First Thing Today | Sept. 17, 2021
Some overnight pressure on corn and soybeans… Corn futures faced light pressure overnight and most contracts are currently around a penny lower. Soybean futures are down 7 to 9 cents after softer trade overnight. Winter wheat futures are favoring the downside in choppy trade. Spring wheat futures are favoring the upside in mixed action. Corn, soybeans and wheat are all working on gains for the week. The U.S. dollar index is down slightly after yesterday’s strong gains. Crude oil futures are also posting modest losses. Of note, China’s central bank injected liquidity into its financial system Friday to calm jittery markets—the first such action in seven months.
Ukraine wraps up bumper wheat harvest… Ukraine farmers have completed their 2021 wheat harvest, bringing in 33 MMT in bunker weight, the ag ministry said today. The country’s total grain harvest was estimated at 65% complete as of yesterday, with a total of 45.7 MMT of grain collected. The country plans to bring in a record 80.6 MMT of grain this year, a dramatic 15.6-MMT (24%) jump from 2020-21.
Russia lowers tariff on wheat exports for first time in a month… Russia will lower its wheat export tax by $1.60 to $50.90 per metric ton for the week of Sept. 22-28. This marks the first week-to-week decline in the duty since the week beginning Aug. 18, when the tariff dipped to $30.40 per metric ton.
Equipment, workers could be hard to come by as Australia readies for bumper wheat harvest… Australia is preparing to harvest its second-largest wheat crop on record, but harvest season could present some challenges. Demand for equipment is strong, with the country on track to sell a record number of new tractors this calendar year. But strong demand paired with Covid-19 related shipping disruptions has resulted in long delays getting equipment and a red-hot second-hand market. “As we head into harvest people are going to be desperate to get their hands on anything that works,” Gary Northover, executive director at Tractor and Machinery Association of Australia, told Reuters. In addition, the country is also facing worker shortages. Many farms in Australia rely on overseas workers who have been unable to travel during the pandemic. The Australian Bureau of Agricultural and Resource Economics has also warned a mouse plague could lead to some localized crop losses.
Japan’s use of corn in feed still sliding… Corn accounted for 47.2% of Japan’s feed mix during July, a notable 2.5-percentage-point decline from year-ago and a 0.3-point decline from year-ago levels. High corn prices have limited its use of corn in feed, with wheat and barley use climbing in response. Barley accounted for 3.8% of the feed mix in July, which is up 0.3 points from year-ago. Wheat use climbed 0.4-points to 1.9%. Sorghum use in feed has also fallen vs. year-ago, with the grain making up 1.1% of the feed mix in July 2021 compared with 1.5% the year prior.
Biofuel producers pushing for modeling change regarding SAF tax credit eligibility… Biofuel producers are pushing for a change to a proposal to boost production of sustainable aviation fuel (SAF) included in Democrat’s $3.5-trillion spending plan that would allow farmers to join the market. Last week, the Biden administration said it wants to slash aircraft greenhouse gas emissions by 20% over the next decade by boosting the use of SAF. The White House has set a target of boosting the amount of SAF used as jet fuel in the U.S. from less 1% of the total 21.5 billion gallons burned in the U.S. each year to 3 billion gallons by 2030, and it has backed a $1.75 to $2.00 per gallon tax credit for sellers and users of sustainably produced fuels to do so. Currently, SAF is produced using cooking oil and animal fat, but biofuel groups say reaching the White House’s goals would be impossible without tapping into feedstocks like ethanol and soybean oil. Therefore, they want the current model used to determine eligibility for the tax credit to be changed to once developed by the U.S. Energy Department so farmers can be included. Biofuel groups say the current model exaggerates the impact on land use of farm grown biofuel feedstocks.
President Joe Biden said his administration is “taking a close look” at why U.S. gasoline prices are not going down… The cost at the pump to consumers has hit the highest level since 2014, as a recent New York Fed survey showing expectations of higher inflation are becoming entrenched.
China has formally applied to join an 11-nation Asia-Pacific trade pact made up of American allies... The announcement that China will try to join a pact that was initially championed by former President Barack Obama to counter China came a day after the Biden administration unveiled a new security partnership with the U.K. and Australia in the Indo-Pacific as Beijing’s influence grows in the region. China’s Commerce Ministry announced Thursday that it submitted the application for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP.
Bankers report record farmland price index… For the 10th straight month, the Creighton University Rural Mainstreet Index (RMI) remained above growth neutral. The September reading of 62.5 was down from August’s 65.3; this was the fourth straight month the index declined. Approximately, 35.7% of bank CEOs report their local economy expanded between August and September. “Solid grain prices, the Federal Reserve’s record-low interest rates, and growing exports have underpinned the rural mainstreet economy. USDA data shows that 2021 year-to-date agriculture exports are more than 27.6% above that for the same period in 2020. This has been an important factor supporting the rural mainstreet economy,” says Creighton University’s Dr. Ernie Goss, who conducts the survey. The confidence index increased for the first time since May. Read more.
Grocers locking in Thanksgiving turkey, holiday staples as logistics issues, inflation linger… U.S. supermarket chains have already started buying turkeys, cranberry sauce and other holiday staples in preparation for Thanksgiving, traditionally the busiest time of year, hoping to avoid the shortages and supply-chain problems that left some store shelves empty last year. Barron’s reports that Jeff Culhane, senior vice president of merchandising for 162-store Tops Markets in Williamsville, N.Y., said the chain “locked down” turkeys in February and ordered gravy, cranberry sauce, nutmeg, cinnamon, and holiday sprinkles early, and is squirreling them away in its warehouses. Grocery delivery provider Fresh Direct started ordering turkeys in February, a month earlier than usual, and 2% to 3% more supplies than usual. It also ordered sugar, flour and other ingredients earlier for its prepared foods. Supermarket executives say they are buying holiday foods earlier than usual from more brands, to lock in supplies.
Russia has imposed some restrictions on Brazilian beef imports… Following Brazil’s detection of two cases of atypical bovine spongiform encephalopathy (BSE), Russia’s ag safety watchdog determined beef imports from the states of Mato Grosso and Minas Gerais (where BSE was detected) can only happen if the meat was from cows slaughtered at 30 months of age or under. A veterinary certification regarding the age of the slaughtered animals will also be required. The restrictions also apply to live cattle imports. Saudi Arabia also suspended beef imports from five Brazilian meatpackers in Minas Gerais earlier this week. And Brazil temporarily suspended beef shipments to its top customer China.
Beef prices still falling… Choice and Select boxed beef values are still sliding, with Choice dropping another $1.82 on Thursday and Select diving $3.62. Meanwhile, this week’s kill, at an estimated 475,000 head through Thursday is lagging year-ago by 1.0%. Packer profit margins have come down in recent weeks, but they remain strong at nearly $800 a head, according to HedgersEdge.com. Cash cattle trade has thus far been fairly light and in the lower end of last week’s $123 to $127 range.
Pork prices have turned up, but cash market remains under pressure… Lean hog futures posted strong rallies Thursday, with recent product market action giving the market hope near-term lows could be in the works. The pork cutout value climbed 27 cents on Thursday, the third straight day of gains, and it’s now up 87 cents from where it closed last week. Cash hog bids have remained under pressure, dropping another $1.86 on Thursday to a weighted average of $81.64 per cwt., which is $4.78 under where it stood a week ago and $7.89 under where prices started the month.
Overnight demand news… Algeria is thought to have purchased around 30,000 MT of soymeal in a tender from optional origins. Jordan’s state grain buyer has purchased around 120,000 MT of animal feed barley to be sourced from optional origins. South Korean flour mills bought an estimated 81,700 MT of milling wheat to be sourced from Australia. The country’s Korea Feed Leaders Committee bought 66,000 MT of animal feed corn to be sourced from optional origins in a private deal.
Today’s reports
- 1:00 p.m. Weekly Red Meat Production Report — AMS
- 10:00 a.m. Fruit and Tree Nut Data — ERS
- 10:00 a.m. Vegetables and Pulses Data — ERS
- 2:00 p.m. Stone Fruit: World Markets and Trade — FAS
- 2:00 p.m. Peanut Prices — NASS
- 2:30 p.m. Commitments of Traders Report — CFTC
