First Thing Today | July 23, 2021
Light followthrough selling in corn and beans… Corn futures are 1 to 2 cents lower, extending the market’s recent sideways trajectory. Soybeans are down 7 to 8 cents after the November contract yesterday dropped to its lowest level in nearly two weeks. Whether yesterday’s low holds will be telling. Winter and spring wheat futures are generally 1 to 3 cents higher. The greenback and crude oil futures are posting light gains. is up slightly.
Evening weather update calls for less Midwest rain… Markets dived yesterday after midday weather updates showed better rain chances for the Midwest, Delta and Tennessee River Basin. But the evening GFS model run suggests the rain intensity of the midday model run was overdone, says World Weather Inc., adding that scattered showers and thunderstorms are still expected for these areas. The weather watcher says, “Ridge building in the western United States late in the first week of August is likely to verify, which will set the stage for a cool bias to temperatures during mid- and especially late August in the heart of the Midwest as well as the southeastern United States. Heat and dryness will be most significant in the Plains and western Corn Belt during the first week of the outlook, but … rainfall will continue below average in the Plains and western Corn Belt even when the ridge moves to the west and the northwesterly flow pattern evolves aloft in early August.”
Temps cool on Canada’s Prairies, but lack of significant moisture means crops still declining… Temperatures cooled for Canada’s Prairies this week, easing moisture stress. However, rain remained largely absent, with the exception of Alberta. World Weather in a special report comments, “Drought has forced crops to advance in development faster than usual at the expense of potential yield and quality.” Over the next week, World Weather reports a series of disorganized disturbances will advance over Canada’s southern Prairies and the U.S. Northern Plains, but they are only expected to generate erratic moisture and minor relief—and not enough to counter evaporation or impact long-term soil conditions for most areas. “Production declines will continue until a significant soaking of rain takes place,” World Weather says, adding that early production crops are unlikely to see a boost even if rain falls. Crops like corn, soybeans and flax could still benefit.
Some nicks to Argentina’s wheat crop… Dryness in northern and central areas of Argentina’s farm belt are causing the country’s 2021-22 wheat crop to deteriorate, the Buenos Aires Grains Exchange said yesterday. But it added that conditions were optimal for southern areas of the farm belt that are heavily planted to wheat. Consequently, its crop forecast held at 19 MMT.
French wheat crop ratings dip again, with heavy rains eroding crop prospects… France’s farm ministry rated 75% of the country’s soft wheat crop good or excellent as of July 19, a one-point slip from the week prior but still well ahead of last year when just 57% of the crop received top marks. Heavy, late-season rains have eroded yields and crop quality, with some concerned about the crop’s suitability for milling. The rains have also slowed harvest. As of July 19, 14% of the crop had been harvested, a 10-point advance for the week and well behind last year’s 67% harvested at this point.
Drop in Russia’s weekly wheat export duty… Russia will set its export duty on wheat at $31.40 per metric ton for July 28 through Aug. 3, which is a retreat from the current duty of $35.20 per metric ton. The duty set by the ag ministry will kick off August nearly $10 under where it started July.
Germany still expects to bring in a bigger barley crop, despite flooding… Southern and western areas of Germany received record-setting rainfall and floods last week. But despite the untimely and excessive rains, The German farm association still expects this year’s barley production to climb 600,000 MT to 9.3 MMT. The association reports that around half the country’s crop has been collected.
Chinese soybean imports could slow 2H of 2021… China imported record volumes of soybeans the first half of the year, but its purchases are expected to slow the second half of the year given a collapse in hog sector profitability and a big jump in wheat and rice use in feed, according to some analysts and Chinese industry sources cited by Reuters. Crushing margins are in the red, which will also clip demand. Some speculate the country’s total imports could fall short of 100 MMT, which compares to USDA’s 102 MMT forecast. One manager at a major crusher with plants across China comments that some top feed producers who bought soymeal earlier are now reselling contracts.
Tepid demand for auctions of imported corn continues for China… At its latest auction, China’s state stockpiler sold just 8,207 MT of imported GMO corn, representing 4% of the total offered. The state stockpiler did not clear any of the 23,488 MT of imported non-GMO corn put up for auction the same day. China launched these auctions in June to ease food inflation, but after a slow start demand has petered out, adding to the slowing feed demand narrative.
Cotton AWP rises again… The Adjusted World Price (AWP) for upland cotton rose to 76.58 cents per pound, effective today, up from 75.96 cents per pound the prior week and the highest since the week of Aug. 10 when it was 79.67 cents per pound. Meanwhile, USDA announced that Special Import Quota #14 will be established July 29 for 53,310 bales of upland cotton that is purchased not later than Oct. 26 and entered into the U.S. not later than Jan. 24.
Slow movement of chemicals, fertilizer stemming from labor shortages, supply chain bottlenecks… America’s freight railroads are struggling to bring back workers, contributing to a slowdown in the movement of chemicals, fertilizer and other products that threatens to disrupt factory operations and hinder a rebound from the pandemic, according to shippers and trade groups cited by the Wall Street Journal. The challenges largely stem from two issues buffeting the U.S. economy: labor shortages and widespread supply-chain bottlenecks as manufacturing ramps up and the economy snaps back.
Taper talk at the Fed… Federal Reserve officials are set to accelerate deliberations at their meeting next week over how to scale back their easy-money policies amid a stronger U.S. economic recovery than they anticipated six months ago. Fed Chairman Jerome Powell has said their discussions are focusing on two important questions: When to start paring their monthly purchases of $80 billion in Treasury securities and $40 billion in mortgage securities, and how quickly to reduce, or taper, them. The answers matter greatly to financial markets because Fed officials have said they aren’t likely to consider raising interest rates from near zero until they are done tapering the asset purchases.
Companies are raising prices... Costs for materials, transportation and employees are all rising, and companies are struggling to continue to absorb the costs. That has meant rising prices for everything from metal fasteners to Oreo cookies, helping fuel inflation like the U.S. hasn’t seen in more than a decade. A poll of more than 600 U.S. businesses found that 33% were planning on raising prices, while 4% were planning to cut them. Customers so far have accepted the price increases. Meanwhile, lumber prices are rising again on worries over the impact of wildfires in the Pacific Northwest.
GOP lawmakers could block debt ceiling hike… Top Senate Republicans said the GOP may line up against any effort to raise the government’s borrowing limit this year, adding to the uncertainty surrounding how Congress will address the issue. Congress suspended the debt ceiling for two years in July 2019 as part of a broader agreement on overall government spending levels. That suspension is set to expire July 31, after which the limit will be reinstated at roughly $28.5 trillion, and the government will no longer be able to tap bond markets to raise new cash to keep paying its bills.
Electric-vehicle sales growth outpaces broader auto industry… Sales of plug-in vehicles more than doubled in the first half of 2021 compared with last year. While still a sliver of the overall market, that far outpaced the rise for total vehicle sales.
Biden aggressively appointing federal judges… President Joe Biden has installed more federal judges in his first six months than any president since Nixon, according to Axios.
Beef prices rise again… Solid month to month drawdown in frozen beef stocks from May 31 to June 30, a period where stocks typically hold pretty steady. That points to strong beef demand at home and abroad. Beef export sales and exports were also strong in the latest weekly reporting period. Today, USDA will provide updates on cattle supplies via its monthly Cattle on Feed and biannual Cattle Inventory Reports at 2:00 p.m. CT. Cash cattle prices have softened a bit this week, narrowing August futures’ discount to the cash market. Both Choice and Select boxed beef values strengthened (90 cents and $1.00, respectively) on Thursday following lighter gains Wednesday. That could signal the product market is working on a low.
Cash hog and pork prices slip… The pork cutout value edged 22 cents higher yesterday, but movement was again light amid a seasonal slowdown in processing. This week’s kill of 1.869 million head (through Thursday) is up 28,000 head from last week but down 16,000 head from year-ago. Cash hog bids dropped $1.47 on a national average basis on Thursday. Pork stocks dipped 20.3 million lbs. from the end of May to the end of June, which compares to the usual drawdown of 27.6 million lbs. for the period. But stocks of 442.15 million lbs. are also 3.9% lighter than year-ago levels.
Overnight demand news… There is no business to report.
Today’s reports
- 8:00 a.m. Food Price Outlook — ERS
- 2:00 p.m. Cattle — NASS
- 2:00 p.m. Cattle on Feed — NASS
- 2:00 p.m. Peanut Prices — NASS
- 2:00 p.m. Poultry Slaughter — NASS
- 2:00 p.m. Peanut Prices — NASS
- 2:30 p.m. Commitments of Traders Report — CFTC
