Good morning!
Corn and wheat firmer, soybeans mixed overnight... Old-crop corn futures posted new contract highs overnight, while new-crop December corn came with 1/2 cent of its high. Wheat was also firmer, while soybean were mixed in quiet two-sided trade. As of 6:30 a.m. CT, corn futures are trading 4 to 7 cents higher, soybeans are 2 cents lower to 2 cents higher, SRW wheat futures are 12 to 14 cents higher, HRW futures are 6 to 8 cents higher and HRS wheat is mostly 8 to 9 cents higher. Front-month U.S. crude oil futures are trading around 50 cents lower, while the U.S. dollar index is up more than 600 points, challenging the 2017 high.
Indonesian palm oil ban expected to be short-lived... Indonesia should be able to resolve the country’s cooking oil shortages not long after the Muslim festival of Eid al-Fitr, which falls in early May, according to Sahat Sinaga, a senior official at the industry-run Indonesia Palm Oil Board. He’s confident additional supplies would ease domestic prices. “Expectation is the ban will be lifted in three weeks,” said Sathia Varqa, co-founder of Singapore-based Palm Oil Analytics. The ban will remove 1.52 MMT of palm oil products a month from already-tight global vegoil supplies, Varqa added.
Higher cooking oil prices around the world... Global cooking oil prices have been rising since the pandemic began for multiple reasons, including poor harvests in South America, Covid-related labor shortages and steadily increasing demand from the biofuel industry, the Los Angeles Times reports. The war in Ukraine — which supplies nearly half of the world’s sunflower oil, with Russia supplying an additional 25% — has interrupted shipments and sent cooking oil prices spiraling. Vegetable oil prices hit a record high in February, then increased an additional 23% in March, according to the United Nations Food and Agriculture Organization. Soybean oil, which sold for $765 per metric ton in 2019, was averaging $1,957 per metric ton in March, the World Bank said. Palm oil prices were up 200% and are set to go even higher after Indonesia’s export ban. Longer term, the crisis may lead countries to reconsider biofuel mandates, which dictate the amount of vegetable oils that must be blended with fuel in a bid to reduce emissions and energy imports. In the U.S., for example, 42% of soybean oil goes toward biofuel production, said Dr. Joe Glauber, a senior research fellow at the International Food Policy Research Institute and former top USDA economist.
Weekly Export Sales Report out this morning… For the week ended April 21, traders expect:
| 2021-22 expectations (in MT) | 2021-22 last week | 2022-23 expectations (in MT) | 2022-23 last week |
Corn | 900,000-1,600,000 | 879,212 | 800,000-1,250,000 | 389,550 |
Wheat | 0-175,000 | 26,347 | 150,000-400,000 | 238,370 |
Soybeans | 250,000-800,000 | 460,244 | 250,000-750,000 | 1,240,000 |
Soymeal | 100,000-250,000 | 101,825 | 0-50,000 | 27,000 |
Soyoil | 0-24,000 | 1,197 | 0-10,000 | 0 |
Potential impact of deglobalization... Goldman Sachs economists calculated what the threat of deglobalization will mean for U.S. inflation. In a new report, they analyzed U.S. imports, production, import prices and producer prices for more than 300 manufacturing industries in a bid to estimate the relationship between American inflation and goods imports from China and other low-wage countries. In either the case of a “blanket deglobalization” or a widescale reshoring of production back to the U.S. from China, Goldman predicted a boost to annual inflation, excluding energy and food costs, of 0.4 percentage points. “Slowbalization” is “one more reason to expect somewhat higher inflation and thus higher nominal interest rates than before the pandemic,” they warned.
Mexico’s president pushes to lower price of 25 basic food staples... Members of Mexican President Andres Manuel Lopez Obrador’s Cabinet are in the final stages of negotiations with businesses and food producers to freeze the domestic prices of 25 food staple items to control inflationary effects on households, El Economista reported. If Mexico freezes the domestic prices of food and implements other measures to fight inflation, Lopez Obrador will likely maintain his high approval rating and ensure the continued prominence of his Morena party and alliances in Congress. However, the action would likely reduce the profits of Mexico’s agricultural and food business sectors. Additionally, if food prices rise or remain high once the food subsidies are lifted, Mexico would likely experience intense inflationary pressure. Mexico’s consumer price index has risen 7.72% from January to April, compared with 6.05% during the same time span in 2021. Global food prices have risen dramatically due to the Covid-19 pandemic and Russia’s invasion of Ukraine, which threatens Mexico’s access to food products as a net food importer.
House Dems plan legislation, not ruling out gas tax holiday... A federal gas tax holiday is “part of the discussion” among Democratic leadership about how Congress can help lower gasoline prices, caucus Chairman Hakeem Jeffries (D-N.Y.) said Wednesday. He said Democrats plan to pass legislation addressing gas prices. But he responded that “nothing has been ruled in, and nothing has been ruled out” when asked if leadership would support a holiday, something several Democrats, including Sens. Mark Kelly (Ariz.) and Maggie Hassan (N.H.) who introduced legislation in February providing for a holiday, have supported.
Russia’s biggest oil production slump since end of Soviet era... Russia is facing its biggest slump in oil production since the final days of the Soviet Union. Russia estimated its oil output could fall as much as 17% this year, signaling the worst crash since the 1990s, according to a new report.
China to eliminate coal import tariffs for 11 months... China will cut import tariffs for all types of coal to zero from May 1, 2022, until March 31, 2023, the finance ministry said, as Beijing strives to ensure energy security amid soaring global prices and supply disruption concerns. Import tariffs for anthracite and coking coal, mainly used in steelmaking, will be cut to zero from the current 3%, and rates for other kinds of coal will drop from the present 3% to 6%. Chinese officials have noted the vital role of coal in the country’s energy mix despite climate pledges to gradually reduce coal use and carbon emissions.
House hearing shows divide on changes for meat sector... The House Ag Committee hearing on the meat sector again underscored the partisan divide on the panel about who and what were to blame for recent cattle market trends — more so than was seen during the Senate session Tuesday, confirming lawmakers appear split on the root causes and proposed solutions. As for any next step, Chairman David Scott (D-Ga.) closed the hearing by saying the committee will consider legislation addressing cattle market reforms. He provided no details as to the form of the legislative initiative. A forthcoming Democratic package, some sources say, will likely include legislation giving the Federal Trade Commission more authority to go after fuel price gouging along with bills to address meat industry chokepoints.
Cargill paying a premium to Black farmers gets attention at House hearing... During Wednesday’s House Ag hearing on the meat sector, Republicans on the committee challenged Cargill Inc. CEO David MacLennan over a program that pays a premium to Black farmers for cotton. Cargill started the program at the request of retail giant Target and plans to expand it to other minority farmers and women, MacLennan said. “I hope you get sued over that,” Rep. Austin Scott, R-Ga., told him. “I think that’s illegal and unconstitutional.” MacLennan said it was fair to target assistance to minority farmers. “I don’t think white men are underrepresented in the farming industry today,” he said.
USDA hosts Mexican counterparts in final step to end potato trade dispute... USDA’s Animal and Plant Health Inspection Service (APHIS) said on Twitter it is appreciative of a “successful California potato site visit with our Mexican counterparts.” The visit is part of the deal reached between the two countries to pave the way for the U.S. to ship fresh potatoes into Mexico, potentially putting a years-long trade dispute to rest. “We look forward to the successful export of U.S. potatoes to Mexico by May 15,” APHIS said via social media. USDA announced in early April the two sides had concluded all the needed plant health protocols and agreed to a final visit by Mexican officials in April that would finalize the expanded access to the Mexican market no later than May 15 for all U.S. table stock and chipping potatoes. However, given the history of the dispute, some in the U.S. remain wary the matter will be finally resolved.
Wholesale beef prices tumble... Wholesale beef prices fell $2.26 for Choice boxes and $3.91 for Select on Wednesday. Over the past week, Choice beef dropped $6.91 and is down $11.56 from the April 12 peak. Packers are cutting prices to keep product moving through the pipeline as demand waned after post-Easer orders were filled. But a seasonal rise in demand and prices is likely in May as retailers gear up for Memorial Day and Father’s Day features.
Hog futures premium to continues to narrow... The CME lean hog index is down 55 cents today, ending the recent string of strength. But futures’ premiums to the cash index dropped to $1.835 for May hogs and $8.01 for the June contract as of Wednesday’s settlements. Even if the cash index shows more near-term weakness, it’s unlikely traders would tighten those premiums much more, as seasonally, prices strengthen rather sharply into mid-summer.
Overnight demand news... Exporters reported no tenders of 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
- 7:30 a.m. Weekly Export Sales — FAS
- 2:00 p.m. Egg Products — NASS
- 2:00 p.m. Meat Animals - PDI — NASS
- 2:00 p.m. Milk - PDI — NASS
- 2:00 p.m. Poultry - Production and Value — NASS