First Thing Today | April 29, 2022

Good morning!

Soybeans lead overnight price strength... Soybean futures gained more overnight than they lost on Thursday, making new highs for the week. Wheat and corn also firmed. As of 6:30 a.m. CT, corn futures are trading steady to 3 cents higher, soybeans are 8 to 21 cents higher, SRW wheat is 8 to 9 cents higher, HRW wheat is 2 to 4 cents higher and HRS wheat is mostly 2 to 3 cents higher. Front-month U.S. crude oil futures are around $1 higher and the U.S. dollar index is more than 700 points lower this morning.

Initial analysis of Biden’s farm policy proposal... The Biden administration ask Congress to significantly boost some commodity loan rates for two years, extend the loan term to 12 months for 2022 and provide a $10 per acre incentive paid through crop insurance premiums to producers who double-crop soybeans and wheat. The following is initial analysis of the administration’s farm policy proposals, based on our communication with several contacts:  

• The projected market prices are significantly above loan rates (even these new loan rates). So, while it may be nice to have a little more liquidity at harvest, these loans will likely all have to be repaid. If the problem is tight margins due to historically high costs of production, how is a farmer supposed to get excited about a loan that must be repaid within the marketing year?
• Would the double-crop incentive only be for counties with approved double cropping?  Regardless, what is $10 per acre payment supposed to incentivize that the market won’t already?
• Since Congress would have to approve all of this, why aren’t they sending up a proposal to help offset skyrocketing costs?
• The proposal in total is estimated to cost $400 million over two years. Are there costs associated with the significant boosts in selected commodity loan rates?
• This is clearly a proposal that shows the administration’s concern about 2023 crops since little if anything can be done to impact 2022-crop plantings.
• This could skew plantings in 2023 if corn prices decline relative to soybeans and wheat.
• The crop insurance program again is being used to try to adjust farmer planting behavior.

EPA to forward final RFS plans to OMB for review soon... Reuters reported EPA would be sending its final 2020, 2021 and 2022 Renewable Volume Obligations (RVOs) under the Renewable Fuel Standard (RFS) to the Office of Management and Budget (OMB) for review “by early next week.” That review can take up to 90 days. Another EPA effort that would need to go to OMB soon for review is it proposal on how to set RFS levels for 2023 and beyond. Indications are an announcement of that proposal will come potentially in late-June/early July and be finalized by the end of the year. But it would likely face an extensive review by OMB given the potential implications for the program. And there will be several groups seeking meetings with OMB on the proposal, including biofuel backers and biofuel opponents.

Germany drops opposition to Russian oil ban... German representatives to the EU have lifted their objection to a full a Russian oil embargo, the Wall Street Journal reports, increasing the likelihood the bloc will move forward with its plans to adopt a phased-in Russian oil ban. Details on the timeline for the phased-in ban are unclear since Germany will need time to secure alternative supplies. Still, some officials suggested the EU could move to vote on the embargo as early as next week. The EU imports between 3 and 3.5 million barrels of oil a day from Russia, sending just under $400 million in payments daily. That amounts to some 27% of EU oil imports. Oil and gas revenues accounted for 45% of Russia’s federal budget in 2021, according to the International Energy Agency.

Pelosi nixes gas tax holiday... Congressional Democrats will steer clear of a gas tax holiday in upcoming legislation meant to lower prices. House Speaker Nancy Pelosi (D-Calif.) referred to such a measure as merely a PR move. “The pros of it are it’s good PR,” she said at a press conference. “The cons are that there’s no guarantee that the saving, the reduction in the federal tax, that would be passed on to the consumer,” she said, noting the lost revenue would have to be replaced elsewhere. Instead, Democrats will pursue legislation to attack oil companies as manipulating the marketplace. “Big Oil has profiteered and exploited the marketplace,” Pelosi said. She was joined at the press conference by Senate Majority Leader Chuck Schumer, House Energy and Commerce Chairman Frank Pallone (D-N.J.), and Senate Commerce Chair Maria Cantwell (D-Wash.). They declined to offer specifics about the legislation. But Schumer made it clear Democrats think the public is receptive to the idea of blaming the industry for high gas prices.

China will adjust policy to support economy... China will step up macroeconomic policy adjustments to stabilize the economy as challenges and risks increase, state media quoted the Politburo, a top decision-making body of the ruling Communist Party. Beijing will adopt a package of policies to support Covid-hit industries and small firms, back healthy development of the property market and ensure stable operations of capital markets, while reining in major risks and guard against systemic risks.

EU lowers wheat crop, but still expects record exports... The European Commission lowered its forecast for the 2022-23 EU wheat crop by 1.2 MMT to 130.1 MMT. Despite the cut to production, the commission left its 2022-23 wheat export forecast at a record 40 MMT. The commission lowered its 2021-22 wheat export outlook by 1 MMT to 32 MMT.

China to sell more soybean reserves... China will auction another 500,000 MT of imported soybeans from state-owned reserves on May 6. Beijing has been selling state-owned soybean stocks to boost domestic prices and ease soymeal prices.

U.S. reports first human case of H5 bird flu... The first known human case of H5 bird flu in the U.S. was detected in a person in Colorado, the Centers for Disease Control and Prevention (CDC) said. The person that tested positive for avian influenza A(H5) virus was involved in the culling of poultry presumed to have had H5N1 bird flu, CDC said. It’s possible the person may not have actually been infected with the virus, the Colorado Department of Public Health and Environment (CDPHE) noted, suggesting the virus may have been present in his nose due to close contact with infected poultry but did not cause an infection. “We want to reassure Coloradans that the risk to them is low,” said Dr. Rachel Herlihy, a state epidemiologist at CDPHE.

China’s sow herd declines... China’s sow herd declined 3.3% in March to 41.9 million head, down 3.1% from last year. China had 422.5 million head of hogs at the end of March, down 5.9% from the previous month but up 1.6% from last year, according to the country’s ag ministry.

Choice beef firms, movement stays strong... Choice boxed beef prices firmed 69 cents Thursday, ending a recent string of declines. Despite the higher prices, packers moved 168 loads of beef, including 160 Choice boxes. The strong pickup in beef movement the past three days suggests retailers have started buying ahead of the upcoming grilling season and major “beef” holidays.

Hog/pork cash fundamentals weaken... The CME lean hog index is down 53 cents today (as of April 27) following a 55-cent decline Thursday. The pork cutout value dropped $1.02 yesterday amid sharp declines in bellies, butts and ribs. Softening cash fundamentals may limit followthrough strength in hog futures to close out the week after corrective gains Thursday.

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

• 2:00 p.m. Annual milk production and factors affecting supply — ERS
• 2:00 p.m. Vegetable and Pulses Outlook: April 2022 — ERS
• 2:00 p.m. Agricultural Prices — NASS
• 2:30 p.m. Commitments of Traders — CFTC