First Thing Today | August 31, 2022
Good morning!
Followthrough selling overnight... Corn, soybean and wheat futures built on Tuesday’s losses during overnight trade. As of 6:30 a.m. CT, corn futures are trading 8 to 9 cents lower, soybeans are around 8 cents lower and wheat futures are 2 to 8 cents lower. Front-month crude oil futures are around $2.50 lower and the U.S. dollar index is about 225 points higher this morning.
Vilsack uncertain whether USDA will release export sales data on Thursday... USDA Secretary Tom Vilsack said he’s not sure if the Foreign Agricultural Service (FAS) will be able to release its normal Weekly Export Sales report on Thursday, although he gave no date of its return. Glitches last Thursday forced FAS to take down and retract some of the data released. “We’re going to make sure we’ve got it fixed and I appreciate the fact when they made the mistake, we owned up to it,” Vilsack said Tuesday. “Mistakes happen.”
China’s manufacturing PMI rises, but factory sector still contracting... China’s official purchasing managers index (PMI) rose to 49.4 in August from 49.0 in July, though that was still below the 50.0-point mark that signals contraction. The latest figure was the second straight month of contraction in factory activity, amid a resurgence of Covid-19 cases, new lockdowns in some cities and power rationing due to the worst heatwaves in decades.
Euro zone inflation climbs to another record... Euro zone inflation rose to another record high of 9.1% this month from 8.9% in July. Energy prices, despite a slight deceleration, remain by far the main driver of the general rise in prices with a jump of 38.3% compared to August 2021, after a surge of 39.6% in July. Prices of food, alcohol and tobacco jumped 10.6% from year-ago. Inflation excluding energy and unprocessed food rose a stronger-than-expected 5.5%.
Indonesia tweaks palm oil export tax rules... Indonesia on Wednesday tweaked its palm oil export tax rules to charge a maximum levy of $240 per metric when the reference price hits over $1,430 per metric ton, a regulation document showed. The new levy will take effect Nov. 1. The government has waived palm oil export levies until the end of October to encourage shipments.
Vilsack announces three grant recipients for ‘climate smart’ products... Vilsack announced the first three grant recipients and said the others will be announced the week of Sept. 13. The over $1 billion the federal government is devoting to voluntary efforts to reduce agriculture’s adverse effects on the environment is a better long-term strategy than mandating new rules for farmers, Vilsack said Tuesday. “The challenge, Vilsack said, is how do you increase production sustainably? How do you increase production but at the same time do it in a climate-smart way?”
Kerry sounds very conciliatory toward China... U.S. climate envoy John Kerry said in an interview with the Financial Times he was hopeful the U.S. and China could resume talks on climate change before the November COP27 climate summit in Sharm el-Sheikh. China broke off talks in retaliation for House Speaker Nancy Pelosi’s visit to Taiwan in August. Even before that, China had sounded fairly dismissive of the agreement that Kerry had touted on climate cooperation. Chinese President Xi Jinping said straightforwardly in January that climate goals should not disrupt life and that China, the world’s largest emitter, must “overcome the notion of rapid success” on lowering emissions. Kerry, though, said in the interview China had “generally speaking, outperformed its commitments… They had said they will do X, Y and Z and they have done more,” he said. He specifically cited China’s development and production of renewable energy.
South Korea notes concerns on U.S. EV tax credits... A South Korean trade official raised the country’s concerns with elements of the Inflation Reduction Act related to tax credits for electric vehicles at a meeting with U.S. counterparts. South Korean Deputy Trade Minister Ahn Sung-il and Deputy U.S. Trade Representative Sarah Bianchi “agreed the two sides would keep in close contact on this issue over the coming weeks,” the Office of the U.S. Trade Representative said in an emailed statement after the officials met.
U.S. diesel prices are back above $5... Low inventories sent the national average diesel price in the U.S. back above $5, the first weekly price increase in more than two months. Distillate fuel inventories in the Northeast are particularly low, with supplies of diesel fuel and heating oil in New England currently 63% below the five-year average. There is a growing fear that an extreme weather event could significantly disrupt distillate supply in the Northeast.
IEA eyes more SPR releases... With the 180-million-barrel U.S. Strategic Petroleum Reserve (SPR) release coming to an end in November, the head of the International Energy Agency (IEA) Fatih Birol advocated more strategic stock releases. He says members should consider emergency releases of supplies whenever the prospect of supply disruption emerges.
Still good retailer demand for beef, especially on lower prices... Wholesale beef prices fell more than $3.00 for both Choice and Select boxes on Tuesday, though movement picked up to 162 loads. While the sharply lower prices are not positive, there continues to be strong retailer demand, especially on days with weaker prices. Packers are keeping supplies moving through the pipeline as they pushed through the biggest weekly slaughter of the year last week.
Pork cutout, cash hog prices continue to slide seasonally... Packers moved a strong 355 loads of pork on Tuesday amid a modest 41-cent decline in the pork cutout value. The pork cutout has fallen sharply recently, which has driven packer margins into the red at a time when market-ready supplies are building seasonally. That will keep the cash market under pressure.
Overnight demand news... Algeria purchased an unspecified amount of milling wheat that is expected to be sourced from Russia. Taiwan tendered to buy 65,000 MT of corn that can be sourced from the U.S., Brazil, Argentina or South Africa.
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
- 8:30 a.m. Weekly Ethanol Production — EIA
- 2:00 p.m. Fluid beverage milk sales by product (Annual) — ERS
- 2:00 p.m. Number and average size of U.S. fluid milk product plants — ERS
- 2:00 p.m. Selected soft dairy products, domestic use (Annual) — ERS
- 2:00 p.m. Agricultural Prices — NASS
- 2:00 p.m. Broiler Hatchery — NASS
