First Thing Today | July 30, 2021
Profit-taking moved in overnight… Corn futures are trading near session lows and down 3 to 4 cents. Soybeans are also trading low-range and down 5 to 10 cents. Spring wheat futures have slumped 13 to 15 cents, with SRW and HRW wheat down 5 to 7 cents. The U.S. dollar index and crude oil futures are both facing light pressure.
Spring wheat tour confirms heavy toll of drought… North Dakota’s spring wheat crop will likely yield an average of 29.1 bu. per acre, scouts on the Wheat Quality Council’s spring wheat tour forecast. That’s the lowest yield projection for the tour that dates back to 1993. The forecast was well behind the tour’s 2015-2019 average of 43.6 bu. per acre but a bit above USDA’s 28.0 bu. per acre projection for the top-producing state. Scouts encountered uneven growth and short plants with small grain heads due to long-lasting and severe drought in the region. They also commented that some fields will be abandoned or hayed. Dave Green, executive vice president of the Wheat Quality Council, commented that “within the next week or two, farmers are going to harvest a lot of below-average wheat yields with above-average quality.”
Exchange maintains Argentine wheat crop forecast, despite frosts… The Buenos Aires Grains Exchange in a report Thursday said the country’s 2021-22 wheat crop was damaged by last week’s cold front, but the exchange maintained its 19-MMT crop estimate. In its weekly report, the exchange said, “In the central strip of the agricultural area, the thermal decrease gave rise to frosts that caused foliar damage and delays in development.”
French farmers make big strides harvesting wheat… The French farm office maintained its 75% good or excellent rating for the French soft wheat crop this week and reported solid gains in harvest thanks to a dry week. Harvest surged 33 percentage points ahead the week ending July 26 to 47% complete. But that’s still well behind last year at this time when 87% of the crop had been cut.
European Commission raises wheat crop projection… The European Commission now estimates the EU will bring in a 127.7 MMT usable common wheat crop in 2021-22, up 1.9 MMT from its forecast last month. That would also be a 9% jump from last year’s 117.2 MMT crop. The commission made no change to its 2021-22 export forecast that stands at 30 MMT.
Russian wheat export tax holds steady… Russia has set its export tax for wheat at $31.40 for the week of Aug. 4-10, steady with where it set duties for the week of July 28 through Aug. 3. The tariffs are down nearly $10 from where they started July. Russia’s government implemented these duties as a way to curb food price inflation and ensure adequate domestic supplies.
China to suspend some fertilizer exports… China’s state planner announced today that some of its major fertilizer companies would temporarily suspend exports to ensure domestic supplies. China is the world’s top exporter of phosphate. China did not identify which firms would be impacted, but it did say it had summoned fertilizer firms for a discussion warning against hoarding and speculation. Analysts cited by Reuters expect the list to include state-owned firms like Sinofert Holdings Ltd, Sinoagri Group, China National Offshore Oil Corp and China National Coal Group. Chinese fertilizer prices have shot to record highs this year due to strong demand overseas, a drop in production and high energy costs. The country has taken many steps in recent months to control the price of raw materials. Some analysts say fertilizer exports will likely fall from September forward once port stocks have cleared.
Another antidumping, CVD investigation on Russian fertilizer… CF Industries has filed a petition relative to urea ammonium nitrate (UAN) imports from Russia and Trinidad and Tobago, and the International Trade Administration (ITA) said it initiated an antidumping and countervailing duty (CVD) investigations under the petitions July 20. CF Industries said in their petition that imports of UAN from Russia and Trinidad and Tobago are being sold or are likely to be sold in the U.S. at less than fair value and that “such imports are materially injuring and threaten to injure an industry of the United States.” A notification in the Federal Register today also said that Russia should be treated as a market economy under the U.S. antidumping duty law. The International Trade Commission (ITC) is to make preliminary determinations in the antidumping and CVD investigations Aug. 16; if it makes an affirmative determination, the investigations will continue. The ITA would issue a preliminary determination Sept. 23 in the CVD investigations and Dec. 7 in the antidumping investigations.
Here we go again: Debt ceiling comes back into force this weekend… The deadline will curb the Treasury's capacity to issue new debt unless lawmakers can reach an agreement. GOP leadership contends that Democrats are in a spending free-for-all and will only support raising the debt ceiling if they promise major spending reforms and cutbacks. The longer the delay in raising the debt ceiling, the more pressure on money market rates, which in turn will put pressure on money market funds. Starting at noon ET today, the Treasury will use the first of its so-called "extraordinary measures," which will suspend sales of securities that help states and municipalities invest bond proceeds. Others will take months to kick in. Starting in October or November, the Congressional Budget Office predicts the Treasury will run out of cash. Longer term, if Democrats can't get support from 10 Republican senators, they may be forced to increase the debt limit via an upcoming budget reconciliation bill (which only needs a simple majority). They could also advance a vote to raise the debt ceiling along straight party lines before the August recess or tie the debt ceiling to a must-pass funding bill at the end of September.
EU moves past the U.S. on inoculations… The European Union passed the U.S. in Covid-19 vaccinations, with the continent inoculating people at a sustained pace and America struggling to persuade vaccine holdouts to get a shot to slow the spread of the Delta variant. Meanwhile, President Joe Biden called for state and local governments to make $100 payments to every newly vaccinated American as authorities race to stem the newest wave of Covid-19 cases.
Odds of a third vaccine dose rising... Here’s why: The efficacy of Pfizer's coronavirus vaccine, pegged at 96%, declines an average of 6% every two months, according to the company, and effectiveness in groups like the elderly and immunocompromised diminishes even more quickly. As a result, the drugmaker is recommending a third dose of its vaccine that can "strongly" boost protection against the Delta variant. Preliminary data (that has yet to be peer-reviewed or published) even suggests levels of antibodies from a third booster increases antibody levels five to 10 times higher over its two-dose shots.
If you think Congress will do much about a new farm bill prior to 2022 elections, think again... Although Republicans have a habit of losing elections they should win. The odds favor them taking control of the House after 2022 midterm elections. That is one of the main reasons Republicans will not want to do any major work on writing a new farm bill. There will likely be field hearings, etc., but most of that gives cover to lawmakers and staff who do what they want anyway.
Steady cash cattle action… Rising corn prices weighed on feeder cattle futures Thursday, putting some spillover pressure on the live cattle market. The front-month contract is trading in line with this week’s cash cattle action in the western Corn Belt. Cash cattle action picked up in Texas and Kansas yesterday mostly around $120, down slightly from a light test in the latter state earlier in the week but steady with action the week prior. The Iowa market saw some additional light action at $123, with cattle moving at $122 in Nebraska. Boxed beef values extended their rally a seventh day, with Choice rising $2.06 and Select rising 70 cents. Movement dipped to 112 loads.
Pork and cash hog prices fall… Traders tried for a rebound in lean hog futures after a limit-down performance at midweek, but disappointing action for both the product and cash markets made that a difficult task. The pork cutout value dropped $1.10 and movement slowed to 275.37 loads on Thursday, with the cutout now up $1.50 for the week. Cash hog bids fell a weighted average of $1.22 yesterday, with cash hog bids down roughly $2 from last Friday. On a more encouraging note, weekly pork export sales shot 43% higher vs. the national average to 38,500 MT. China bought only a small amount of pork, but big purchases by other nations like Mexico more than made up for it.
Overnight demand news… Pakistan is thought to have purchased around 220,000 MT of wheat in an international tender for up to 500,000 MT of the grain.
Today’s reports
- 1:00 p.m. Weekly Red Meat Production Report — AMS
- 2:00 p.m. Peanut Prices — NASS
- 2:00 p.m. Vegetable and Pulses Yearbook — ERS
- 2:00 p.m. Agricultural Prices — NASS
- 2:00 p.m. Farm Production Expenditures — NASS
- 2:30 p.m. Commitments of Traders Report — CFTC
