First Thing Today | June 30, 2022

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Good morning!

Price pressure ahead of USDA reports... Corn and wheat futures (aside from HRW) extended Wednesday’s losses overnight, while soybeans pulled back from recent gains. As of 6:00 a.m. CT, corn futures are trading 5 to 6 cents lower, soybeans are 1 to 5 cents lower, SRW wheat is 2 to 4 cents lower, HRW wheat is 1 to 3 cents higher and HRS wheat is 3 to 5 cents lower. Front-month U.S. crude oil futures are around 50 cents lower and the U.S. dollar index is about 250 points higher this morning.

Acreage, Grain Stocks data out later today... USDA will release its Acreage and Grains Stocks Reports at 11 a.m. CT. Based on a Reuters poll, analysts expect USDA to estimate plantings at 89.861 million acres for corn (89.490 million in March), 90.446 million acres for soybeans (90.955 million), 47.017 million acres for wheat (47.351 million) including 10.844 million acres of spring wheat (11.200 million) and 12.194 million acres for cotton (12.234 million). June 1 stocks are expected to total 4.343 billion bu. for corn (4.111 billion bu. on June 1, 2021), 965 million for soybeans (769 million bu.) and 655 million bu. for wheat (845 million bu.).

Weekly Export Sales Report out this morning... For the week ended June 23, traders expect:

 

2021-22 expectations (in MT)

2021-22

last week

2022-23

expectations (in MT)

2022-23

last week

Corn

200,000-700,000

671,919

100,000-500,000

358,407

Wheat

NA

NA

200,000-600,000

477,776

Soybeans

(100,000)-300,000

29,348

100,000-500,000

264,978

Soymeal

40,000-200,000

(8,248)

0-50,000

42,325

Soyoil

0-25,000

1,376

0-10,000

0

 

Deal to reopen Ukrainian grain exports ‘more optimistic than reality’... A deal to end Russia’s blockade of Ukrainian seaports and grain exports remains distant because Moscow is using talks to push its ambition to dominate the Black Sea, Kyiv’s top negotiator said. Turkey and the United Nations are trying to broker an end to Russia’s naval blockade in the Black Sea. But Taras Kachka, Ukraine’s deputy minister for the economy and lead trade negotiator, said Russia’s efforts to conquer the country’s south were preventing a deal and rumors of a breakthrough were “more optimistic than reality… If there are talks, we will participate. But that doesn’t mean we will agree to any option that is on the table,” Kachka said. “Any attempts to base a food security solution on the goodwill or grace of Russia will not work or be trusted. Grain as a commodity is better than gas because the demand is not flexible. For gas, you can just switch to coal. Everyone needs bread,” Kachka added. He said Ukraine would accept a third country’s naval presence to escort vessels, including “Her Majesty’s fleet or the U.S. or Turkey”. But western countries are opposed to direct confrontation with Russia, despite their financial and weapons support for Ukraine. Meanwhile, a government official in Kyiv told Politico a plan is under discussion that would open blocked Ukrainian ports, without the need to de-mine the waters in the area. A security guarantee provided by Turkey or another state — likely one within NATO — is now the crucial missing piece of a deal and a plan could be finalized within days, the official said.

Russian: Seizure of frozen assets will prompt retaliatory action... Reuters reports Russia’s foreign ministry “hinted on Wednesday that it had not dropped the idea of seizing Western-owned assets and businesses in the country, as a top official sharply criticized governments that have hit Moscow with sanctions.” Reuters says “in a combative media briefing,” Foreign Ministry spokesperson Maria Zakharova “warned that Russia was prepared to ‘act accordingly’ if the West decided to use Russia’s frozen state assets — chief among them being around $300 billion of central bank foreign currency reserves.” Zakharova is quoted as saying, “We should not forget about the foreign assets of Western countries, businesses and citizens who are located on the territory of our country.”

Europe rushing to rebuild natural gas reserves amid deep cuts in Russian supplies... Europe is walking a thin line to avoid a winter energy crisis as it tries to rebuild lost natural gas supplies from Russia. With a target of ensuring inventories are 80% full by Nov. 1, EU countries are boosting energy savings, buying more liquefied natural gas and subsidizing the rapid restocking of storage sites. While storage filling rates are on track to hit 90% by November, the EU still faces a range of obstacles in meeting its gas reserve goal. More than 20 European LNG projects have been announced or accelerated since March, with the potential to replace about 80% of total imports from Russia. Meanwhile, Austria is preparing to seize one of Europe’s biggest natural gas-storage depots from Russia’s Gazprom as soon as tomorrow, when a new law enters into force that compels operators to fill the site’s capacity. The Alpine country gets about 80% of its gas from Russia and its export-heavy economy is counting on flows for at least another five years.

Argentine trucker strike threatens grain exports... The provincial Road Safety Agency said truckers protesting high diesel prices and shortages prevented the passage of trucks on roads in Santa Fe, home to port city Rosario, which ships around 80% of the country’s ag exports. More than 80% of grains bound for export are transported by trucks in Argentina. “As of today (Wednesday), we are missing more than 400,000 MT (of merchandise), so we are close to running out of grains,” Gustavo Idigoras, the head of the grain exporters and crushers chamber in Buenos Aires, told Reuters.

Indonesia mulls raising palm oil mix in biodiesel... Indonesia is considering expanding the mandatory palm oil mix in its biodiesel to 35%, which would be up five percentage points from the current level, a government official said, as authorities look for ways to stimulate palm fruit purchases from farmers after a slowdown in exports. Bloomberg News reported the world’s biggest palm oil producer was looking at increasing the biodiesel mandate to cut fuel import costs and absorb palm oil stockpiles. Palm oil inventories ballooned after Indonesia stopped exports of crude palm oil and some other derivatives for three weeks to May 23 in a bid to contain soaring domestic cooking oil prices.

Inflation- and recession-watch observations...

  • About 90% of investors expect the U.S. to enter a recession before the end of 2023, according to a survey by Deutsche Bank published Thursday.
  • The personal consumption expenditures price index, due to be released later today, should offer a broad gauge of whether inflation in the economy is peaking. The index is Fed officials’ preferred measure of rising prices and is likely to influence how aggressively it opts to raise interest rates at future policy meetings.
  • After initially discounting postpandemic inflation as transitory, the Fed and other global central banks have pivoted to making fighting it with interest-rate increases their most important priority, even if it means halting economic growth.
  • Mortgage applications to purchase a home dropped sharply last week and are now down 24% vs. last year. Meanwhile, a higher percentage of borrowers have been tapping adjustable-rate mortgages to reduce initial monthly payments.
  • More low-income households surveyed by the Census Bureau are behind on rent as of early June.
  • Cyclical cargo railcar loadings are indicating a slowdown.

China’s factory sector expands for first time in four months... China’s factory sector snapped three months of contraction in June, as authorities lifted strict Covid lockdowns in Shanghai, buoying growth in production and new orders. China’s official manufacturing purchasing managers index (PMI) rose to 50.2 in June from 49.6 in May. A sub-index for production stood at 52.8, the highest since March 2021, while new orders also expanded for the first time in four months. Though factory activity in China is gaining momentum from lengthy Covid lockdowns, headwinds, including a subdued real estate market, soft consumer spending and fear of recurring infections, persist.

China must keep cuts to interest rates, RRR as policy tools to boost economy... China’s central bank needs to use all of its policy options in supporting an economic recovery, a former senior official at the country’s foreign exchange regulator said. “Before the economy returns to a reasonable growth range, it is necessary to maintain sufficient policy tools, among which RRR (bank reserve requirement ratios) and interest rate cuts should still be policy options,” Guan Tao, global chief economist at BOC International and a former official at the State Administration of Foreign Exchange, was quoted in a report by state-run Shanghai Securities News. “The time window for China's monetary policy does not depend on the Federal Reserve's interest rate hike, but rather on the actual state of domestic economy,” Guan said.

Two SCOTUS rulings coming today... Today will be the last decision day for the Supreme Court’s summer term. The court has left two controversial cases: rulings on whether President Joe Biden’s administration can end the “Remain in Mexico” border policy and a major case on EPA’s power to tamp down greenhouse gas emissions. Meanwhile, Justice Stephen Breyer is officially retiring at 11 a.m. CT. He will be replaced by Ketanji Brown Jackson, the first Black woman to serve as a Supreme Court justice.

As expected, USDA taps CCC for $1 billion for school meal programs... The Biden administration announced USDA will provide nearly $1 billion in additional funding to schools to support the purchase of American-grown foods for their meal programs. The $943 million boost from the department is provided through USDA’s Commodity Credit Corporation (CCC). Funds will be distributed by state agencies to schools across the country, so they can purchase domestically grown foods for their meal programs. This assistance builds on the $1 billion in Supply Chain Assistance funds USDA previously allocated in December 2021, which states can use this school year as well as next to provide schools with funding for commodity purchases.

OPEC+ ministers meet today... The global oil cartel will discuss production policy as oil prices approach their first dip since November. The oil cartel and partner nations are expected to approve a slight increase in August production.

Cash cattle traded steady/firmer... Cash cattle sources reported trade in the $137 to $141 range in the Southern Plains, with bids around $232 in the northern dressed market. Those prices are generally steady to firmer compared with last week. August live cattle futures remain well below the cash market, signaling traders sense cash prices will soften through summer.  

H&P Report mostly neutral... USDA’s Hogs & Pigs (H&P) Report on Wednesday showed the June 1 inventory down 0.9%, with the marketing herd also down 0.9% and the breeding herd 0.8% smaller than year-ago. Those figures were virtually in line with traders’ expectations and should have no significant market impact this morning.

Overnight demand news... South Korea purchased 136,000 MT of corn to be sourced from the U.S., South America or South Africa. Egypt purchased 815,000 MT of wheat, including 350,000 MT French, 240,000 MT Romanian, 175,000 MT Russian and 50,000 MT Bulgarian.

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

 

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