First Thing Today | July 19, 2021

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Good morning!

Spring wheat still soaring amid weather woes… Corn futures strengthened overnight, with futures currently trading low-range but up 7 to 9 cents. Soybean are also trading well off their highs with futures up 7 to 10 cents. Spring wheat has soared 16 to 19 cents, with September gapping higher and registering a new contract high of $9.44 1/2. That’s the highest price on the continuation chart since Nov 2012. SRW and HRW wheat futures have climbed 8 to 10 cents on spillover support. The U.S. dollar index is modestly higher. Crude oil futures are under heavy pressure.

Warm, dry forecast for the western Corn Belt… Weekend rains once again favored southern and eastern areas of the Midwest, though some rains did fall in north-central North Dakota and the Central Plains. Weather was dry in other areas of the western Corn Belt. As expected, temperatures climbed well into the 90s for the Dakotas, with Montana recording temperatures in the 100s F. Through Thursday, any moisture that occurs for the Pacific Northwest, the Northern and Central Plains or Midwest are expected to be too light or brief to counter evaporative moisture losses, with temperatures expected to remain anomalously hot in the northern Plains, according to World Weather Inc. More seasonable temperatures are likely for the Midwest, though the western Corn Belt should see temperatures creep into the 90s later this week. Rainfall is expected heading into the weekend for central and eastern Minnesota, Wisconsin and parts of Michigan to the Ohio River Valley, according to World Weather, but it says net drying will continue elsewhere, including most of the western Corn Belt.

China’s grain imports soaring vs. year-ago… China imported 3.75 MMT of corn during June, up 305% from year-ago, according to data released by the General Administration of Customs. That pushes its year-to-date (YTD) imports to 15.3 MMT, a 319% surge from year-ago. Its wheat imports at 750,000 MT for June were a bit behind year-ago, but its YTD imports of 5.37 MMT are up 60% from last year at this point. The country also brought in 1 MMT of barley and 1.1 MMT of sorghum during June, a 100% and 61% jump from June 2020, respectively. Halfway through the year, China has imported 5.65 MMT of barley and 4.79 MMT of sorghum, which is up 131% and 169% from year-ago, respectively. Also of note, customs data shows China imported 340,000 MT of pork during June, a 14% dip from year-ago. But its YTD imports at 2.3 MMT are 8.5% ahead of last year’s strong showing.

OPEC+ agrees to boost oil output as demand roars back… Producers reportedly agreed to increase production by 400,000 barrels a day, moving to restore capacity they cut at the start of the Covid-19 pandemic, the Wall Street Journal first reported. The Organization of the Petroleum Exporting Countries (OPEC) said Sunday that the cartel and its allies agreed to begin increasing oil production in August, with the goal of eliminating a 5.8 million barrel-per-day cut by September 2022. The United Arab Emirates, which had objected to a previous plan to phase out production cuts because it wanted to increase its baseline for oil production, expressed its support for the deal.  

The week ahead… Senate Majority Leader Chuck Schumer (D-N.Y.) said Thursday that he intends to hold a vote to begin debate on the bipartisan infrastructure framework on Wednesday. While a group of bipartisan senators agreed to the plan generally a few weeks ago, no legislative text has been released yet on either infrastructure measure. Wednesday is also the deadline Schumer has set for Senate Democrats to determine the final terms of their $3.5-trillion budget package. Republicans and Democrats were still working on details over the weekend and said they weren’t sure if they would meet the midweek deadline. Republican senators working to negotiate a bipartisan, $1.2-trillion bipartisan infrastructure bill are ditching plans to strengthen enforcement at the Internal Revenue Service to pay for the legislation, Senator Rob Portman (R-Ohio) said Sunday. Meanwhile, President Joe Biden hosts the kind, queen and crown prince of Jordan at the White House.

Argentina sets aside money to help ease impact of low Parana River levels… Over the weekend, Argentina announced it would create a $10.4 million fund to help ease pain associated with low water levels along the country’s key Parana River. The money is intended to help provinces and communities that depend on the river. Last week, the Rosario grains exchange estimated the shallowness of the Parana River would cost grain farmers and exporters nearly $315 million in the six-month stretch ending in August, with vessels forced to reduce loading.

Bread makers in Russia warn of price increases… Several Russian bread producers have informed retail chains they plan to increase prices by 7% to 12% from August as production costs have risen and state support has had limited impact, according to the Kommersant daily. The country’s ag ministry said there was no reason for a significant increase in bread prices since domestic prices for wheat so far this year are down 7.2%, though it did acknowledge prices for bread made from wheat flour are up 4.6% since the start of 2021. Given Russia’s focus on food price inflation and its subsequent efforts to curb grain exports and cap domestic prices, the situation bears watching.

Economists expect economic growth to moderate after strong Q2 growth… Economists surveyed this month by the WSJ, on average, estimated that the economy expanded at a 9.1% seasonally adjusted annual rate in the April-to-June period. That would mark the second-fastest pace since 1983. The survey respondents see growth cooling to a 7% pace in the third quarter and drifting down to a 3.3% rate in the second quarter of 2022. But that burst of economic growth is starting to slow, economists say. “We’ve moved into the more moderate phase of expansion,” said Ellen Zentner, chief U.S. economist at Morgan Stanley.

Third case of ASF on a German farm… Over the weekend, Germany confirmed a third case of African swine fever on a farm in the country’s eastern state of Brandenburg. The latest case was on a small farm within the restriction zone where the disease is common among wild boar. Late last week, the state confirmed the disease was present in two nearby farms.

China’s Sichuan reports ASF in illegally transported piglets, says virus is not impacting the province… On Sunday, China’s Sichuan province said it had detected ASF in piglets being illegally transported from other provinces. Province officials also said it had not had any reports of the virus within Sichuan this year. That differs dramatically from what others in the industry are saying.

State planner official expects Chinese hog prices to extend their rebound near-term… Chinese live hog prices “May continue to rebound in stages for a period of time,” Wan Jinsong, head of the price department under the National Development and Reform Commission, told reporters. Fewer pigs were born in January and February, which should lead to a drop in the number of hogs slaughtered in July and August, according to Wan. Outbreaks of ASF over the winter accelerated slaughter, weighting heavily on prices during the second quarter and in turn triggering panic selling by producers. But prices have risen 15% since the start of June, with China making some domestic pork prices for the first time since 2019. The country plans to buy another 20,000 MT of frozen pork for its state reserves on July 21, the country announced Sunday. China’s National Development and Reform Commission says it will work with related planners to intensify regulatory measures meant to prevent major swings in hog prices as necessary.

Three late-week reports of note for cattle complex… This is a report-heavy week for the cattle complex, with USDA releasing its monthly Cold Storage update on Thursday and its Cattle on Feed Report Friday. The department’s biannual Cattle Inventory Report will also be released Friday. Meanwhile, beef prices continue to slide in the wake of the July 4 holiday. Choice boxed beef values fell $1.93 on Friday and Select fell 69 cents, with Choice dropping nearly $12 for the week. Movement has picked up on the price break, however. Cash cattle action softened as the week progressed, but trade was generally steady with the week prior.

Seasonally tightening hog supplies… Rising wholesale values boosted hog futures Friday, with strong demand for pork coinciding with tightening supplies. USDA estimated this week’s hog slaughter at 2.280 million head, which topped last week’s holiday-reduced total by 18.6% but fell 10.4% short last year’s inflated total. A more modest annual reduction is likely this week, but the numbers confirm industry ideas that hog slaughter and pork production are at or near annual lows. The pork cutout value climbed 42 cents on Friday, though movement was light at 230.81 loads. Seasonal patterns suggest the product market will continue to strengthen this week.

Weekend demand news… Bangladesh’s state grains buyer is considering offers in its tender to buy 50,000 MT of wheat; the country reportedly withdrew a previous tender to buy 50,000 MT of wheat. The Philippines bought around 50,000 MT of animal feed wheat to be sourced from the Black Sea Region.

Today’s reports


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