First Thing Today | June 23, 2023

Good morning!

Grains sharply lower overnight... Corn and soybean futures faced active followthrough selling amid forecasts calling for improved rain chances for the Corn Belt. Wheat futures actively followed to the downside. As of 6:30 a.m. CT, corn futures are trading 14 to 16 cents lower, soybeans are 20 to 23 cents lower, winter wheat futures are 9 to 11 cents lower and spring wheat is 5 to 6 cents lower. Front-month crude oil futures are around 85 cents lower and the U.S. dollar index is more than 550 points higher.

Weekly Export Sales Report out this morning... For the week ended June15, traders expect:

Russia lowers wheat export tax for tenth straight week... The tax for June 28 to July 4 will be 2,473.3 rubles ($29.28) per metric ton based on an indicative price of $244.40. That’s down from a rate of 2,612.9 rubles per metric ton the previous week and the lowest since the week of Oct. 12-18, 2022.

Stabenow’s $20 billion farm bill solution?... Senate Ag Chair Debbie Stabenow (D-Mich.) opened the door to shifting almost $20 billion from her party’s climate and tax credit law enacted last year to more general spending in the upcoming farm bill. Her comments came during a Bloomberg Government panel discussion on Thursday. Stabenow has now signaled openness to moving some of these funds to the baseline portion of the farm bill, so long as they remain climate focused. Republicans have long eyed the conservation money initially reserved for climate-smart farm programs as a source for general spending. Reconciliation rules dictated the Inflation Reduction Act (IRA) funding all had to be spent by 2031. In a farm bill, Stabenow has no such restrictions. Stabenow can reshuffle the roughly $15 billion remaining from IRA into the farm bill, and it will be added to the permanent baseline. Note: Stabenow said it must “remain climate focused.” Unless she frees it up for other purposes, it’s a ploy to make IRA climate funding go on forever. Stabenow, a master at farm bill negotiating, could leverage this to get other things she wants in a farm bill. And this could include moving some of the IRA funding to Title 1 rather than shift all of it to conservation (Title 2).

U.S., India resolve trade disputes... The U.S. and India resolved six trade disputes at the World Trade Organization (WTO), including those involving former President Trump’s steel and aluminum tariffs and India's retaliatory duties. While the U.S. will maintain its steel and aluminum tariffs, India agreed to remove retaliatory tariffs on certain U.S. products, including chickpeas, lentils, almonds, walnuts, apples, boric acid and diagnostic reagents, that it imposed after former President Donald Trump slapped duties on steel and aluminum imports using Section 232 of the 1962 Trade Expansion Act. Both nations agreed to terminate four other WTO disputes — two of those had been filed by India and two by the United States. That still leaves one filed by the United States in 2012 challenging India’s poultry trade barriers. Additionally, Indian Prime Minister Narendra Modi and President Joe Biden discussed the possibility of India rejoining the U.S. Generalized System of Preferences (GSP) program and touched on government procurement issues and high-performance computing technology exports.

EU plans to relax GMO restrictions to help farmers adapt to climate change... An EU draft regulation, seen by the Financial Times, proposes that many modified plants be approved as conventional rather than undergo the expensive and laborious existing GMO regime. The plan aims to determine and categorize plants that have used gene editing to create new varieties that could have been achieved through traditional breeding. Such plants include drought-resistant wheat, fungus-resistant tomatoes, and potatoes containing reduced acrylamide, which becomes carcinogenic when fried. EU officials believe these new techniques are critical for maintaining crop yields while contending with changing weather patterns and reducing the use of pesticides, fertilizers, and other chemicals. The proposal is expected to be put forward by the European Commission on July 5. While gene editing is distinct from genetic modification, plants that could not arise naturally would require full GMO authorization. Opposition from Greenpeace and some political groups is anticipated, but EU officials say that easing the regulations on gene-edited crops would have benefits for the environment and food security.

French wheat crop ratings slip into harvest... France’s ag ministry rates the wheat crop as 83% good/excellent, down two points from the previous week and the fourth straight weekly decline. Crop conditions have faded amid a string of hot, dry weather, though rains over the last week are coming as the country’s wheat harvest gets underway.

Yellen: Risk of U.S. recession declining... Treasury Secretary Janet Yellen said the risk of the U.S. falling into recession is diminishing. This comes at the cost of a slowdown in consumer spending, which Yellen views as necessary to control inflation. These remarks come on the heels of Fed Chair Jerome Powell emphasizing the importance of returning inflation to 2% to ensure the long-term health of the U.S. economy. He said “a couple of rate hikes” were still likely to come.

Euro zone private sector growth slows sharply... The HCOB Eurozone Composite PMI fell to 50.3 in June, the lowest since January and below forecasts of 52.5. The latest reading indicated a sharp slowdown in the bloc’s output expansion due to a combination of a slower rise in service sector activity and a deepening downturn in manufacturing output.

Cattle on Feed Report will show further tightening of feedlot supplies... USDA’s Cattle on Feed Report on Friday afternoon is expected to show the U.S. feedlot inventory as of June 1 down 3.4% from year-ago at 11.438 million head. That would be the nineth straight month of year-over-year declines in feedlot numbers. Analysts expect USDA to show May placements increased 1.7% from year-ago, while marketings are likely to be up 1.6%.

Cold Storage Report also out this afternoon... USDA will detail frozen meat stocks at the end of May. The five-year average is a 26.3-million-lb. decline in beef stocks and a 25.7-million-lb. drop in pork stocks during the month.

Analyst: Prop 12 could increase risk of ASF reaching America... According to Rabobank Protein Analyst Christine McCracken, California’s Proposition 12 law might inadvertently lead to the introduction of African swine fever (ASF) into the United States. Speaking at the Rabobank BBQ Index Virtual Media event, McCracken explained that the law, which prohibits the raising or sale of pork from pig farms using gestation stalls, could raise pork prices and lead to an increase in cross-border pork movement. This, in turn, could risk the spread of ASF, which has not yet been detected in the U.S., though it is present in some Caribbean nations. McCracken praised the pork industry’s preparedness and the federal government’s efforts in intercepting smuggled pork.

Cash cattle trade turns more active... Cash cattle trade ranged from $2 to $5 lower across the five-state area so far this week. Despite the lower prices, feedlots have moved quite a few cattle, knowing packers have a fresh supply of contract animals and a holiday-shortened slaughter schedule the first week of July. Given their big discount to the cash market, August lives cattle posted strong gains on Thursday, marking this week’s low as key near-term support.

July hogs’ premium to cash narrows... July lean hog futures faced heavy pressure on Thursday, finishing at $91.85. Today’s cash index quote (as of June 21) is up another 85 cents to $90.47. That narrowed the premium in the lead-month futures contract to $1.38 – about two days worth based on recent cash index gains. That should limit followthrough selling in July hogs.

Overnight demand news... Algeria purchased an unspecified amount of corn expected to be sourced from Argentina.

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
• 8:00 a.m. Food Price Outlook — ERS
• 2:00 p.m. Cattle on Feed — NASS
• 2:00 p.m. Chickens and Eggs — NASS
• 2:00 p.m. Cold Storage — NASS
• 2:00 p.m. Peanut Prices — NASS
• 2:30 p.m. Commitments of Traders — CFTC