First Thing Today | June 15, 2023

Good morning!

Grains strengthen overnight... Mounting weather concerns supported corn and soybean futures overnight, while wheat followed to the upside. As of 6:30 a.m. CT, corn futures are trading 6 to 10 cents higher, soybeans are 16 to 19 cents higher, SRW wheat is mostly 8 cents higher, while HRW and HRS wheat are 3 to 4 cents higher. Front-month crude oil futures are around 85 cents higher and the U.S. dollar index is nearly 200 points higher.

Kremlin says no positive prospects for renewing Black Sea grain deal... The Kremlin reiterated its stance that it saw no positive prospects for renewing the Black Sea grain deal because the portions pertaining it its exports were not being fulfilled. Kremlin spokesman Dmitry Peskov said, “Work is ongoing, but to be honest we don’t see any particularly positive prospects. Everything that was agreed on regarding us has not been fulfilled.”

Cargill exec: Black Sea grain shipments shrinking... Jan Dieleman, president of Cargill’s ocean transportation business, told Reuters, “The [Black Sea] corridor is definitely not performing as it was at the beginning. It’s more focused on the smaller (ship) sizes now.” Dieleman said if the Black Sea grain deal ended, the price impact would be less “simply because it is a smaller (export) program already. The grain market is not the same as it was a year ago.”

Weekly Export Sales Report out this morning... For the week ended June 8, traders expect:

Exchange further cuts Argentine soybean crop... The Rosario Grain Exchange cut its 2022-23 Argentine soybean crop estimate another 1 MMT to 20.5 MMT amid the historic drought. That forecast is 58% below where the exchange pegged the crop at the start of the growing season. It forecast the 2023-24 Argentine wheat crop at 16.2 MMT, noting “rains at the end of May saved the wheat planting.” That would be up 3.6 MMT (28.6%) from last year’s drought-ravaged wheat production.

Strategie Grains cuts EU crop forecasts... Strategie Grains lowered its forecasts for this year’s European Union wheat, barley and corn crops because of adverse weather, including dryness in Spain and northern Europe. The French consultancy cut its EU wheat crop forecast by 1.3 MMT to 128.7 MMT, though that would still be up 3.6 MMT (2.9%) from year-ago. The barley crop was reduced 2 MMT to 47.9 MMT, down 3.3 MMT (6.4%) from last year. The firm lowered its corn crop forecast by 900,000 MT to 61.2 MMT, though that would be up 8.9 MMT (17.0%) from year-ago. Total EU grain production is forecast at 273.2 MMT, up 8.2 MMT (3.1%) from last year.  

NOPA May soy crush expected to be record large... Traders expect the National Oilseed Processors Association (NOPA) to report May soybean crush totaled 175.9 million bushels. If realized, that would be up 1.5% from April and 2.8% above last year’s record for the month. Soyoil stocks at the end of May are expected to total 1.942 billion pounds.

Tai to give major trade speech today... U.S. Trade Representative Katherine Tai will give what her office says is a major speech at an Open Markets Institute conference this afternoon called “The Next World System: Can U.S. Trade Policy Make Us More Secure, Democratic, & Prosperous?” Tai will focus on how the U.S. trade agenda is prioritizing resilience in the global economy. This builds on the recent speech by National Security Advisor Jake Sullivan regarding American economic leadership. Tai will highlight the issues that arose from pursuing efficiency and low costs in trade policy, which resulted in vulnerable and high-risk supply chains. The Biden administration says it is working to address these problems by raising standards, promoting sustainability and prioritizing the needs of workers and producers.

Tentative agreement reached between dockworkers and employers at West Coast ports... Following 13 months of tough negotiations, the Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union (ILWU) agreed on a six-year contract for workers at all 29 West Coast ports. This deal was facilitated by the intervention of the U.S. government, led by Labor Secretary Julie Su. A potential conflict could have impacted around 40% of all container shipments into the U.S., causing severe logistical issues similar to those experienced during the Covid pandemic. The ports of Los Angeles and Long Beach will now work to regain cargo volumes that were rerouted in anticipation of potential disruptions.

China to start auctioning state-owned soybean reserves... China will auction 315,000 MT of state-owned soybeans on June 20, the National Grain Trade Center said, the first state soybean sales this year. The initial sales will be from 2020-crop imported supplies.

China unveils plans to modernize agricultural production... China aims to produce 40% of its vegetables and 60% of aquaculture in modern facilities by 2030 to better ensure safe and stable food supplies. The plan targets greater use of digital solutions and advanced equipment to boost food output, China’s ag ministry said.

China cuts interest rates as economy weakens... The People’s Bank of China (PBOC) lowered the one-year medium-term lending facility (MLF) rate by 10 basis points to 2.65%, marking the first reduction since August 2022. That paves the way for cuts to the benchmark loan prime rates (LPR) next week.  Growth in industrial output (3.5% in May vs. 5.6% in April) and retail sales (12.6% vs. 18.4%) missed estimates. Meanwhile, Chinese real estate investment slumped further in May, while youth unemployment hit another record, rising to 21%. JP Morgan trimmed its forecast for China’s 2023 full-year GDP growth to 5.5% from 5.9%.

Walmart to construct beef packing plant... Walmart revealed plans to construct a $257 million beef packaging and distribution facility in Olathe, Kansas. This is part of Walmart’s goal to establish a full Angus beef supply chain. The facility, a first-of-its-kind "case-ready" beef facility for Walmart, is set to open in 2025. Once operational, the Olathe facility will distribute Angus cuts from Sustainable Beef LLC to Walmart stores across the Midwest. Walmart had acquired a minority stake in the rancher-owned, premium beef company last August, which has also enabled the opening of a $325 million processing facility at the Nebraska headquarters. Walmart’s aim in building an end-to-end supply chain for Angus beef, first announced in 2019, is to answer customer demand for a more transparent supply chain. This will be the first time the retail giant has owned and operated a case-ready beef facility.

Taiwan fully opens market to Canadian beef... Taiwan’s government agreed to fully open its market to imports of Canadian beef, lifting a stumbling block as Taipei works to sign a bilateral trade deal with Ottawa. Taiwan had previously banned imports of Canadian beef slaughtered more than 30 months earlier due to concerns about bovine spongiform encephalopathy (BSE).

Slow developing cash cattle negotiations... Packers have been slow to establish cash cattle bids, with only limited trade at lower prices in the far northern market. However, that was too light for a true early test of this week’s likely trade. Most cash sources expect prices to be steady/firmer, though some believe prices could weaken if futures actively extend Wednesday’s losses.

Cash hog fundamentals strength... The CME lean hog index is up another 84 cents to $86.25 (as of June 13), now more than $15.00 off the April low. July lean hog futures assumed lead-month status at more than a $6.50 premium to the cash index, suggesting traders expect prices to continue the steady climb over the next month. The pork cutout value firmed 21 cents on Wednesday to $89.73, the highest level since December 2021.

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

• 7:30 a.m. Weekly Export Sales — FAS
• 11:00 a.m. Monthly Soy Crush — NOPA
• 2:00 p.m. Livestock, Dairy, and Poultry Outlook: June 2023 — ERS
• 2:00 p.m. Sugar and Sweeteners Outlook: June 2023 — ERS