First Thing Today | June 23, 2022
Good morning!
Heavy price pressure overnight... Mounting recessionary concerns triggered heavy liquidation pressure in the grain and soy markets overnight. As of 6:30 a.m. CT, corn futures are trading 11 to 19 cents lower, soybeans are 35 to 38 cents lower and wheat futures are mostly 14 to 20 cents lower. Front-month U.S. crude oil futures are around 50 cents lower and the U.S. dollar index is more than 400 points higher this morning.
Export sales data delayed until Friday... Due to Monday’s federal holiday, USDA’s export sales data for the week ended June 16 is delayed until Friday.
Powell back in front of congressional panel today... On Wednesday, Federal Reserve Chair Jerome Powell told the Senate Banking Committee the central bank’s battle against inflation could lead it to raise interest rates high enough to cause a recession, though that’s not the intent. Powell will return to Capitol Hill this morning for the second of two days of testimony, this time before the House Financial Services Committee. Meanwhile, Philadelphia Fed President Patrick Harker said the U.S. economy might see a modest contraction in growth. And Chicago Fed President Charles Evans said after Powell’s testimony that another 75-basis-point hike is a “very reasonable place to have a discussion” in the July FOMC meeting. Economists and investors are growing increasingly concerned the Fed’s fight against inflation will trigger a contraction in the U.S. economy.
Euro zone business growth slows substantially... Euro zone business growth has slowed significantly this month – and far more than expected – as consumers worried about rising bills chose to stay at home and delay shopping to save money. The S&P Global Composite purchasing managers index (PMI), seen as a good indicator of overall economic health, dropped to 51.9 in June from 54.8 in May – far below the forecast of 54.0 in a Reuters poll and its lowest level since February 2021. S&P Global’s industry PMI fell from 54.6 to a nearly two-year low of 52.0.
Canadian inflation nears 40-year high... Canada’s annual inflation rate accelerated to 7.7% in May – the highest since January 1983 – all but assuring market expectations the country’s central bank will raise interest rates by 75 basis points in July. Economists expect inflation in Canada to surpass 8% when June data are released, and possibly stay above 7% for most of 2022.
U.S. urges countries to seek its help with food, fertilizer imports from Russia... Countries should ask for help if they have any problems importing Russian food and fertilizer, a senior U.S. official said on Wednesday, stressing that such goods were not subject to U.S. sanctions over Moscow’s war in Ukraine. “Nothing is stopping Russia from exporting its grain or fertilizer except to own policies and actions,” U.S. State Department Bureau of Economic and Business Affairs Assistant Secretary, Ramin Toloui, said. But he added that concerns had been raised about “so-called over compliance with sanctions.” Facilitating Russian grain and fertilizer exports is a key part of attempts by United Nations (UN) and Turkish officials to broker a package deal with Moscow that would also allow for shipments of Ukrainian grain from the Black Sea port of Odesa. “We are fully supportive of this and want to see that play out,” Toloui said of the UN efforts. “We’ll continue close coordination with the U.N. delegation and the government of Ukraine on ways to mitigate the impacts to global food security of (Russian President Vladimir) Putin’s war in Ukraine.”
Turkey investigating claims Russia stole Ukrainian grain... Turkey is investigating claims that Ukrainian grain has been stolen by Russia and says it would not allow any such grain to be brought into the country. Kyiv’s ambassador to Ankara said in early June Turkish buyers were among those receiving grain that Russia had stolen from Ukraine. The Kremlin reiterated its assertion that Russia has not stolen any grain from Ukraine.
China pushes for removal of U.S. tariffs... China’s commerce ministry said the sooner U.S. tariffs on Chinese goods are lifted, the sooner consumers and companies will benefit. It says removing all additional tariffs on Chinese goods would benefit China, the U.S. and the world. The comments come on the heels of U.S. Trade Representative Katherine Tai on Wednesday saying the U.S. should keep tariffs on Chinese goods in place as “a significant piece of leverage” against Beijing. She also said lifting the tariffs would have limited impacts on controlling short-term inflation.
Cold Storage Report out this afternoon... The data will detail frozen meat stocks at the end of May. The five-year average is a 34.5-million-lb. decline in beef stocks and a 28.7-million-lb. drop in pork stocks during the month.
Final push on holiday beef demand... Wholesale beef movement has been strong this week in what is likely the last push of retailer demand for Fourth of July features. Barring an unexpected surge in demand through the heart of summer, beef purchases are likely to slow. Cash cattle price typically soften as summer beef demand wanes, though currentness of feedlots and recent heat-related death losses may limit pressure on the cash market this year.
Pork margins stay negative... After an extended period of positive margins, pork packers have been cutting in the red recently. HedgersEdge.com estimated pork margins at nearly $30 per head in the red as of yesterday. The negative margins could stall the recent assent in the cash hog market, especially once slaughter supplies start to build during the second half of the year.
Overnight demand news... Japan purchased 168,330 MT of wheat in its weekly tender, including 59,080 MT U.S., 63,820 MT Canadian and 45,430 MT Australiana. Saudi Arabia tendered to buy 480,000 MT of 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
- 9:30 a.m. Weekly Ethanol Production — EIA
- 2:00 p.m. Coffee: World Markets and Trade — FAS
- 2:00 p.m. Chickens and Eggs — NASS
- 2:00 p.m. Cold Storage — NASS
- 2:00 p.m. Livestock Slaughter — NASS
