First Thing Today | Sept. 1, 2021
Corn and soybeans under pressure to kick off September… Corn futures are trading low-range and down 5 to 7 cents in early trade. Soybeans are 6 to 7 cents lower. Winter wheat futures are choppy, while spring wheat is posting gains of 4 to 5 cents. The greenback and crude oil futures are up slightly.
Transportation expert comments on Hurricane Ida destruction… Ken Erickson, senior vice president of agribusiness with IHS Market, who focuses on transportation and infrastructure, was on AgriTalk yesterday speaking about the impact of Hurricane Ida. He said, “Thankfully, all the work that went on after Katrina with the levees held it in place and we didn't have major topping and breakthroughs. But it's this power thing … the winds just did some serious damage, and we had a direct hit on those expert elevators.” The U.S. is entering a critical time for exports, especially soybeans, and recovery will need to be swift to prevent any further erosion to the U.S. export program this year. The facilities hit weren’t small ones. Erickson points out a Cargill reserve “is about 8% to 10% of center Gulf capacity” and the CHS Myrtle Grove facility that’s without power has about 7% to 8% capacity share. Listen here.
Hurricane Ida is set to push up gas prices… Moody's said that Ida will mimic the gas spike following Hurricane Katrina in 2005 and could weigh on consumer spending and GDP. The energy market's reaction has been muted so far.
OPEC+ meets today for the first time since July… Delegates expect the group to stick to its planned production increase. They predicted ministers would ratify October’s 400,000 barrel-a-day supply increment at an online meeting this evening.
Expectations for monthly soy processing and corn usage reports… USDA will likely report the U.S. crushed 165.2 million bu. (4.957 million short tons) of soybeans during July, according to analysts polled by Reuters. That would be up from June’s disappointing crush of 161.7 million bu. but well under last July’s 184.5 million-bu. crush. Those polled expect soyoil stocks to end July at 2.132 billion lbs., a 32-million-lb. increase from June 30 and up a marginal 9 million lbs. from the end of July, despite the much smaller crush. Meanwhile, analysts surveyed by Bloomberg expect USDA’s monthly Grain Crushings report to show 448.8 million bu. of corn were consumed for ethanol use during July, which would be a 5.8% increase from year-ago.
Russia could extend mineral extraction tax to fertilizer… Russia is currently considering a mineral extraction tax (MET) linked to global prices for its metal producers and a deputy finance minister yesterday commented that tax could be extended to fertilizer companies. President Vladimir Putin has said the MET tax would rise beginning in 2022. A final decision on the MET is expected in early October. Moscow has been very concerned about rising costs for foods and raw materials. Fertilizer companies previously agreed to freeze the prices at which they sell products within Russia.
Anec trims August export pegs for Brazilian corn and soybeans… Brazil likely exported 5.785 MMT of soybeans during August, says Anec, an association of grain exporters. That’s a 201,000 MT dip from its forecast last week. The association also lowered its corn export projection for the month by 393,000 MT to 4.344 MMT.
Indian monsoon rains expected to pick up this month… India’s monsoon rains are expected to top the long-term average during September, the state-run India Meteorological Department (IMD) said at a news conference. Monsoon rains were 10% above average during June but they weakened during July and August, with rains 9% below average three months into the four-month season, said Mrutyunjay Mohapatra, director general of IMD. He said above-normal rains are likely to reduce the current seasonal deficit, with total seasonal rainfall “very likely to be around the lower end of the normal.” IMD defines average rainfall as between 96% and 104% of the 50-year average of roughly 34 inches.
China blames big grain traders for its woes... A respected voice on China agriculture is Dim Sums: Rural China Economics and Policy. In a recent item, it says, “With China's grain and soybean imports on a record pace and agricultural prices at a high level, communist propagandists are blaming multinational companies for price-gouging. When Chinese officials blame someone else for a problem, they are usually trying to divert attention from their own mistakes. Wonder what they're hiding?” It says China's solution is “to divert vast sums of capital from the state-owned banks to create its own grain-trading behemoths… A 2008 China food security plan formulated during an earlier grain price spike authorized Beidahuang and Chongqing Grain Group to acquire huge tracts of land and build warehouses and wharfs in Brazil and Argentina to save money on imported soybeans, but both plans quickly crashed and burned. A decade ago, COFCO and other state-owned companies were handed money to build soybean crushing plants in China to dilute the share of multinationals in that industry, but complaints go on.”
Litigation, confusion follow overturning of water rule… A federal court ruling tossing out a Trump-era rule defining waters of the U.S. (WOTUS) is fueling even more uncertainty about federal wetlands jurisdiction and puts possibly hundreds of projects in legal limbo, lawyers told Bloomberg. The decision in Pasqua Yaqui Tribe v. EPA is the latest twist in a decades-long tug-of-war over how to define WOTUS under the Clean Water Act, which determines how wetlands can be developed. It instantly touched off debates over how widespread it will be applied. It could set off a cascade of lawsuits to the ruling itself, and possibly to future WOTUS definitions, said Dave Owen, an environmental law professor at the University of California-Hastings College of the Law. “This isn’t going to be the last word,” Owen said. “The bottom line is there’s going to be more litigation.”
WSJ comments on ‘USDA’s retreat on racial preferences’… More than a dozen lawsuits have been filed challenging USDA’s racial preferences relative to its to program to forgive loans for “socially disadvantaged” farmers. Three of those cases so far have resulted in preliminary injunctions by district courts in Florida, Wisconsin and Texas. The Department of Justice failed to appeal the Florida injunction before its 60-day deadline last week and hasn’t contested the others. In a commentary item, the Wall Street Journal says, “Perhaps it thinks it will lose on appeal and doesn’t want to risk taking these cases all the way to the Supreme Court. The farmers’ program is a blatant violation of the Constitution’s equal protection clause.”
Has the Delta-fueled Covid-19 surge in the U.S. finally peaked?... The number of new daily U.S. cases has risen less over the past week than at any point since June. After Delta took hold last winter in India, caseloads there rose sharply for slightly more than two months before plummeting at a nearly identical rate. In Britain, caseloads rose for almost exactly two months before peaking in July. In Indonesia, Thailand, France, Spain and several other countries, the Delta surge also lasted somewhere between 1.5 and 2.5 months. In the U.S., case numbers in Arkansas, Florida, Louisiana, Mississippi and Missouri peaked in early or mid-August and have since been falling.
Social Security costs are expected to exceed total income this year... Trustees for the Social Security trust fund say the program is expected to pay benefits that exceed its income in 2021, the same as it anticipated last year at the outset of the pandemic. While the pandemic had a significant impact on the program, the trustees said, they expect Social Security’s reserves to be depleted by 2034, only one year sooner than they estimated in their April 2020 report. Once the reserves are exhausted, benefits would be reduced automatically unless Congress shores up the program.
Canadian National Railway won’t be permitted to complete its $30 billion bid for Kansas City Southern using a temporary voting trust… The Surface Transportation Board ruled it hadn’t demonstrated that using a voting trust would be consistent with the public interest. Canadian National can challenge the ruling in court. Meanwhile, it could sweeten its terms to encourage Kansas City Southern to continue recommending its offer over a less valuable but potentially safer one from rival Canadian Pacific.
Beef prices continue to slide and movement remains light… The product market pullback continued Tuesday, with Choice dropping 67 cents, Select falling 52 cents and movement remaining light at 89 loads. Cash cattle trade has yet to get underway. The new front-month October contract is trading in line with the upper end of last week’s trade that ranged from $122 to $123 in Texas and Kansas up to $128 in Nebraska and the Western Corn Belt. September feeder cattle futures are at around a $3.50 premium to its cash feeder cattle index.
Cash hog prices rise, but futures slide… Nearby lean hog contracts softened for the second day on a row on Tuesday, but the market’s short-term uptrend remains intact. And futures remain at an overly wide discount to the CME lean hog index. Cash hog bids firmed an estimated $2.23 nationally on Tuesday. The pork cutout value slipped 71 cents yesterday, but movement picked up notably to 357.66 loads. Butts and picnics climbed, but all other cuts softened, with bellies leading the decline.
Overnight demand news… Algeria bought roughly 390,000 MT to 460,000 MT of milling wheat from optional origins in an international tender. The North African country lowered its test weight requirement for the shipments, an apparent bid to coax more offers from France. Jordan is thought to have three trading companies taking part in its international tender to buy 120,000 MT of wheat. Egypt’s state grain buyer is seeking to buy at least 30,000 MT of soyoil and 10,000 MT of sunflower oil. Turkey issued an international tender to buy around 245,000 MT of animal feed barley.
Today’s reports
- 9:30 a.m. Weekly Ethanol Production — EIA
- 2:00 p.m. Broiler Hatchery — NASS
- 2:00 p.m. Cotton System — NASS
- 2:00 p.m. Fats & Oils — NASS
- 2:00 p.m. Grain Crushings — NASS
