First Thing Today | June 21, 2023

Good morning!

Grains sharply higher overnight... Plunging crop condition ratings and dryness concerns fueled strong gains in corn, soybean and spring wheat futures overnight. Winter wheat futures actively followed to the upside. As of 6:30 a.m. CT, corn futures are trading 14 to 19 cents higher, soybeans are 15 to 22 cents higher, winter wheat futures are 16 to 18 cents higher and spring wheat is 12 to 14 cents higher. Front-month crude oil futures and the U.S. dollar index are near unchanged.

Corn, soybean and spring wheat CCI ratings plunge... When USDA’s weekly condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn crop plunged 14.4 points to 346.5 while the soybean crop fell 10.6 points to 339.9. The corn CCI rating fell in 16 of the top 18 production states, led by a nearly 4-point drop in Illinois and just over a 3-point decline in Iowa. Illinois and Iowa also led the soybean CCI rating decline. CCI ratings are now 29.7 points (7.9%) below year-ago for corn and 26.1 points (7.1%) below for soybeans. The spring wheat CCI rating plummeted 15.9 points to 340.7 and is now 23.5 points (6.4%) below year-ago for this date. Click here for details.

Crop Progress Report highlights… Following are highlights from USDA’s crop progress and condition update as of June 18.

• Corn: 96% emerged (94% average); 55% good/excellent (61% last week).
• Soybeans: 92% emerged (81% average); 54% good/excellent (59% last week).
• Cotton: 89% planted (94% average); 19% squaring (21% average); 3% setting bolls (4% average); 47% good/excellent (49% last week).
• Spring wheat: 98% emerged (95% average); 51% good/excellent (60% last week).
• Winter wheat: 94% headed (93% average); 15% harvested (20% average).

RFS announcement could come today... Expectations are that EPA will officially announce Renewable Fuel Standard mandates for 2023, 2024 and 2025 sometime today. EPA reportedly plans to boost overall biofuel blending levels, but the finalized volumes include just 15 billion gallons of conventional biofuels like corn-based ethanol in all three years, plus a 250-million-gallon supplemental amount for 2023, Reuters reported. Bloomberg reports EPA in 2023 will require the use of 2.82 billion gallons of biomass-based diesel, generally made from soybean and canola oil — just a 2.2% increase over the 2.76 billion gallons mandated last year. For 2024 and 2025, the quotas are being set at 3.04 billion and 3.35 billion gallons, respectively. EPA is planning to step up the government’s policing of biofuel compliance credits, but the final rule will not include a pathway for electric vehicle manufacturers to generate eRINs. EPA also is set to lay out plans to collaborate more closely with CFTC and FTC on the matter as part of its RFS plan. The final rule will not likely be published in the Federal Register for several weeks.

Kremlin: ‘No grounds’ to extend grain deal... The Kremlin reiterated its position that there are “no grounds” to extend the Black Sea grain deal, saying its portion of the deal is not being properly implemented. Kremlin spokesperson Dmitry Peskov said the United Nations acknowledged that “unfortunately, they are not managing to exert the necessary influence on the countries of the collective West in order to fulfil this Russian part of the agreement.”

Biden’s ‘dictator’ label for Xi angers China... China lashed back after President Joe Biden referred to Chinese President Xi Jinping as a “dictator,” saying the remarks were “extremely absurd” and “open political provocation” following recent efforts by both sides to lower tensions. Biden’s comments came just a day after Secretary of State Antony Blinken visited Beijing to stabilize bilateral relations with China.

India approves wheat, broken rice export requests from four countries... India approved wheat and broken rice exports to select countries following their requests to allow the shipments, the Indian government said in two separate notifications. India will allow broken rice exports to Indonesia, Senegal and Gambia in 2023-24, which started April 1. India will also allow wheat export to Nepal in 2023-24.

China unveils $72 billion tax break for EVs, other green cars... China unveiled a 520 billion yuan ($72.3 billion) package of tax breaks over four years for electric vehicles (EVs) and other green cars, its biggest yet for the industry as it seeks to boost slower auto sales growth. New energy vehicles (NEVs) purchased in 2024 and 2025 will be exempted from purchase tax amounting to as much as 30,000 yuan ($4,170) per vehicle. The exemption will be halved and capped at 15,000 yuan for purchases made in 2026 and 2027, the ministry of finance said. The new package extends the current NEV purchase tax exemption, which expires at the end of 2023. NEVs include all-battery EVs, plug-in petrol-electric hybrids and hydrogen fuel-cell vehicles.

Powell to testify... Fed Chair Jerome Powell appears before the House Financial Services Committee for regularly scheduled testimony. He will do the same before a Senate panel on Thursday. Panel members will likely try to get Powell to better explain why the Fed last week held interest rates steady but still predicts two more rate hikes later this year.

UK consumer inflation unchanged in May... British consumer inflation unexpectedly held at 8.7% in May. Core inflation, which strips out volatile food and energy costs, rose 7.1%, the highest rate since March 1992. Economists expected British inflation to decline last month. Markets now see a 40% chance the Bank of England will raise interest rates another 50 basis points on Thursday.

ERP Phase 2 payments continue to edge higher... USDA’s Farm Service Agency has now paid out $1.496 million to 788 producers under Phase 2 of the Emergency Relief Program (ERP). The total includes $557,066 in revenue payments for other crops and $557,351 in revenue payments for specialty and high-value crops. Payments under Phase 1 of ERP remained essentially unchanged and the two Coronavirus Food Assistance Program (CFAP) efforts were paused due to the Fiscal Responsibility Act.

Lower cash cattle expectations... Despite last week’s low trading volume, sources expect cash cattle prices to soften after falling last week for the first time in six weeks. Wholesale beef prices also fell on Tuesday, with Choice down $3.23 and Select $2.83 lower, extending Monday’s declines. Seasonally, cash cattle and boxed beef prices are likely to weaken into July.

Cash hogs rise, pork cutout weakens... The CME lean hog index is up another 54 cents to $88.75 (as of June 19), extending its seasonal price rally. The pork cutout value fell $1.44 on Tuesday, ending a five-day string of gains, but remains in the seasonal uptrend from the April lows.

Overnight demand news... Taiwan purchased 65,000 MT of corn expected to be sourced from Brazil. Thailand purchased 55,000 MT of feed wheat expected to be sourced from the Black Sea region or Australia.

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

• 8:00 a.m. The Food and Nutrition Assistance Landscape: Fiscal Year 2022 Annual Report — ERS
• 10:00 a.m. Fruit and Tree Nuts Data — ERS
• 10:00 a.m. Vegetables and Pulses Data — ERS
• 2:00 p.m. Broiler Hatchery — NASS
• 2:00 p.m. Milk Production — NASS