First Thing Today | June 15, 2022
Good morning!
Followthrough selling in corn, wheat overnight... Corn and wheat futures extended Tuesday’s losses overnight, while the soybean market traded mixed. As of 6:30 a.m. CT, corn futures are trading mostly 2 to 3 cents lower, soybeans are 4 cents lower to 3 cents higher, SRW wheat futures are 2 to 3 cents lower, HRW wheat futures are 5 to 8 cents lower and spring wheat is 10 to 13 cents lower. Front-month U.S. crude oil futures are around 65 cents lower and the U.S. dollar index is down more than 700 points this morning.
Key interest rate decision looming... The Fed had been widely expected to raise interest rates by 50 basis points at the conclusion of the two-day monetary policy meeting at 1 p.m. CT. But there are a growing number of economists who believe the Fed will raise rates 75 basis points in the wake of recent stronger-than-expected consumer and producer inflation data for May. The updated set of Fed projections will be key in driving the market reaction. Fed Chair Jerome Powell’s press conference will also be key in signaling future rate hikes.
ECB calls emergency meeting to discuss bond market turmoil... A measure known as Europe’s fear gauge has hit its highest level since early 2020. The European Central Bank’s decision to meet today also comes just ahead of a rate decision by the U.S. Federal Reserve. Bond yields have come down and the euro moved higher against the U.S. dollar. The ECB meeting announcement also followed a speech by one of the members of the central bank that looked to address some of the recent market fears over financial fragmentation. The unscheduled meeting is raising the prospect ECB could announce a new tool to tackle surging borrowing costs in weaker euro zone economies.
Record May NOPA soy crush expected... Members of the National Oilseed Processors Association (NOPA) are expected to report record May soybean crush of 171.6 million bu., according to a Reuters survey. If realized, that would be up 1% from April and 4.9% above May 2021. However, the estimated average crush rate of 5.534 million bu. per day would represent a third monthly decline in the daily processing pace and the lowest average rate since September. Soyoil stocks are expected to fall to an eight-month low of 1.765 billion pounds.
Romania faces ‘epic’ challenge in exporting Ukrainian grain... Romania faces a logistical challenge of “epic proportions” and requires new infrastructure to help transport Ukrainian grain to global markets, President Klaus Iohannis said. Ukraine is sending grain to the Romanian Black Sea port of Constanta as it tries to avoid a storage and logistics bottleneck as winter crop harvest starts. “These logistical routes, this entire large capacity transport logistics do not exist. We are in a position to develop transport capabilities, maybe not from zero but from a pretty low level to a very high level.” Iohannis said a broad-gauge train line compatible with Ukraine’s must connect the border to one of its Danube ports.
Ukraine’s farm sector has lost $4.3 billion from war damage... Ukraine has suffered $4.3 billion in damage to farmland, machinery and livestock due to Russia’s invasion, according to the Kyiv School of Economics. About half of the “already immense” destruction from the war comes from pollution caused by mines and unharvested crops, according to a report by authors Roman Neyter, Hryhorii Stolnikovych, and Oleg Nivievskyi. Almost a quarter of the total — $926 million — accounts for damage done to farm machinery due to military activity and occupation, they note.
Possible sanctions rethink... Some Biden administration officials are privately expressing concern that sanctions meant to punish Vladimir Putin’s government and pressure him to pull his forces back from Ukraine are exacerbating inflation, worsening food insecurity and punishing ordinary Russians more than Putin or his allies. Bloomberg reports that officials were “initially impressed by the willingness of companies to abruptly ‘self-sanction.’ But the administration was caught off-guard by the potential knock-on effects — from supply chain bottlenecks to uninsurable grain exports.”
Russia oil revenues surge despite sanctions... Russia’s oil-export revenues surged to around $20 billion in May despite shipping lower volumes, as a rally in global energy prices buoyed its coffers, according to the International Energy Agency. That was an 11% increase from the previous month, taking Russia’s total revenue for shipping crude and oil products roughly back to levels before the invasion of Ukraine, even as exports fell by about 3%, the IEA estimates in its monthly report published today.
Biden weighs partial tariff rollback to ease inflation... President Joe Biden is weighing whether to roll back some of the tariffs former President Donald Trump imposed on Chinese goods, in hopes of mitigating the most rapid price gains in 40 years, according to senior administration officials. A study this year predicted a move to lift tariffs could save households $797 a year, but Biden administration officials say the actual effect would most likely be far smaller, in part because there is no chance Biden will roll back all of the federal government’s tariffs and other protectionist trade measures.
China’s industrial output picks up, retail sales remain weak... Chinese industrial output grew 0.7% in May from a year earlier, after falling 2.9% in April. The uptick in the industrial sector was underpinned by the easing of COVID curbs and strong global demand. However, retail sales fell another 6.7% in May versus year-ago on top of an 11.1% contraction the previous month, as shoppers were confined to their homes in Shanghai and other cities by tight Covid restrictions.
China keeps rates unchanged... China’s central bank rolled over maturing medium-term policy loans on Wednesday, while keeping interest rates unchanged for a fifth straight month, matching market expectations. The People’s Bank of China (PBOC) said it was keeping the rate on 200 billion yuan ($29.68 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions unchanged at 2.85% from the previous operation.
Kazakhstan extends wheat, flour export quotas... Kazakhstan will limit exports of wheat to 550,000 MT and wheat flour to 370,000 MT until Sept. 30, the country’s ag ministry said. Kazakhstan originally imposed export limits of 1 MMT of wheat and 300,000 MT of flour from April 15 to June 1.
UAE suspends exports of Indian wheat... The United Arab Emirates (UAE) has ordered a four-month suspension in re-exports of wheat and wheat flour originating from India, state news agency WAM reported. UAE’s economy minister cited interruptions to global trade flows as the reason for its move but added India had approved exports of wheat to the country for domestic consumption.
Agriculture-FDA appropriations up for House Ag Approps subcommittee markup... The USDA-FDA appropriations bill has a top-line total of $27.2 billion, a nearly $2.1 billion increase over fiscal year 2022, though it’s less than the $28.5 billion sought by the Biden administration. FDA would receive more than $3.6 billion in discretionary funds, a $341 million increase over fiscal 2022. The bill includes $6 billion in discretionary funding for the Special Supplemental Nutrition Program for Women, Infants and Children.
House announces farm bill listening sessions... House Ag Chairman David Scott (D-Ga.) announced the first in a series of listening sessions entitled “A 2022 Review of the Farm Bill: Perspectives from the Field.” The House Agriculture Committee has conducted several hearings in Washington, DC focused on the 2018 Farm Bill and improvements that can be made in the next farm bill. This series of listening sessions will allow House Ag Committee Members to gather input from producers and consumers on the ground across the country, the panel said. The first session in this series will take place at 11:00 a.m. MT (noon CT) at Central Arizona College in Coolidge, Arizona on Saturday, June 25. It will be hosted by Rep. Tom O’Halleran of Arizona and chaired by Rep. Cheri Bustos of Illinois. This event is open to the public.
China to buy more pork for state reserves... China will buy 40,000 MT of frozen pork for state reserves on June 17. Beijing has been stockpiling pork via weekly purchases to boost hog margins.
Cash cattle trade higher... Cash cattle traded as high as $145 in the northern market and around $136 in the Southern Plains on Tuesday. That not only represented solid gains from last week in both regions but was a record price spread between the two regions, according to cash sources. The northern market where supplies are tighter was further supported by reports of death loss due to extreme heat.
July hogs take over lead-month status at discount to cash... July lean hog futures moved to the lead month contract with Tuesday’s expiration of the June contract. July hogs finished Tuesday at a $1.505 discount to today’s cash index quote (as of June 13). With the index firming again after a three-day fade late last week, it should support summer-month hog futures.
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
- 11:00 a.m. Soybean Crush — NOPA
- 11:00 a.m. Feed Grains: Yearbook Tables — ERS
- 1:00 p.m. FOMC meeting concludes — Fed
- 2:00 p.m. Broiler Hatchery — NASS
- 2:00 p.m. Turkey Hatchery — NASS
