First Thing Today | April 27, 2022

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Good morning!

Soybeans and soyoil higher, corn and wheat lower this morning... Soybeans and soyoil extended gains overnight, while corn and wheat are trading lower this morning after two-sided overnight trade. As of 6:30 a.m. CT, corn is trading fractionally to a penny lower, soybeans are 12 to 16 cents higher, winter wheat is 7 to 10 cents lower and spring wheat is 3 to 8 cents lower. Front-month U.S. crude oil futures are modestly firmer and the U.S. dollar index is up nearly 400 points to another two-year high.

Russian attack on bridge may impact Ukraine’s grain export plans... Russia launched two missile strikes and damaged a strategic bridge in Ukraine's Odesa region, state railways and local officials said on Wednesday, which could affect Ukraine’s plans to expand grain exports through Danube ports. The bridge across the Dniester Estuary is a part of the only fully Ukrainian-controlled railway route to Ukraine’s ports on Danube. Ukrainian officials have said the country is seeking to boost export capacity of Danube River ports, which allow grain to be shipped through the river to Romanian Black Sea ports.

Russia halts natural gas to Poland, Bulgaria... Russia halted gas supplies to Bulgaria and Poland on Wednesday for rejecting its demand to pay in rubles, taking direct aim at European economies in its toughest retaliation so far against international sanctions over the war in Ukraine. European leaders called the move “black mail” and Bulgaria said Russia is using natural gas as a “political and economic weapon.” Moscow says the gas cut-off is to enforce its demand for payment in rubles, needed to shield its economy from sanctions.

STB hearings focus on several railroad issues, including rail fertilizer shipments... On Tuesday, the first day of two hearings by the Surface Transportation Board (STB), USDA Deputy Secretary Jewel Bronaugh said, “Union Pacific (UP) recently announced a cutback in the number of cars it has online, and we’ve heard reports that the railroad has asked fertilizer shippers to reduce their volume by 20%.” But some companies have reportedly reached agreement with UP to deal with the alleged reductions. The hearing comes as shippers and labor unions complain that U.S. railroad business decisions have led to rail delays, worker shortages and strained supply chains, while rail executives blame the pandemic. Congestion and service issues have become a “real problem” for industries across the country that need rail to move their goods, and the situation is now a priority for the administration, Transportation Secretary Pete Buttigieg told the board. Buttigieg called for more investment on the rail workforce since “turnover is still far above normal levels” and for the board to expand its data collection, as well as require improvement plans from railroads. He suggested the railroads consider the need for more employees and the impact of increasing service without expanding the workforce.

Bank of America sounding the alarm on collapsing freight demand... Trucking demand is “near freight recession levels,” according to Bank of America. Shippers’ outlook on rates, capacity and inventory levels are matching attitudes not seen since May and June 2020, when pandemic lockdowns sent freight volumes into a historic decline. In a Friday note to investors, Ken Hoexter, the managing director of Bank of America’s trucking research, wrote that shippers’ view of demand is down 23% year-over-year. The proprietary Truckload Demand Indicator hit 58 — the lowest since June 2020. Hoexter said the shippers’ view of rates have “melt[ed] down,” hitting a low not seen since May 2020. Bank of America’s survey represented views from 44 shippers in industries including retail, consumer goods and manufacturing. Meanwhile, these shippers are finding it easy to find capacity to move their loads; outlook on capacity hit its highest level since June 2020. They also noted their view on inventory levels had climbed to its highest point since May 2020.

China pushes to beat U.S. GDP growth... Chinese President Xi Jinping has told officials to ensure the country’s economic growth outpaces the U.S.’ this year, according to the Wall Street Journal (WSJ), citing people familiar with the discussions, even as its economy sags under its worst Covid-19 outbreak since the pandemic began. In meetings over the past few weeks, Xi told senior economic and financial officials that ensuring the economy is stable and growing is important because it is critical to show that China’s one-party system is a superior alternative to Western liberal democracy, and that the U.S. is declining both politically and economically. “The desire to have a stronger GDP compared to the U.S. doesn’t help a healthy economy but certainly helps the party to maintain its rule,” Alfred Wu, a political scientist at the National University of Singapore, told WSJ.

Democrats using inflation card to pass controversial legislation... Cattle pricing proposals were the topic of a Senate Ag Committee hearing yesterday and the meat industry structure will be discussed today at a House Ag panel hearing, which will hear from CEOs of several meat packing companies. In a clear political swipe at Republicans, Senate Ag Chairwoman Debbie Stabenow (D-Mich.) said the Grassley/Fischer proposal (both Republicans) would impose cash trade mandates on meatpackers and would “help our ranchers get a fair price” and not be “gouged at the supermarket.” Speaking at the weekly Democratic leadership news conference on Tuesday, Stabenow added: “I would just say that Republicans talk and talk and talk, and we act and act and act. We’re going to continue to lead these efforts that are related to price gouging that is causing incredible prices that people are having to pay.” Meanwhile, Senate Commerce Chairwoman Maria Cantwell (D-Wash.) said the Ocean Shipping Reform Act also would help address inflation. “Shipping costs have accelerated greatly and raised costs on average Americans,” she said.

Brainard wins confirmation for Fed vice chair... Lael Brainard was confirmed as vice chair of the Federal Reserve Board of Governors Tuesday in a 52-43 Senate vote, but a combination of Covid-related absences and a political spat may delay three other Fed nominees. Brainard, 60, had been considered by President Joe Biden for the Fed’s top job before he chose to keep Jerome Powell in that post. She won over four Republicans on the Banking Committee after a relatively friendly confirmation hearing, though most GOP senators still opposed her because of her views on regulation. Brainard had dissented from several moves to reduce the regulatory burden on banks in recent years.

IRS eyes limits on exclusion of large gifts from estate tax... The IRS proposed limits on a special rule that protects taxpayers from having to pay future estate taxes on large gifts made from 2018 through 2025. The proposed rules would place limitations on a special rule adopted in 2019 that ensures the estate of a donor is not taxed on completed gifts that were free of gift tax when made. The rule stems from the 2017 tax-law overhaul, which allowed taxpayers to exclude larger gifts from estate and gift taxes. When the 2019 rules were issued, the IRS said “further consideration” would be given as to whether certain gifts should be exempted from the special rule.

U.S. HPAI update... USDA’s Animal and Plant Health Inspection Service (APHIS) now puts the count of commercial operations that have been confirmed with highly pathogenic avian influenza (HPAI) at 157 with the addition of cases in Utah (1.4 million table egg layer flock in Cache County) and Minnesota (14,600 turkey meat birds in Stearns County). Meanwhile, APHIS is requesting comments on its draft environmental assessment (EA), “Emergency Response for Highly Pathogenic Avian Influenza Outbreaks in Seven States,” and a draft Decision and Finding of No Significant Impact (FONSI) for the EA. The report covers outbreaks within Delaware, Indiana, Kentucky, Maine, Michigan, New York, and Virginia where actions have been completed. The draft emergency EA looks at potential environmental impacts from proposed actions where USDA would work with state and local authorities and affected operations with response activities in the seven states, potentially including “monitoring wild birds and poultry, depopulating and disposing of HPAI-infected domestic poultry flocks, disinfecting premises, and conducting follow up monitoring and quarantine release.” Similar actions will take place in any additional states where HPAI is detected. Comments are due by May 31.

China reports first human case of H3N8 avian influenza... China’s National Health Commission (NHC) reported its first human infection with the H3N8 strain of bird flu. The variant was found in a four-year-old boy from the central province of Henan province who had been in contact with chickens and crows raised at his home. “Experts’ preliminary assessment believes that the H3N8 avian influenza virus is of avian origin and has not yet had the ability to effectively infect humans,” NHC said. It characterized the situation as an “occasional bird-to-human cross-species transmission, and the risk of large-scale transmission is low.” Some reports have stated the NHC view was that the situation is a “one-off” development. The strain is not the same as the H5N1 virus currently affecting U.S. poultry operations.

China to buy more pork for state reserves... China will buy another 40,000 MT of frozen pork for state reserves on Friday to support domestic prices for hog producers saddled with poor margins. This will be the sixth round of pork buys for state reserves.

Early week cash cattle trade again... Moderate to active cash cattle trade occurred so far this week at steady to lower prices compared with last week. Cash sources say packers are filling holes in upcoming slaughter schedules, suggesting they may be a little more short-bought on near-term needs than thought. But once the holes are filled, packer demand for cash cattle is likely to wane as the summer supply of fed cattle should be plentiful.

Cash hog index continues to firm... The CME lean hog index is up another 39 cents today (as of April 25), extending the recent string of price strength. After recent sharp price declines, May hog futures finished Tuesday only $2.31 above today’s cash index quote, while the premium in June hogs narrowed to $8.285. Given the technical breakdown in hog futures, followthrough selling is likely, meaning premiums would further narrow.  

Overnight demand news... Algeria purchased between 230,000 and 250,000 MT of durum – likely to be sourced from Mexico. Jordan made no purchases in its tender to buy 120,000 MT of optional origin milling wheat. Thailand passed on a tender to purchase optional origin feed wheat.

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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