gain, but was largely in line with the 20% growth forecast by economists.
China’s PPI shoots to a 12-year high… China’s factory-gate prices rose at an unexpectedly fast clip in July, matching the highest level in more than 12 years as crude oil and coal prices soared. China’s producer-price index rose 9% from a year earlier, the National Bureau of Statistics said today. The price increases came despite measures taken by Beijing in recent months to cool soaring commodity costs. Fortunately for Chinese policy makers, the high producer prices haven’t fed through to consumers. China’s consumer-price index rose 1% from a year earlier in July, down from June’s 1.1% gain.
Brazilian farmers less aggressive on forward bean sales this season… Brazilian producers have presold just under 34 MMT of their 2021-22 soybean crop, planting of which will begin in September, representing 23.7% of their 142.24 MMT anticipated crop, reports the agribusiness consultancy Safras & Mercado. Last year at this time, producers had sold an impressive 43.3% of their expected crop thanks to high prices. The historical average is for forward sales of 20.6% for this time of year. Regarding the recently harvested crop, producers have sold just 82% of their soybeans, or 112 MMT), which compares to 96% sold last year at this time, Safras reports. Some farmers are holding out for better deals.
Russian wheat export prices rallying… The consultancies SovEcon and IKAR both reported Russian wheat export prices shot $13 higher over the past week, with prices for wheat with 12.5% protein loading from Black Sea ports for August supply estimated in the $267 to $268 per MT area at last week’s close. SovEcon commented that Russian wheat prices have rallied “substantially” in recent weeks, but the price gains are expected to moderate amid increased competition from the European Union and Ukraine. Domestic prices have also climbed alongside rising crop concerns. The consultancy also detailed that Russian wheat exports were weak in July but are expected to pick up to between 4.0 MMT and 4.5 MMT in August. Also of note, Russian customs data shows the country exported 12.2 MMT of wheat the first half of 2021, a 200,000 MT dip from year-ago.
Saudi Arabia scraps ‘protection fee’ on wheat imports… Saudi Arabia has privatized its flour mills and has been working to allow them to buy wheat directly from global markets and the country’s state grain buyer. As part of that effort, the country canceled a “protection fee” on wheat imports.
India investing in its edible oilseed production, with goal of self-sufficiency… India has launched a nearly $1.5-billion plan to boost domestic oilseed production and make the country self-sufficient in edible oil, Prime Minister Narendra Modi announced Monday. That should cut its vegetable oil imports. Typically, the country imports around half of the 24 MMT of edible oil it consumes each year, buying the bulk of its palm oil from Indonesia and Malaysia, soyoil from Brazil and Argentina and sunflower oil from Russia and Ukraine.
The week ahead… The House is in recess but may return to pass a bipartisan infrastructure package and a partisan fiscal year 2022 budget resolution after passage by the Senate, which remains in session. The Senate voted Saturday to get the physical infrastructure bill over a key procedural hurdle, but lawmakers are pessimistic about the chances for a quick agreement. Senator John Thune (R-S.D.) said that Democratic lawmakers would not allow Republicans to offer amendments to the infrastructure bill unless they first could reach an agreement on expediting a final vote. Without a deal, the next vote on the bill will be on Sunday evening and it would not pass the Senate until early Tuesday morning. In focus for ag, USDA will issue new Crop Production and Supply & Demand Reports on Aug. 12. China’s farm ministry will also issue its supply/demand updates Thursday. Inflation watchers will get updates via the consumer price index and producer price index this week,
Quick shift to human infrastructure plan expected to follow physical infrastructure measure… After a coming vote on the physical infrastructure measure, Senate Democrats plan to immediately turn to a resolution to set up the second part of President Joe Biden’s infrastructure plan: the “human” infrastructure plan. The text of that resolution could be released soon. The $3.5-trillion package includes progressive priorities such as subsidies for childcare, tuition-free community college, additional Medicare benefits and potentially a pathway to citizenship for people in the country illegally. Because Republicans universally oppose the package, Democrats plan to pass it through a fast-track legislative process that requires a simple majority and doesn’t allow for a GOP filibuster. Senate Majority Leader Chuck Schumer (D-N.Y.) has committed to holding a vote on the resolution framework before senators leave for their August recess, though the legislation won’t be written and ready for final passage until they return in September.
Sanderson Farms announces $4.53 billion sale to Continental Grain… Mississippi-based Sanderson is the country’s third-biggest chicken producer. It runs 13 poultry plants from North Carolina to Texas, processing about 13.6 million chickens a week. The ag-investment firm Continental Grain also owns a smaller chicken processor, Wayne Farms LLC, and Cargill. Combining Sanderson with Georgia-based Wayne Farms LLC, a poultry company owned by Continental, would form a new competitor representing about 15% of U.S. chicken production, according to data from Watt Poultry USA. Tyson Foods Inc. leads the industry with about one-fifth of the market, while Pilgrim’s Pride Corp. represents about 16% of the national total. The transaction coincides with increasing scrutiny in Washington on consolidation among meatpackers.
Beef rally continues… Boxed beef values climbed another $3.32 (Select) to $3.68 (Choice) on Friday, marking the 12th consecutive day of gains, many of which have been quite strong. Grocers typically wrap up feature purchases for the first weekend of the month 10 days prior, signaling the surge in beef prices could slow or reverse around Aug. 25. The rally has padded already strong packer profit margins and could prompt producers to dig in and push for higher prices. Cash action was steady to a bit higher last week.
Pork has not gotten a lift from from soaring beef values… There had been some hope that surging beef prices would spark some value buying demand for pork, but steep declines in the pork cutout value last week dashed such ideas. The pork cutout value dropped more than $5 over the past week, though it did edge 55 cents higher on Friday. Hams led the decline. Cash hog bids tumbled $2.75 nationally on Friday. Last week’s kill of 2.327 million head was up 0.6% from the week prior but down 9.1% from year-ago. Some plants gave workers the day off last Monday.
Weekend demand news… Tunisia’s state grain buyer is thought to have purchased around 75,000 MT of soft milling wheat and 25,000 MT of feed barley.
Today’s reports
- 10:00 a.m. Weekly Export Inspections – AMS
- 3:00 p.m. Crop Progress — NASS
