First Thing Today | August 5, 2022

Good morning!

Weaker price tone overnight... After failing to find sustained followthrough from Thursday’s gains early in the overnight session, corn, soybean and wheat futures faded. As of 6:30 a.m. CT, corn futures are trading 3 to 4 cents lower, soybeans are 8 to 9 cents lower, SRW wheat futures are around 4 cents lower, while HRW and HRS wheat futures are mostly 1 to 2 cents lower. Front-month crude oil futures are modestly weaker and the U.S. dollar index is more than 200 points higher this morning.

Three more grain ships leave Ukrainian ports... Three ships loaded with grain left Ukrainian ports, the Turkish defense ministry said, two from Chornomorsk and one from Odesa. The three ships were carrying a total of about 58,000 MT of corn. Meanwhile, a team of inspectors in Turkey on Friday completed checking an empty cargo ship before it heads to be loaded with grain at Chornomorsk, the Turkish defense ministry said.

Ukraine wants export deal to extend beyond grains... As grain shipments start to flow from Ukrainian ports, Kyiv called the pact to be extended to other goods such as metals. “This agreement is about logistics, about the movement of vessels through the Black Sea,” Ukrainian Deputy Economy Minister Taras Kachka told Financial Times. “What’s the difference between grain and iron ore?” The Kremlin said an extension of the export deal to include metals could only be reached if it was linked to lifting restrictions on Russian metals producers.

Russia may not hit grain production forecast... Russia may not reach its expected harvest of 130 MMT of grain due to weather factors and a lack of spare parts for foreign equipment, the country’s ag ministry said on Friday. “Taken together, all of this creates risks in terms of reaching the grain harvest figure of 130 million tonnes,” the ministry said. If the country does not meet the planned volumes, the ministry said it will have to revise its export plans of 50 MMT for 2022-23.

Sharp jump in Russian wheat export tax... Russia’s wheat export tax for Aug. 10-16 will be 5,219.6 rubles ($86.24) per metric ton based on an indicative price of $369.40, up from 4,626.8 rubles the previous week. The tax is still well below levels when it was pegged to the U.S. dollar.

Rhetoric, tensions between U.S. and China escalate... China has decided to sanction House Speaker Nancy Pelosi (D-Calif.) and her immediate family in response to her “vicious” and “provocative” actions when she visited Taiwan earlier this week, the Chinese foreign ministry said on Friday. “Despite China’s serious concerns and firm opposition, Pelosi insisted on visiting Taiwan, seriously interfering in China’s internal affairs, undermining China’s sovereignty and territorial integrity, trampling on the one-China policy, and threatening the peace and stability of the Taiwan Strait,” a ministry spokesperson said. Meanwhile, U.S. Secretary of State Antony Blinken said, “There is no justification for this extreme, disproportionate and escalatory military response. Now, they’ve taken dangerous acts to a new level.” He emphasized the U.S. would not take actions to provoke a crisis, but it would continue to support regional allies and conduct standard air and maritime transit through the Taiwan Strait. “We will fly, sail and operate wherever international law allows,” he said.

World food prices post biggest decline since 2008... The UN Food and Agriculture Organization (FAO) global food price index dropped 13.3% in July – the fourth straight monthly decline and the steepest drop since October 2008. FAO’s global food price index was still 13.1% above last year.

Slowdown in jobs growth expected... Economists polled by Reuters expect the employment data later this morning to show the U.S. economy added 250,000 non-farm payrolls in July, down from a gain of 372,000 in June. The unemployment rate is expected to hold at 3.6%.  

Democrats, Sinema reach deal on new taxes in Inflation Reduction Act... Sen. Kyrsten Sinema (D-Ariz.) said she would “move forward” on a revised version of Senate Democrats’ health care, climate and deficit-reduction package, after party leaders agreed to scale back some of their original tax proposals. The bill still needs to go before the nonpartisan Senate parliamentarian, who will determine that each line of the measure fits the reconciliation rules. If a piece doesn’t conform to the rules, Democrats will have to rewrite it or scrap it (unlikely). A new version of language in the bill will be released on Saturday and the first Senate vote on the package is expected Saturday afternoon. House Democrats will bring their members back next week, likely Wednesday or Thursday, assuming the Senate passes the measure during the weekend or early Monday. Democrats said they expect it will pass, which would send it to President Joe Biden for his signature.

USDA updates ERP payments, unveils program dashboard... USDA has processed more than 255,000 applications for its new Emergency Relief Program (ERP). Payments of approximately $6.1 billion to date have been made to commodity and specialty crop producers to help offset eligible losses from qualifying 2020 and 2021 natural disasters. A new public-facing dashboard has information on ERP payments that can be sorted by crop type — specialty or non-specialty, specific commodities and state. FSA will update the dashboard every Monday.

Top five states receiving the most ERP payouts thus far:

• North Dakota: $987.20 million
• Texas: $772.89 million
• South Dakota: $485.18 million
• Minnesota: $433.40 million
• Iowa: $381.15 million

Two largest U.S. water reservoirs reach ‘dangerously low’ levels... Water supplies at the two largest U.S. reservoirs — Lake Mead and Lake Powell — have dwindled to “dangerously low levels” due to the impacts of climate change, according to researchers at the United Nations’ Environment Program (UNEP). Both reservoirs are on the verge of reaching so-called “dead pool status,” the point at which water levels drop so low they can no longer flow downstream and power hydroelectric stations. That could threaten water and power supplies for millions of people in the West, including in the states of Nevada, Arizona, California, Wyoming, Colorado and New Mexico, UNEP researchers said. “The conditions in the American west, which we’re seeing around the Colorado River basin, have been so dry for more than 20 years that we’re no longer speaking of a drought,” Lis Mullin Bernhardt, an ecosystems expert at UNEP, said. “We refer to it as ‘aridification’ — a new very dry normal.”

France raises wheat crop estimate... France’s ag ministry raised its estimate for the country’s wheat production by 1 MMT to 33.9 MMT amid a higher yield forecast. That would still be down 1.6 MMT (4.4%) from last year.

China soybean auctions continue... China will auction another 500,000 MT of imported soybeans from state reserves on Aug. 12. Beijing continues to sell soybean stockpiles into the domestic market to boost supplies.

Canada to challenge U.S. duties on lumber... Canada will begin new lumber dispute settlement proceedings against the U.S. after the Commerce Department announced results of its latest administrative review of anti-dumping and countervailing duties imposed on Canadian softwood lumber during the Trump administration. “While the duty rates will decrease from the current levels for the majority of exporters, the only truly fair outcome would be for the United States to cease applying baseless duties to Canadian softwood lumber,” Canadian Trade Minister Mary Ng said. The Commerce Department set a new combined anti-dumping and countervailing duty rate Thursday of 8.59% for most companies, down from the current rate of 17.91%. Canada already has launched several other unresolved challenges to the duties under the USMCA.

Wholesale beef prices weaken again... Wholesale beef prices have weakened for three straight days, with the Choice cutout down $3.92 from Monday’s high. While prices have eased, movement has picked up, signaling solid retailer demand under the market. The real test of retailer demand will come when packers raise beef prices.

Cash hog index ends brief pullback... The CME lean hog index is up 67 cents to $121.61 (as of Aug. 3), with today’s quote 2 cents higher than prior to the two-day pullback and only $1.07 below the 2021 peak. Given tighter slaughter supplies than year-ago, we expect the cash index to top last year’s high. The cash rally is lasting deeper into the year than normal since the start of the seasonal upswing was delayed.

Overnight demand news... The Philippines passed on a tender to buy 150,000 each of wheat and feed barley.

See ‘Policy Updates’ for late-breaking morning news updates... For updates to items in “First Thing Today” or any late-breaking morning news stories, check “Policy Updates” on www.profarmer.com.

Today’s reports

• 10:00 a.m. Livestock and Meat International Trade Data — ERS
• 2:00 p.m. U.S. Agricultural Trade Data Update — ERS
• 2:00 p.m. Cash Rents- State — NASS
• 2:00 p.m. Land Values — NASS
• 2:00 p.m. Peanut Prices — NASS
• 2:30 p.m. Commitments of Traders — CFTC