First Thing Today | April 18, 2022

Good morning!

Price strength to start the week... Corn futures posted contract highs overnight, with front-month May futures poking above $8.00 – the 2013 high on the continuation chart that was matched earlier this year. Wheat and soybean futures were also strong coming off the extended holiday weekend. As of 6:30 a.m. CT, corn futures are trading 7 to 8 cents higher, soybeans are 6 to 12 cents higher and wheat futures are mostly 20 to 27 cents higher. Front-month U.S. crude oil futures are trading just below unchanged, while the U.S. dollar index is around 250 points higher this morning.  

Chinese Covid lockdowns impacting impact on the world’s global supply chain... The Port of Shanghai, which handled over 20% of Chinese freight traffic in 2021, is at a virtual standstill because of roadblocks and stringent Covid test requirements. Food supplies stuck in shipping containers without access to refrigeration are rotting. Incoming cargo is now stuck at Shanghai marine terminals for an average of eight days before it’s transported elsewhere, a 75% increase since the recent round of lockdowns began. Meanwhile, cargo airlines have canceled all flights in and out of the city, and more than 90% of trucks supporting import and export deliveries are currently out of action. On Friday, China's Ministry of Industry and Information Technology said it sent a taskforce to Shanghai to work on a plan to resume production at 666 key manufacturers in the locked down city.

China’s Q1 GDP growth quickens, tops expectations... China’s economy expanded 4.8% in the first quarter of 2022, above expectations of 4.4% and faster than 4.0% growth in the previous period. However, the risk of a sharp slowdown in the coming months heightened amid widespread Covid-19 lockdowns, a prolonged downturn in the property sector and uncertainty from the war in Ukraine. Experts are warning China’s target of 5.5% economic growth for 2022 is now unrealistic because so much of daily economic life has ground to a halt. The World Bank recently revised its estimates for Chinese economic growth to 5% but noted that if its restrictive policies continue that could fall to 4%.

The week ahead in Washington... Congress remains out on its Easter recess. The focus in Washington will be the annual spring meetings in Washington of the International Monetary Fund and the World Bank. New economic forecasts are expected to show cooling global growth amid rising global inflation, the war in Ukraine and the ongoing Covid pandemic. The highlights for agriculture will be Friday’s Cattle on Feed and Cold Storage Reports from USDA.  

Texas halts all Mexican truck inspections after border chaos... Texas Governor Greg Abbott halted all Mexican truck inspections after a week of protests, traffic jams and mounting outrage from business interests on both sides of the border. Abbott signed an agreement with the governor of the border state of Tamaulipas on Friday that ends vehicle-safety checks in exchange for increased vigilance south of the international line. Tamaulipas was the fourth and final border state to ink such a deal after Abbott triggered gridlock and angry trucker protests with an April 6 crackdown on northbound commercial traffic. Although Abbott initially said his decree was intended to curb undocumented immigration and drug smuggling, Texas state troopers targeted highway-safety issues such as bad brakes and other mechanical issues. Tamaulipas has pledged “to prevent illegal immigration from Mexico into Texas,” Abbott said during a joint press conference with Tamaulipas Governor Francisco Javier García Cabeza de Vaca in the Texas border town of Weslaco on Friday. Abbott warned that if enforcement south of the border falters and undocumented migration increases, he will reimpose the program of inspecting every commercial vehicle that crosses over.

Argentine grain truckers end strike... Argentine grain truckers ended their strike last Friday following intervention by the government’s transport ministry that resulted in an “immediate increase of 20%” in freight rates and a promise to renegotiate those again in the first half of May, according the FETRA. The transport ministry also committed “to resolve the problem of diesel scarcity,” said FETRA.

India to be regular wheat exporter... India aims to become a permanent global supplier of wheat as Russia’s invasion of Ukraine hits the global grains trade and creates opportunities for the world’s second-biggest grower. Shipments from the South Asian nation may total an all-time high of as much as 15 MMT in the year that began in April, compared with more than 7 MMT last year, Piyush Goyal, food and commerce minister, said on Friday. India targets to be a permanent exporter of wheat, he said. Indian wheat has become competitive for the first time in years following the Russia/Ukraine war and drought in some major growing nations. The Indian government also wants the World Trade Organization to relax rules so that it can export wheat from state reserves to help countries that are facing a shortage due to the war, the Indian minister said. India has a huge surplus of wheat after record harvests in the past years. State-run warehouses stored almost 19 MMT of the grain at the beginning of April, more than double the level required by the government for this time of the year.

Cargill suspends palm oil purchases from Malaysia’s Sime Darby... Cargill stopped buying palm oil products from Sime Darby Plantation Bhd. after the U.S. said it found indicators of forced labor in the Malaysian grower. Cargill has suspended all new sourcing of palm oil and derivative products from Sime Darby, the world’s biggest oil palm planter by acreage, since Feb. 25 it told Bloomberg. Sime did not give a reason for the halt but said it is in talks with Cargill, who is a direct customer. Some of Malaysia’s biggest palm and rubber-glove producers have been under scrutiny in recent years over allegations of migrant worker abuse. The U.S. Customs and Border Protection in late January said it would seize Sime’s palm oil and related goods as it has sufficient information to determine the company’s products were made using convicts, forced or indentured labor.

China’s grain import surged in March... China imported 2.41 MMT of corn in March, up 25% from last year, while wheat imports surged 95.1% to 870,000 MT and sorghum arrivals jumped 57.5% to 1 MMT. Through the first quarter of 2022, China’s imports were up 5.5% for corn, 4.6% for wheat and 36.9% for sorghum compared with the same period last year.

Demand for China’s wheat reserves remains strong... China sold 531,469 MT, or 96.4%, of wheat reserves put up for auction at an average price of 2,841 yuan ($446) per metric ton. The sales price was up from 2,709 yuan ($425) per metric ton the previous week.

China’s pork exports plunged in March as domestic production jumped... China imported 140,000 MT of pork last month, down 70% from the previous year. Through the first three months of this year, Chinese pork imports totaled 420,000 MT, down 64.2% from the same period last year. A strong increase in domestic production has sharply reduced China’s domestic pork prices and the need to import foreign supplies. China’s pork production totaled 15.6 MMT in the first three months of this year, up 14% from the same period last year and the highest quarterly output since the fourth quarter of 2018. China’s hog herd declined to 422.5 million head at the end of March, down from 449.2 million head at the end of last year.

Will cash cattle strength persist?... The cash cattle market was stronger than expected last week, which has some traders expecting more strength this week. Firmer cash trade would support an extension of last week’s gains in cattle futures. But there haven’t been consecutive weeks of cash strength since mid- to late February.

Strong cash rally built into June hogs... June lean hog futures finished last week nearly $19 above the CME lean hog index, which is at $99.59 today (as of April 13). Over the previous five years, the cash index has rallied an average of $14.40 from mid-April to mid-June. While traders have a bigger-than-average cash rally built into June hogs, we still feel there’s upside potential as slaughter numbers will run well under year-ago into summer.

Weekend demand news... On Friday, USDA announced daily soybean sales of 121,000 MT to China for 2021-22 and 540,000 MT for 2022-23, along with 177,000 MT to unknown destinations for 2021-22.

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