First Thing Today | April 17, 2023
Good morning!
Varied price tone to start the week... Soybean futures are trading solidly higher, while corn and wheat futures are mixed to open the week. As of 6:30 a.m. CT, corn futures are trading fractionally lower to 2 cents higher, soybeans are 4 to 6 cents higher, SRW wheat futures are 1 to 2 cents higher, HRW wheat is 3 to 7 cents lower and HRS wheat is 2 to 3 cents lower. Front-month crude oil futures are modestly weaker, while the U.S. dollar index is around 150 points higher.
Ukraine says Black Sea grain deal at risk of being shut down... Ukraine’s restoration ministry said the Black Sea grain initiative was in danger of being shut down after Russia again blocked inspections of ships under the deal. “For the second time in nine months of operation of the Grain Initiative, an inspection plan has not been drawn up, and not a single vessel has been inspected. This threatens the functioning of the Grain Initiative,” the restoration ministry said. Russia said an extension of the deal “are still not that rosy,” as it reiterated the need to improve conditions for exports of its grains and fertilizers.
Slovakia temporarily halts grain imports from Ukraine... Slovakia will temporarily halt imports of grains and other selected products from Ukraine, a government spokesman said on Monday, joining Poland and Hungary in such action. Hungary could extend its import ban on Ukrainian grains beyond the current June 30 deadline if the EU does not take sufficient action to protect Hungarian farmers, the country’s ag ministry said. But the European Commission said unilateral action on trade by EU member states is unacceptable. EU member countries’ envoys in Brussels will discuss this week bans on Ukrainian grain imports, a senior EU official said. “There is an issue and we expect the Commission to come up with a proposal on that... We’ll see what we can do in the coming weeks and months.”
Ukraine seeks re-opening of grain transit via Poland... Ukraine will aim to secure the re-opening of grain transit via Poland as “a first step” at talks in Warsaw today, the country’s ag minister said, after Poland and Hungary announced bans on some imports from Ukraine last week. Poland’s ban on grains, in effect since Saturday evening, also applied to transit through the country. Officials have said it is meant to keep grain transport from entering the Polish market. “The first step, in our opinion, should be the opening of transit, because it is quite important and it is the thing that should be done unconditionally and after that we will talk about other things,” Ukrainian Agriculture Minister Mykola Solsky said. Polish Deputy Foreign Minister Pawel Jablonski said, “The ultimate goal is not that the import ban will be in force indefinitely, but to ensure that grain from Ukraine, which is to be exported, goes (where it is headed).”
Record March NOPA crush expected... Traders expect members of the National Oilseed Processors Association (NOPA) to report March soybean crush totaled 183.4 million bu., which would be up 10.9% from February and 0.5% above last year’s March record. If realized, it would also be the largest crush total since October. Traders expect soyoil stocks to total 1.867 billion bushels.
Brazil/China sign more than 20 bilateral agreements... Brazilian President Luiz Inácio Lula da Silva’s China visit that began on April 12 signaled the two countries want to “balance world geopolitics” and limit the importance of the U.S. dollar. Lula was lauded by Chinese president Xi Jinping as his “good old friend” and the two countries signal accords with $10 billion in areas ranging from infrastructure investment to the construction of satellites and trade facilitation. China is Brazil’s largest trade partner, and both nations operate as cornerstone members of the trade bloc known as BRICS. This alliance also includes Russia, India, and South Africa. Members of the trade bloc openly share a desire to displace the U.S. dollar in trade and as a global reserve currency. During a speech, Lula called on the BRICS group to come up with an alternative currency to the dollar for use in trade between them. “Every night I ask myself why all countries have to base their trade on the dollar,” said Lula.
WOTUS rule comes up Tuesday in House override vote... The waters of the U.S. (WOTUS) rule it is not expected to get the two-thirds vote needed to override. The House initially approved the Congressional Review Act resolution, 227-198, considerably short of the two-thirds margin needed to override President Joe Biden’s veto of the resolution. The Senate approved the measure, 53-43. A federal judge last Wednesday enjoined EPA’s new waters and wetlands protection rule from being enforced in 24 states, issuing a preliminary injunction similar to a ruling in March blocking the rule in Texas and Idaho. Timeline for a coming Supreme Court ruling on WOTUS is murky, with possible decisions on topics coming today.
The week ahead in Washington... Lawmakers return from an extended Easter recess. EPA Administrator Michael Regan will testify before the House Ag Committee on Wednesday, when he will face questions on year-round E15 sales for 2023, EPA’s proposed mandates for biofuels, WOTUS, EPA’s recent rule on tailpipe emissions and other topics. USDA Secretary Tom Vilsack is on a week-long trip to Asia, starting in Hanoi today through Wednesday. The Senate Agriculture subcommittee hearing on SNAP and the farm bill will be held Wednesday, with farm bill conservation programs on the docket for Thursday. Key data for agriculture this week is Friday’s Cattle on Feed Report.
China boosts liquidity, keeps interest rates unchanged... The People’s Bank of China (PBOC) liquidity support for the economy as it rolled over maturing medium-term policy loans with higher cash offerings for the fifth month on Monday, while keeping the interest rate unchanged. PBOC injected a total of 170 billion yuan ($24.75 billion) via a one-year medium-term lending facility (MLF) to some financial institutions while rolling over MLF policy loans for the fifth consecutive month. With 150 billion yuan of MLF loans set to expire this month, the operation resulted in a net 20 billion yuan fresh fund injection into the banking system, the smallest since November. The central bank also pumped 20 billion yuan through a seven-day reverse repurchase operation while keeping borrowing costs unchanged at 2%.
Is the bank turmoil over?... The CBOE Volatility Index (VIX), the so-called fear gauge, closed last week at its lowest level since early January 2022. The MOVE Index, which tracks Treasury market volatility, has also fallen below where it was before Silicon Valley Bank collapsed last month, Deutsche Bank analysts noted. Still, other analysts are not that quick to conclude no other major surprises are ahead. This week will bring more bank earnings reports and on Wednesday the Fed releases its latest Beige Book survey of economic conditions and that will be another indicator of the impact.
Indonesia seeks improved governance of palm oil sector... Indonesia has formed a new task force to improve governance in the palm oil plantation sector, aiming to ensure companies comply with rules including on tax payments, its deputy finance minister said. The formation of the task force followed an industry-wide audit officials launched last year after a domestic cooking oil supply scarcity led to exports of some palm oil products being stopped for three weeks, shocking the global vegetable oil market.
Cash cattle attitudes remain bullish... Traders are expecting cash cattle to trade higher again this week after strong gains and a new all-time high last week. But we fully expect the cash market will continue to trade above futures as traders remain relatively cautious buyers.
Cash hog index continues to drop... The CME lean hog index is down another 32 cents to $71.63 (as of April 13), extending the prolonged price slide. April lean hog futures, which exit the board today and will be settled against the cash index on Wednesday, finished at a 12-cent premium to today’s cash quote. May hog futures finished last Friday at an $8.82 premium to today’s cash quote.
Weekend 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
- 10:00 a.m. Export Inspections — AMS
- 11:00 a.m. Monthly Soybean Crush — NOPA
- 2:00 p.m. Livestock, Dairy, and Poultry Outlook: April 2023 — ERS
- 2:00 p.m. Sugar and Sweeteners Outlook: April 2023 — ERS
- 2:00 p.m. Potato Stocks — NASS
- 3:00 p.m. Crop Progress Report — NASS
