First Thing Today | June 14, 2022

Good morning!

Corn and wheat weaker, soybeans firmer overnight... Soybeans rebounded some from Monday’s sharp losses, while corn and wheat traded lower overnight but held above yesterday’s lows. As of 6:30 a.m. CT, corn futures are trading 3 to 5 cents lower, soybeans are 5 to 9 cents higher and wheat futures are 6 to 11 cents lower. Front-month U.S. crude oil futures are around 75 cents higher and the U.S. dollar index is holding near unchanged this morning.

Ukraine asks Europe for temporary grain storage... Bloomberg reports Ukraine asked European partners for temporary grain storage to help with its upcoming harvest. Ukraine’s Deputy Agriculture Minister Markian Dmytrasevych said Russian attacks and occupation in southern and eastern areas of the country reduced grain storage capacity by 15 MMT.

Corn CCI rating slips, soybeans start above average... When USDA’s weekly condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn crop dropped 2.8 points to 379.7, though that was still 5.8 points above the five-year average. The soybean crop started the growing season with a 370.9 CCI rating, 12.9 points above last year at this time and 3.2 points above the five-year average. The first spring wheat CCI rating was 2.8 points below average for the date. Click here for details.

Crop progress & Condition Report highlights… Following are highlights from USDA’s crop progress and condition update for the week ended June 12.

• Corn: 97% planted (97% five-year average), 88% emerged (89% average), 72% rated good/excellent (73% last week)
• Soybeans: 88% planted (88% average), 70% emerged (74% average), 70% rated good/excellent (62% last year)
• Spring wheat: 94% planted (99% average), 72% emerged (93% average), 54% rated good/excellent (37% last year)
• Winter wheat: 86% headed (90% average), 10% harvested (12% average)
• Cotton: 90% planted (88% average), 14% squaring (15% average); 46% rated good/excellent (48% last week)

Consultant raises South American crop estimates... While yields on early harvested safrinha corn in Brazil are poor, Conab again increased its planted acreage figure last week. As a result, Crop Consultant Dr. Michael Cordonnier raised his Brazilian corn crop estimate by 3 MMT to 110 MMT. He also raised his Brazilian soybean crop estimate by 1 MMT to 123 MMT, noting better-than-expected yields in Rio Grande do Sul and northeastern states. In Argentina, Cordonnier raised his soybean estimate by 1 MMT to 42 MMT, citing favorable yields in northern areas. He left his Argentine corn crop peg at 49 MMT.

Indonesia details palm oil export taxes... Details of the new regulations were in line with previous announcements, including lowering the maximum levy rate for crude palm oil to $200 a MT from $375, effective until July 31. The levy rate will be raised in August, according to the finance ministry regulations. Indonesian exporters pay a levy and an export tax on shipments. Overall, the combined ceiling for both levy and tax would be reduced to $488 per MT from $575 per MT. The new rates apply to sales that are tied to the domestic distribution of cooking oil. The trade ministry recently bumped up the allocation for such exports to 2.25 MMT, from about 1 MMT previously. As of today, the ministry has issued export permits for 566,614 MT of crude palm oil and its derivatives under this scheme. Separately, companies are currently allowed to sell stocks built up during the export ban without having to join a domestic cooking oil program. But they will have to pay a higher export tax of a maximum $488 per MT for crude palm oil, bringing the combined levy and tax to $688 a MT.

Fed’s math: How many hikes, how deep?... The Fed is on track to raise interest rates seven times this year, with the third rate hike expected to be a 50-basis-point increase Wednesday at the conclusion of the Federal Open Market Committee meeting. But The Wall Street Journal reports Federal Reserve officials are starting to think about raising rates by three quarters of a percentage point. That would be an abrupt shift from the Fed’s carefully orchestrated message that it planned to move in half-percentage points both at this meeting and in July. Last Friday’s stronger-than-expected inflation data could have scrambled those plans and officials are also worried about recent surveys showing households’ expectations of future inflation have increased. Fed officials worry those expectations could be self-fulfilling. Some forecasters, such as investment banks Barclays and Jefferies, said Friday they believed the inflation data would prompt a 75-basis-point rate rise. Other firms, such as JPMorgan Chase & Co. and Goldman Sachs Group Inc., joined in the same call on Monday.

Electricity prices adding to inflation worries... Electricity prices are up 12% on the year, according to the latest inflation figures, and are likely to continue rising. That will push up the power bill for the average American household by $90 to $540 between June and August, according to the National Energy Assistance Directors Association. In the hotter parts of the country, air conditioning accounts for as much as 27% of summer electric bills.

S&P 500 in a bear market... The S&P 500 index ended Monday with a greater than 20% decline from its recent peak. Since 1929, the S&P has experienced more than two dozen bear markets. This time, it has been a quicker-than-average descent into bear territory, at 111 trading days since the index’s Jan. 3 record high, according to Dow Jones Market Data. Only the 1987, 2009 and 2020 bear markets took fewer trading days to achieve a 20% drop among the past 10 bear markets. The average bear market peak-to-trough decline for the S&P has been almost 36%, and the index has taken a median of 52 trading days to bottom out. That would mean another 10 weeks or so of continued declines, putting the bottom at roughly late August.

Worries about South Korean economy grow amid trucker strike... South Korea’s prime minister warned Tuesday the disruption of cargo transport could cause “irrecoverable” damages on the country’s economy, as a nationwide truckers’ strike entered its eighth day. About 6,840 truckers were rallying Monday at 14 sites across South Korea. The trucker strike has shut steel plants, disrupted car production and delayed shipments of raw materials needed for semiconductors. In the past week, the cost of those disruptions has amounted to $1.2 billion, South Korean officials say. Truckers are striking over pay and high diesel costs.

Wall Street Journal: WTO struggling for relevance... The World Trade Organization is holding a ministerial meeting this week in Geneva for the first time since 2017 and must grapple with several problems, including how to respond to food shortages amid rising commodity prices, the continuing pandemic shock and other long-running issues such as the depletion of global fishing stocks. Major economies such as the U.S. and the European Union are moving away from globalization and focusing more on domestic production and trade with like-minded nations.

Weak start for wholesale beef trade... Wholesale beef prices weakened 78 cents for Choice and $1.44 for Select, while packers moved only 93 loads on Monday. Given wholesale weakness and Monday’s sharp pressure on futures, traders expect cash cattle prices to soften this week.

Cash hog index ends mini slump... The CME lean hog index is 21 cents higher to $107.40, ending a three-day price slide. June hogs ended Monday 60 cents above that level, while the July and August contracts finished with discounts of 72 1/2 cents and $3, respectively.

Overnight demand news... Japan is seeking 186,441 MT of milling wheat in its weekly tender. Bangladesh tendered to buy 50,000 MT of optional origin milling wheat.

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

• 11:00 a.m. Cotton and Wool Outlook: June 2022 — ERS
• 11:00 a.m. Oil Crops Outlook: June 2022 — ERS
• 2:00 p.m. Feed Outlook: June 2022 — ERS
• 2:00 p.m. Rice Outlook: June 2022 — ERS
• 2:00 p.m. Wheat Outlook: June 2022 — ERS
• 2:00 p.m. Fresh Apples, Grapes, and Pears: World Markets and Trade — FAS