First Thing Today | March 29, 2023
Good morning!
Mostly firmer price tone overnight... Wheat futures extended their recent corrective gains overnight. Corn followed to the upside while soybeans pivoted around unchanged. As of 6:30 a.m. CT, corn futures are trading 2 to 5 cents higher, soybeans are a penny lower to fractionally higher, SRW wheat futures 14 to 16 cents higher, HRW wheat is 8 to 14 cents higher and HRW wheat is 7 to 8 cents higher. Front-month crude oil futures are around 75 cents higher and the U.S. dollar index is near unchanged.
Cargill to cease exports of Russian grain... Global commodities trader Cargill Inc. it will stop exporting Russian grain at the beginning of 2023-24 on July 1, the country’s ag ministry said. “The cessation of its export activities on the Russian market will not affect the volume of domestic grain shipments abroad. The company’s grain export assets will continue to operate regardless of who manages them,” the ag ministry told Reuters. Cargill will likely export around 2.2 MMT of Russian grain in 2022-23, accounting for around 4% of the country’s total grain exports. Focus now is on whether the other major global grain exporting companies follow suit and vacate the Russian market.
Russia’s economy is starting to come undone... The opening months of Russia’s invasion of Ukraine last year drove an increase in oil and natural-gas prices that brought a windfall for Moscow. Those days are over. The Wall Street Journal reports that as the war continues into its second year and Western sanctions bite harder, Russia’s government revenue is being squeezed and its economy has shifted to a lower-growth trajectory, likely for the long term. The country’s biggest exports – gas and oil – have lost major customers. Government finances are strained. The ruble is down more than 20% since November against the dollar. The labor force has shrunk as young people are sent to the front lines or flee the country over fears of being drafted. But there is no sign the economic difficulties are bad enough to pose a short-term threat to Russia’s ability to wage war.
China to sell wheat, rice from state stockpiles... China will auction another 140,000 MT of state-owned wheat reserves on April 6. China will also auction 900,000 MT of state-owned rice reserves on April 4.
SVB and Signature Bank the focus of Senate Banking Committee hearing Tuesday... When will Congress glean what went wrong that permitted vulnerabilities inside the bank to fester for years? Federal Reserve Vice Chairman for Supervision Michael Barr said a central bank report will answer those questions by May 1. “The bank failed because its management failed to appropriately address clear interest rate risk and liquidity risk,” Barr said, blaming executives at SVB and describing the situation as a “textbook case of bank mismanagement.” The Federal Deposit Insurance Corporation (FDIC) also faced criticism for not moving quicker to clear the sale of the bank, forcing the government to step in and guarantee all deposits at the bank. But FDIC officials countered one of two offers was not valid and the other would have resulted in greater costs than liquidating the bank. Barr and other federal witnesses will today reprise their testimony before the GOP-led House Financial Services Committee.
New regs could be coming for midsize banks... The White House is preparing to call for federal banking regulators to impose new rules on midsize banks, prompted by the collapse of Silicon Valley Bank earlier this month, the Washington Post (WaPo) reports. “The exact details of the White House’s recommendations are not clear, but they will try to reestablish rules for banks with between $100 billion and $250 billion that were deregulated by Congress and the Fed during the Trump administration.” But the WaPo article said, “It appears unlikely that the administration will ask Congress in the immediate future to undo a deregulation law passed five years ago with bipartisan support.”
Biden again urges GOP to release budget plan... President Joe Biden responded to House Speaker Kevin McCarthy (R-Calif.) relative to his call for talks to take place on the debt ceiling, telling McCarthy he hoped the Republican budget plan would be released before lawmakers depart for their two-week Easter break so discussions can take place when they return. Republicans say they won’t raise the nation’s authority to borrow to pay its bills without Biden’s agreement to shrink spending and deficits. But Biden said there would be no conditions on any action to address the debt ceiling, saying it had been raised previously with no conditions and that should be the case again. Biden sought to separate the debt ceiling from budget issues as some Republicans have called for major budget cuts before they will agree to raise the debt ceiling. Congress raised the debt ceiling three times under former President Donald Trump without conditions. Meanwhile, there’s a concern that even if Democrats cut a deal with McCarthy, he won’t be able to deliver votes given his limited hold on the GOP conference.
China’s green loans near 10% of loan balance... China’s outstanding green loans currently exceed 22 trillion yuan ($3.2 trillion), accounting for about 10% of the country’s total loan balance, People's Bank of China Governor Yi Gang said. Separately, China’s green bonds have hit more than 2.5 trillion yuan, Yi said. To support carbon emission reduction, the central bank has lent more than 300 billion yuan via a relending tool which has helped banks to make 600 billion yuan in loans to green projects. The central bank said in January it would keep the relending tool in place until the end of 2024. Meanwhile, China is creating a policy environment to promote green and low-carbon development, Zhao Chenxin, deputy director of the National Development and Reform Commission said. Beijing has set so-called “dual carbon” goals, which aim to peak carbon dioxide emissions by 2030 and achieve carbon neutrality before 2060.
Battle traders biding time... Price action was light and choppy in live cattle futures on Tuesday following strong corrective gains the two previous days. Traders have just a slight premium to last week’s cash market built into April live cattle futures, but they will likely remain cautious buyers until there’s a better sense of cash cattle trade, which isn’t likely until late in the week.
Hog market fundamentals weaken... The CME lean hog index is down another 32 cents to $76.25 (as of March 27), marking the seventh consecutive daily decline. The index is down $3.76 during that span. The pork cutout value dropped $1.22 yesterday to $80.00 and is down $8.80 over the past two weeks. Cash fundamentals likely need to stabilize before buyers regain their confidence in lean hog futures.
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
- 9:30 a.m. Weekly Ethanol Production — EIA
- 2:00 p.m. Broiler Hatchery — NASS
