First Thing Today | July 29, 2021

Good morning!

Spring wheat leads grain and oilseed futures higher overnight… Corn futures are a penny higher in early trade after a quiet overnight session. Soybeans are up 5 to 7 cents, but off overnight highs. Spring wheat futures are 6 to 10 cents higher, and the market could be heading toward a test of contract highs registered July 19. Winter wheat futures are 5 to 8 cents higher. The U.S. dollar index is under pressure and has hit a new low for the month. Crude oil futures are slightly higher.

Second day of spring wheat tour finds even lower yields… On Day 2 of the Wheat Quality Council’s spring wheat tour through North Dakota and neighboring areas, scouts calculated an average yield estimate of just 24.6 bu. per acre, a dramatic drop from 40.8 bu. per acre in 2019 and the five-year average of 42.4 bu. per acre. On the first day of the tour, they measured an average yield of 29.5 bu. per acre. The key producing state has been dealing with a devastating drought for months that has resulted in short wheat with small grain heads. Last week’s National Drought Monitor showed 96.7% of the state is dealing with severe to exceptional drought. But scouts did comment that crop quality appeared strong. Today, scouts will sample wheat in northeastern North Dakota and release a final tour estimate.

Expectations for today’s Weekly Export Sales Report… The report is for the week ending July 22. 

Bunge CEO optimistic Chinese demand for corn is here to stay… In a post-earnings call Q&A, Bunge CEO Greg Heckman said demand from China for corn has been “very solid,” with USDA forecasting corn imports to be up three times what was shipped the year prior. He said that while there will be some ups and downs, “the trend has been more and been up, and we think that that's going to repeat and be sustainable.” He also said that China has increased wheat use in feed, curbing its corn and soymeal needs, but he commented “We think we're kind of getting to the tail end of that.” He also noted hog margins and soymeal crushing margins in China seem to be stabilizing.

Another round of damaging frost for Brazil’s south/southeast… Brazil’s statistics agency Conab issued a warning to producers earlier this week about the threat yet another round of frost poses for corn and wheat in the country’s southern and southeastern states. Conab said moderate to severe frost Wednesday and Thursday could damage filling safrinha corn and flowering wheat in Sao Paulo and Parana, with Mato Grosso do Sul also expected to see some frost. It says crops in Santa Catarina and Rio Grande do Sul are far enough along that damage should be limited. Conab expects a safrinha corn crop failure due to early-season drought and subsequent frosts. The frost is expected to reduce wheat crop prospects, though other areas of the country are enjoying favorable weather.  

Russian weather forecaster cuts grain crop estimate… Russia’s state weather forecaster has lowered its grain crop estimate for the country by 3 MMT to 121 MMT, citing dry weather, RIA news agency reported. That would be a 9.4% retreat from last year’s 133.5 MMT crop. The country’s central and Volga regions have been dealing with heat and dryness since July, said Roman Vilfand, head of science at Hydrometcentre.

Senate clears procedural hurdle on physical infrastructure package… The Senate on Wednesday voted to open formal debate on the bipartisan infrastructure proposal. The resulting bill would provide about $550 billion in new federal money for roads, bridges, rail, transit, water and other physical infrastructure programs. Many of its spending provisions are unchanged from the original framework. But it pared spending in a few areas and eliminated a $20-billion “infrastructure bank” meant to catalyze private investment in large projects. The plan includes $110 billion in new funding for roads, bridges and surface transportation projects over the next five years. An additional $73 billion would go to upgrading the power infrastructure, $65 billion to expanding high-speed internet nationwide and $55 billion to expanding access to clean drinking water. The plan also includes $50 billion for what the White House has called resilience and water infrastructure, such as funding to protect against droughts, floods and cybersecurity intrusions. The bill, which is not yet completely written, will face further tests as it goes through the Senate, and again when it moves to the House, where Speaker Nancy Pelosi (D-Calif.) says she will not bring it up until the Senate passes the $3.5-trillion human infrastructure bill (reconciliation).

The pay fors… Lawmakers proposed paying for the physical infrastructure measure by repurposing more than $250 billion from previous Covid relief legislation, delaying a Medicare rebate rule passed under President Donald Trump (saving $50 billion) and raising nearly $30 billion by applying tax information reporting requirements to cryptocurrency. It also proposes to recoup $50 billion in fraudulently paid unemployment benefits during the pandemic.

Pipeline chief blasts Biden’s oil policy… A U.S. clampdown on oil to meet climate-change goals will likely result in higher inflation and benefit crude-producing rivals, according to pipeline giant Enterprise Product Partners. Nations pledging to slash greenhouse-gas emissions through 2050 have largely failed to enact policies designed to curb fossil fuel demand and the U.S. is mostly alone in bearing the costs of curtailing oil-and-gas supplies, Enterprise Co-Chief Executive Officer Randall Fowler said in a conference call yesterday with investors. “We’re putting a freeze on permits on federal lands, but we’re asking OPEC+ to come in and produce more oil,” Fowler said. “It’s going to end up with higher crude oil prices, higher motor gasoline prices across the board, which will be inflationary.”

USDA confirms ASF in Dominican Republic… USDA has confirmed African Swine Fever (ASF) in samples from pigs in the Dominican Republic via a cooperative surveillance program, USDA announced Wednesday. According to the Animal and Plant Health Inspection Service (APHIS), pork and pork products are already banned from entering the U.S. due to restrictions linked to classical swine fever, and the Department of Homeland Security’s Customs and Border Protection (CBP) is “increasing inspections of flights from the Dominican Republic to ensure travelers do not bring prohibited products” into the U.S. APHIS also said that CBP will also be “ensuring that garbage from these airplanes are properly disposed of to prevent the transmission of ASF.” USDA said it has offered more testing support and will consult with the country on any additional steps of actions to “support response and mitigation measures.” USDA has offered similar help to Haiti, which shares a border with the Dominican Republic.

China still working to stabilize hog prices… China’s cabinet on Wednesday said it would step-up emergency adjustments of its pork reserves and take steps to stabilize hog prices, according to state media reports cited by Reuters. A surge in marketing of heavy hogs late-winter and into spring caused Chinese hog and pork prices to tank, raising concerns about producer margins and their ability to remain in business. The country is still working to rebuild its hog herd after ASF and to control the virus. Recent flooding in key producing areas has added to concerns about producers’ ability to stay in business as well as the spread of disease.

U.S. list of facilities eligible to export to China continues to expand… USDA’s Food Safety and Inspection Service (FSIS) has released an updated list of slaughter, processing or cold storage establishments that are eligible to export product to China. Under the Phase 1 agreement with China, FSIS certifies establishments to the General Administration of China Customs (GACC) and those facilities must be listed on the GACC website before slaughtering and processing products for export to China. A notification on the GACC site said that six U.S. facilities were added to the list of those eligible. Information from FSIS indicates that on July 26 and 27, a total of eight facilities were added to the approved list for beef, seven were added for pork, and six were added for poultry. There have been 37 poultry plants added in 2021, bringing the total to 529; 31 have been added in 2021 for pork for a total of 508; and 34 have been added this year for beef bringing the total to 547.

Beef price gains picking up steam… Boxed beef values jumped $2.18 (Select) to $3.40 (Choice) at midweek, with a solid 136 loads changing hands. Choice beef has climbed nearly $8 over the past week, with Select up more than $7. But so far, that hasn’t translated to cash market strength. Some light sales occurred yesterday from $121 to $123 in Kansas, Iowa and Nebraska, with the latter two locations leading gains. Texas saw some light sales from $118 to $119. Last week, sales ranged from $119 on the Southern Plains to $124 in the western Corn Belt.

Limits expand for lean hog futures… Daily trading limits expand to $4.50 today after a limit-lower close for the October contract on Wednesday. Profit-taking was largely to blame, with traders taking advantage of recent gains. News about ASF creeping closer to the U.S. may also have come into play. The pork cutout value climbed another $1.48 on Wednesday, with hams leading gains. But movement did slip to 284.96 loads. Cash hog bids dropped a national average of $1.74 yesterday. Today, analysts will turn their attention to USDA’s exports sales update and any business to China.

Overnight demand news… Jordan made no purchase in its international tender to buy 120,000 MT of animal feed barley.

Today’s reports

• 7:30 a.m. Weekly Export Sales — FAS
• 2:00 p.m. Egg Products — NASS