First Thing Today | June 14, 2023

Good morning!

Grains face pressure overnight... Corn and soybeans pulled back from their recent gains during overnight trade. Wheat was led lower by HRW contracts amid increased harvest activity. As of 6:30 a.m. CT, corn futures are trading 4 to 6 cents lower, soybeans are 3 to 4 cents lower and wheat futures are 4 to 10 cents lower. Front-month crude oil futures are around 90 cents higher and the U.S. dollar index is about 200 points lower this morning.

Fed expected to pause... After the consumer inflation data on Tuesday, the Fed is widely expected to pause its monetary policy tightening at the conclusion of the two-day Federal Open Market Committee meeting this afternoon. Market participants will pay particular attention to the so-called “dot plot” economic projections from Fed officials and Chair Jerome Powell’s post-meeting press conference for indications of the path of monetary policy moving forward.  

Argentina competition bureau to review Bunge/Viterra merger... Argentina’s competition bureau has not yet received formal notification of the merger between Bunge and Viterra to create a $34 billion agricultural trading entity, a government source told Reuters. The deal is expected to draw regulatory scrutiny and “will be evaluated.” The source noted the National Commission of Competition Defense “had objected on many occasions” to other deals.

Putin discusses ag exports with Mali... Russian President Vladimir Putin discussed supplies of fertilizers, wheat and fuel during a phone call with the interim president of Mali, the Kremlin said. The Kremlin noted Mali requested the call after Putin indicated Russia was ready to pull out of the Black Sea grain deal. Putin indicated he would talk with leaders of several African countries about supplying grains to them if Russia exits the Black Sea deal.  

Ukraine’s grain exports slightly behind year-ago... To date, Ukraine exported 47.1 MMT of grain in the 2022-23 marketing year, 700,000 MT behind last year’s pace for mid-June. That total included 27.9 MMT of corn, 16.2 MMT of wheat and 2.7 MMT of barley.

France cuts wheat export forecast... France’s ag ministry lowered the country’s 2022-23 wheat export forecast outside the EU by 100,000 MT to 10.2 MMT, though that would still be 16.2% above the previous year. The wheat export forecast within the bloc was trimmed 10,000 MT to 6.38 MMT.

Farm bill update... Look for new farm bill news today as House Ag Chair Glenn “GT” Thompson (R-Pa.) is having his monthly “coffee” with reporters. Meanwhile, AgriTalk with interview the chairman this morning. Key unknowns:

• Will far-right GOP House members derail the farm bill timeline or make it difficult to get a consensus bill?
• Will House GOP members who want lower funding level for fiscal year (FY) 2024 than the recent debt-limit agreement complicate the push for more farm bill spending beyond CBO’s baseline score?
• Will the House put restrictions on USDA’s use of the CCC Charter Act? That is evident from the current House GOP spending plan for FY 2024.
• Will any new farm bill include a voluntary base update? One farm bill analyst says the topic is like “a black hole” in getting data to make a decision on a base acre update.

Yellen: Dollar will remain dominant currency... Treasury Secretary Janet Yellen stated that the U.S. dollar’s share of global reserves will likely decline slowly, but it will not be replaced entirely as there are no viable alternatives. Yellen told the House Financial Services Committee U.S. sanctions have led some countries to consider other currencies, yet the dollar remains dominant due to factors like deep liquid open financial markets, strong rule of law and an absence of capital controls. Yellen maintained that even traditional allies, like France using non-dollar transactions, have not found meaningful workarounds for using the dollar as a reserve currency. She also noted that the gradual increase in the share of other assets in countries’ reserve holdings is a natural progression in a growing global economy. The dollar’s reserve status has been eroding over the past two decades, with a steep decline in 2022, but it remains strong in international trade. Some central banks are looking to gold as an alternative way to reduce their reliance on dollar reserves. However, Yellen cautioned that U.S. lawmakers are not helping the dollar’s standing when they prolonged the debt ceiling crisis, which undermines global faith in America's ability to meet its debt obligations and weakens the greenback’s reputation.

IEA: Oil demand to peak this decade as EVs boom... Rising demand for crude oil is set to slow to a trickle within five years and peak before the end of the decade, as electric-vehicle uptake surges and developed nations rapidly transition to cleaner sources of energy, according to the International Energy Agency (IEA). But the group, who is funded by some of the world’s largest oil consumers, said the oil-market outlook appears sharply different in the near term as Asian economies ramp up demand, and OPEC and its allies constrain output.

Administration’s agenda proposes two key actions for meat industry... The first revolves around allowing beef imports from Paraguay by the Animal and Plant Health Inspection Service (APHIS), with a final decision targeted for March 2024. However, the actual date is still subject to change based on APHIS evaluation of public comments. The second action pertains to “Product of USA” labeling, where the Food Safety and Inspection Service (FSIS) plans to release a final decision in May 2024. FSIS proposed that the “Product of USA” and “Made in USA” labels to be used for meat products from animals that were born, raised, slaughtered, and processed in the U.S. In the meantime, FSIS is reviewing comments on the proposed rule. Additionally, APHIS is expected to release a final rule on cattle ID tags requiring both visual and electronic readability by February 2024. The Product of USA labeling effort is being monitored by Canada and Mexico to assess potential impacts on them. A Notice of Proposed Rulemaking (NPRM) for cell-based meat labeling is expected by the end of the year. Additionally, USDA plans to release a final rule in August outlining organic livestock and poultry standards.

Choice beef continues to climb... Choice boxed beef prices firmed another 56 cents on Tuesday to $337.99, the highest price since the 2021 peak at $348.03. While Select beef dropped 76 cents on the day, movement improved to 137 loads, signaling retailers remain selective buyers. Strength in the wholesale beef market has kept packer margins in the black despite the record prices they are paying for cash cattle.

Pork prices strengthen and movement improves... The pork cutout value firmed $1.32 on Tuesday to $89.52, a new high for the year, while movement increased to 385.2 loads. While the pork market is strengthening seasonally, the advance hasn’t kept pace with gains in cash hogs, which has driven packer margins sharply in the red.

Overnight demand news... Taiwan purchased 56,000 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

• 9:30 a.m. Weekly Ethanol Production — EIA
• 11:00 a.m. Feed Grains: Yearbook Tables — ERS
• 2:00 p.m. Broiler Hatchery — NASS
• 2:00 p.m. Turkey Hatchery — NASS