First Thing Today | April 27, 2023

Good morning!

Price drop continues overnight... Early corrective buying dried up overnight and grain/soy futures are trading lower and on session lows this morning. As of 6:30 a.m. CT, corn futures are trading mostly 3 to 5 cents lower, soybeans are 7 to 9 cents lower and wheat futures are 8 to 12 cents lower. Front-month crude oil futures and the U.S. dollar index are both near unchanged.

Russia continues strong rhetoric on grain deal... Russian Foreign Ministry spokeswoman Maria Zakharova said Russia does not consider the implementation of the Black Sea grain deal to be satisfactory. She reiterated Russia’s stance that only full implementation of the deal, which Moscow says would require better conditions for the export of its grains and fertilizers, is needed before the country would agree to an extension beyond May 18.  

Weekly Export Sales Report out this morning... For the week ended April 20, traders expect:

U.S. ethanol industry expands push for SAF... The U.S. ethanol industry is lobbying the Biden administration to ensure lower-carbon aviation fuel made from ethanol will qualify for subsidies under the Inflation Reduction Act (IRA), arguing such provisions are crucial to meeting U.S. climate goals. The campaign reflects the ethanol industry's desire to expand into aviation amid projections motor fuel demand will fall in the future due to better efficiency and the ascent of electric cars. The Biden administration is targeting at least 3 billion gallons (11.4 billion liters) of sustainable aviation fuel (SAF) production per year in the U.S. by 2030 as part of its broader push to fight climate change. At issue is a requirement in the IRA package that SAF yield a 50% reduction in lifecycle emissions compared with petroleum-based jet fuel before it can qualify for a $1.25 tax credit. The ethanol industry is asking the administration to use a methodology to calculate emissions developed by the Department of Energy called GREET that shows ethanol to have a lighter carbon footprint as an SAF feedstock than does the methodology proscribed by IRA, which was developed by the International Civil Aviation Organization.

Argentina to pay for Chinese imports in yuan rather than dollars... Argentina will start to pay for Chinese imports in yuan rather than dollars, the government announced Wednesday, a measure that aims to relieve the country’s dwindling dollar reserves. The decision comes as the country battles critical levels in its dollar reserves amid a sharp drop in agricultural exports caused by the historic drought.

China’s industrial profits slump in Q1... Profits earned by China’s industrial firms dropped 21.4% from a year earlier to 1,516.74 billion yuan ($219.1 billion) in the first three months of 2023, as factory activity struggled to recover from the slump caused by pandemic disruptions. In March, profits for the sector fell 19.2%. Among the 41 industries surveyed, 28 saw losses, namely petroleum, coal (-97.1%), non-ferrous metal smelting and rolling (-57.5%), computer, communication, & electronic equipment (-57.5%), chemical products (-54.9%), textile (-34.0%), non-metallic mineral product (-30.6%), automobile (-24.2%), agricultural & food processing (-18.4%), special equipment manufacturing (-10.1%), coal mining & washing industry (-4.9%), and oil & natural gas extraction industry (-4.8%).

House passes debt-limit legislation... The House voted 217-215 to raise the federal government’s $31.4 trillion borrowing limit. Republicans made up all votes in favor of the revised bill, while four GOP representatives joined all 211 Democrats present in voting against, setting up a showdown with the Senate and White House. Besides raising the federal debt ceiling until the government incurs another $1.5 trillion in arrears, or through the end of March 2024, whichever occurs first, the legislation would cut federal funding by $130 billion in fiscal year 2024 ($4.8 trillion over the next 10 years), reverse spending to fiscal year 2022 levels and limit future budget growth to 1% per year. The amendment struck provisions repealing three of the five biofuel-related tax credits Midwestern GOP members sought to protect. The amendment would still repeal the other two credits but would grandfather in projects with signed contracts or “concrete investment action” undertaken up until April 19, the date GOP leaders introduced the original bill. The Democratic-controlled Senate will not approve the House-passed measure, but as we previously reported, there will be big pressure on the Senate to pass a debt-limit measure. House Speaker Kevin McCarthy (R-Calif.) can use the House bill as a baseline negotiating tool in striking a deal with Democrats and the White House.

Indonesia to reduce palm oil domestic sales obligations... Indonesia will lower its mandatory domestic sales for palm oil producers to 300,000 metric tons per month starting in May, down from 450,000 MT currently, a senior Trade Ministry official said. The government will reduce the ratio of palm oil exports to four times the volume they have sold domestically from six times the volume.

Slow developing cash cattle trade... Packers remained slow to establish cash cattle bids, delaying trade for the week. With packers buying only 74,000 head of cattle last week and market-ready supplies remaining tight, they don’t have much leverage in cash negotiations. But cash sources signal there’s talk some plants may slow production instead of actively raising cash bids.  

Cash hog index taking baby steps... The CME lean hog index is up 11 cents to $71.31 (as of April 25), marking consecutive days with modest gains. That’s the first back-to-back days with gains in six weeks, right before the cash market plunged. Hog futures closed strong amid a sharp late-session rally on Wednesday, though traders may be reluctant to aggressively extend premiums until the cash index shows stronger and sustained gains.

Overnight demand news... Iraq purchased 150,000 MT of Australian wheat. Taiwan tendered to buy 51,925 MT of U.S. milling 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

• 7:30 a.m. Weekly Export Sales — FAS
• 2:00 p.m. Livestock and Meat Domestic Data — ERS
• 2:00 p.m. Vegetable and Pulses Outlook: April 2023 — ERS
• 2:00 p.m. Meat Animals - PDI — NASS
• 2:00 p.m. Milk - PDI — NASS
• 2:00 p.m. Poultry - Production and Value — NASS