First Thing Today | July 7, 2023

First Thing Today
First Thing Today
(Pro Farmer)

Good morning!

Wheat leads overnight price declines... Wheat futures posted sharp losses during overnight trade, while corn and soybeans also traded lower. As of 6:30 a.m. CT, corn futures are trading 5 to 6 cents lower, soybeans are 5 to7 cents lower, SRW wheat is 12 to 13 cents lower, HRW wheat is 16 to 21 cents lower and HRW wheat is mostly 13 to 14 cents lower. Front-month crude oil futures are modestly firmer and the U.S. dollar index is nearly 200 points lower.

Weekly Export Sales Report out this morning... For the week ended June 29, traders expect:

 

2022-23 expectations (in MT)

2022-23

last week

2023-24

expectations (in MT)

2023-24

last week

Corn

0-500,000

140,387

0-500,000

123,537

Wheat

NA

NA

50,000-350,000

155,167

Soybeans

100,000-350,000

227,375

0-400,000

17,000

Soymeal

50,000-250,000

104,847

0-200,000

68,723

Soyoil

0-10,000

963

0-10,000

0

Mexico publishes draft proposal on GMO corn... Mexico’s Health Ministry on Monday published a draft proposal to modify the Official Mexican Standard (NOM) that governs products made from masa, or corn dough. The proposal is part of an overall federal government effort to stop Mexicans from eating white GMO corn imports, most of which comes from the United States. “The use of genetically modified corn as a raw material must be avoided in the making of the products covered by this Mexican Official Standard,” states the document. Interested parties have 30 days to comment on the proposal, after which the government could publish a modified NOM in its official gazette that bans the use of GM corn in tortillas. The modified NOM would take effect 60 days after publication. The National Chamber of Industrialized Corn (Canami) said the proposed measure “creates restrictions on international trade and members of the International Trade Organization must be notified.” Canami also said that the costs of laboratory tests to determine whether corn is GM or not aren’t being considered. The chamber said that those costs could cause their members to record net losses. The draft proposal came just over a week after the federal government imposed a 50% tariff on white corn imports in an effort to limit human consumption of GM corn. The tariff, which ends access to white corn imports, is scheduled to remain in force until Dec. 31, 2023, after which Mexico intends to ban the importation of GM corn for human consumption. A ban on GM corn for animal feed is slated to come in at an unspecified later date, depending on supply.

Tai comments on USMCA meetings... During a bilateral meeting on Thursday, U.S. Trade Representative (USTR) Katherine Tai discussed with Mexico’s Secretary of Economy Tatiana Clouthier various issues concerning energy and biotech corn. Tai highlighted concerns about the recent upsurge of steel and aluminum imports from Mexico into America. Further, the regulatory uncertainties confronted by American electronic payment service providers operating in Mexico, and Mexico’s telecommunications spectrum fee method were also issues that were discussed. Despite the contentious nature of these topics, Tai remains hopeful of solutions. She affirmed the U.S. has noted some progress in negotiations about energy with Mexico, expressing optimism that the dispute would eventually be resolved. Tai discussed the disputes over Mexico’s energy and biotech corn policies with Canadian Trade Minister Mary Ng. Tai also underscored the need for Canada to fully meet its U.S.-Mexico-Canada Agreement (USMCA) commitments, including on home shopping, and urged Canada to refrain from imposing a digital services tax. Tai said trade dispute settlement consultations over GM corn the U.S. requested in June began with Mexico last week.

Yellen calls out Beijing’s pressure on U.S. companies... Treasury Secretary Janet Yellen pushed back against what she said were unfair attacks by Beijing on companies with foreign ties. “During meetings with my counterparts, I am communicating the concerns that I’ve heard from the U.S. business community — including China’s use of nonmarket tools like expanded subsidies for its state-owned enterprises and domestic firms, as well as barriers to market access for foreign firms,” Yellen told members of the American Chamber of Commerce in China at a round-table event.  “I’ve been particularly troubled by punitive actions that have been taken against U.S. firms in recent months.” Representatives of Boeing, Bank of America and Cargill were among those in attendance. Yellen said those actions, along with new Chinese measures to limit exports of some semiconductor-related minerals, justified the Biden administration’s efforts to build up non-Chinese supply chains. Yellen met with Chinese Premier Li Qiang in Beijing on Friday, defending American actions to protect its national security as the countries ratchet up trade controls on each other. “The United States will, in certain circumstances, need to pursue targeted actions to protect its national security,” Yellen said. “We should not allow any disagreement to lead to misunderstandings that unnecessarily worsen our bilateral economic and financial relationship.”

FAO food price index continues to fall... The UN Food and Agriculture Organization global food price index dropped 1.4% in June amid declines in prices for sugar, vegoils, cereal grains and dairy products, while the meat price index remained virtually unchanged. The index was 23.4% below the all-time peak in March 2022. Compared to year-ago, prices declined 6.4% for meat, 22.2% for dairy, 23.9% for cereal grains and 45.3% for vegoils, while sugar prices rose 29.7%.

Slower jobs growth expected... Economists polled by Reuters on average expect the Labor Department to report the U.S. economy added 225,000 non-farm payrolls in June. That would be down from 339,000 jobs added in May. The unemployment rate is expected to inch down to 3.6%. Fed officials will closely watch wage data. It’s expected that average hourly earnings ticked up month-on-month, which would keep pressure on the Fed to raise interest rates further to tame inflation.

Fed trying to assess whether financial conditions are tight... That’s a crucial question for policymakers as they aim to curb inflation by slowing economic growth, which is typically achieved through tactics such as increasing borrowing costs, weakening asset prices, or strengthening the dollar. Although previous metrics have suggested that financial conditions are not too restrictive, a recently introduced measure from economists at the Fed indicates they are exceptionally tight. Financial conditions are reported to be at a level last observed during the 2008 financial crisis but have eased slightly since December. The authors carry out this analysis by measuring the impact of financial conditions on GDP growth, estimating that current conditions could lower GDP growth by approximately 0.75 percentage points in the forthcoming year. This is mainly due to increasing mortgage rates, corporate borrowing costs and a stronger dollar. However, these factors are somewhat mitigated by the high values of stocks and housing, according to the new Fed index.

Round table next week on competition issues... The White House plans to host farm and ranch groups next week for a roundtable listening session on competition issues, Politico reports. Unlike a White House roundtable last year, President Joe Biden is not expected to attend. “Promoting competition, including in agricultural markets, is a core pillar of Bidenomics,” said a White House spokesperson. “The White House and Department of Agriculture are meeting on Thursday [July 13] with a range of stakeholders to hear their priorities in this space.” USDA is also holding a webinar July 11 on a recently released report on competition in agricultural markets.

Ukraine asks to join CPTPP trade pact... New Zealand, which performs the legal depositary functions for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), had received a formal accession request from Ukraine on May 5, a New Zealand foreign ministry spokesperson said. The next steps in the application process would be determined by all members of CPTPP, who are due to meet in the New Zealand city Auckland on July 16, the spokesperson said. CPTPP includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam, with Britain becoming the 12th member state. China, Taiwan, Ecuador, Costa Rica and Uruguay all also have requests pending to join.

China’s sow herd contracts further in June... China’s sow herd declined 1.68% in June compared with the prior month, state-backed Shanghai Securities News reported. The pace of the decline is bigger than in prior months, suggesting that farmers are accelerating culling of sows to cut their losses.

Cash cattle trade lower... Cash cattle trade got underway around $178 in the Southern Plains on Thursday, steady to $2 lower than the bulk of trade in that region last week. Feedlots in the northern market where supplies are tighter resisted the weaker prices.

Cash hog index jumps, pork slumps... The CME lean hog index jumped $1.39 to $96.07 (as of July 5). After Thursday’s losses, July hog held a $3.98 premium, while August hogs finished $1.055 above the cash index. The pork cutout value dropped $3.69 to $105.00.

Overnight demand news... Exporters reported no tenders or sales.

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

 

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