First Thing Today | May 12, 2022

Good morning!

Mostly weaker tone overnight... Soybeans and wheat pulled back from Wednesday’s gains, while corn was mostly firmer overnight. Trade was quiet as traders await USDA’s May crop reports later this morning. As of 6:30 a.m. CT, corn futures are trading 2 to 3 cents higher, soybeans are 5 to 7 cents lower, winter wheat futures are 2 to 4 cents lower and spring wheat is around 2 cents lower. Front-month U.S. crude oil futures are around $1.00 lower and the U.S. dollar index is about 650 points higher.

May crop reports out later this morning... USDA’s May 12 Supply & Demand Report at 11 a.m. CT will be the first official release of balance sheets for 2022-23, which will incorporate March planting intentions. The big question with corn is whether USDA lowers its yield from trendline to reflect the slow planting pace as of early May — something that has happened only five years in the past, with 2013 being the most recent. Globally, focus will be on how much more “Ukraine factor” is added to the old-crop grain and oilseed balance sheets and the new-crop assumptions for both Ukraine and Russia. There are also major uncertainties with what USDA will do with harvested acres and yield in its first U.S. winter wheat crop estimate. Traders’ significant uncertainties about what the data will show is evident in the wide range of pre-report estimates.

Weekly Export Sales Report also out this morning… For the week ended May 5, traders expect:

China’s initial 2022-23 forecasts... China’s ag ministry expects the country’s corn acreage to decline 1.9% to 42.524 million hectares (105.1 million acres) but production is projected to hold virtually steady at 272.6 MMT due to a likely increase in yield. The ministry forecasts corn imports will fall 10% to 18 MMT in 2022-23. Soybean planted acreage is expected to rise 18.3% to 9.933 million hectares (24.5 million acres) and production is projected to increase 18.8% to 19.5 MMT. The ag ministry forecasts 2022-23 Chinese soybean imports at 95.2 MMT, up 2.4% from its estimate for this year.

China increases soybean auction volume for this week... China will auction another 500,000 MT of state-owned soybean reserves on Friday, according to the National Grain Trade Center. It previously said 314,000 MT of state-owned reserves would be auctioned this week.

Putin expects big crop, stronger grain exports... Russia will increase grain exports this year due to a good harvest, President Vladimir Putin told a government meeting on Thursday. He said the country’s grain production will reach 130 MMT, including a record 87 MMT of wheat.

Firm cuts EU wheat export forecast... Strategie Grains cut its EU wheat export forecast for 2021-22 by 1.5 MMT from last month to 29.9 MMT, citing stronger-than-expected Russian shipments even amid Western sanctions. The consultancy raised its EU 2022-23 wheat export forecast by 500,000 MT to 30.8 MMT, despite a 500,000-MT decline in its production forecast to 126.2 MMT.

U.S. food prices have risen 17 consecutive months... The food index jumped 9.4% from one year earlier in April. An index for meats, poultry, fish and eggs rose 14.3% from the previous year, the largest annual increase since 1979. Ariane Curtis, a global economist at Capital Economics, said in a note Wednesday the rise in agricultural commodity prices stemming from the war in Ukraine had added 0.6 percentage points to average inflation in advanced economies, but that the effect would fade in the months ahead as price increases cooled. “If we break down global supply chains for food and agriculture, the food crisis will only become worse,” David W. MacLennan, the chief executive of Cargill, said at a conference hosted by the U.S. Chamber of Commerce on Tuesday. “The worst thing we can do is close down trade as it relates to food.”

Biden vows to help U.S. farmers ease global spike in food prices... President Joe Biden visited a farm Wednesday in Kankakee, Illinois, and as expected, unveiled policies to increase harvests in ways that the administration believes could also help to reduce grocery bills at home. As we alerted in yesterday’s “First Thing Today,” three policy measures were announced, including doubling funding for domestic fertilizer production to $500 million, greater access to farm management tools for plant and soil needs, and efforts to increase the number of counties eligible for double cropping insurance so that farmers can reuse their land for planting in the same year. Biden noted Ukraine has 20 MMT of wheat and corn in storage the U.S. and its allies are trying to help ship out of the country. This would help to address some supply issues, though challenges could persist.

IEA: More oil output, slower demand... Lower output from Russia due to the fallout from its invasion of Ukraine will not leave the world short of oil, the International Energy Agency (IEA) said on Thursday, as supply ramps up elsewhere and Chinese lockdowns tamp down demand. IEA, after warning on March 16 that 3 million barrels per day (bpd) could be shut in from April, lowered that figure for a second time as it noted only 1 million bpd had gone offline. The assessment suggests the economic impact from further sanctions on Russian energy mulled by the European Union could be limited. “Soaring pump prices and slowing economic growth are expected to significantly curb the demand recovery through the remainder of the year and into 2023,” IEA said, adding that curbs aimed at containing Covid-19 in China were driving an extended economic slowdown there. “Over time, steadily rising volumes from Middle East OPEC+ and the U.S. along with a slowdown in demand growth is expected to fend off an acute supply deficit amid a worsening Russian supply disruption,” IEA said in its monthly oil report.

Senators push for vote on $25 billion WRDA bill before June... Top lawmakers on the Senate Environment and Public Works Committee are pressing leaders in both parties to bring a major bipartisan water projects bill, the Water Resources Development Act, to the floor before the start of the Memorial Day recess in two weeks.

Cash cattle may trend steady/weaker... Packer demand for cash cattle in the northern market, where supplies have been tighter and pushed prices higher in recent weeks, is limited this week, according to cash sources. As a result, the cash market is expected to be steady/weaker when trading is completed, instead of the steady/firmer tone the past four weeks.

June hogs at a discount to the cash index... With additional losses yesterday, June lean hog futures moved to a rare discount to the cash index for this time of year. June hogs finished at $100.85 on Wednesday, 41 cents below today’s cash index quote (as of May 10). The premiums in July and August hogs narrowed to 29 cents and 69 cents, respectively. The cash index pattern this year is similar to 2019 when prices posted an early seasonal peak during spring and then declined into early July. In 2019, the cash index then firmed to near the previous high for the year in late July before slumping seasonally.

Overnight demand news... Japan purchased 196,560 MT of wheat in its weekly tender, including 87,640 MT U.S., 85,580 MT Canadian and 23,340 MT Australian. Taiwan tendered to buy 65,000 MT of corn to be sourced from the U.S., Brazil, Argentina or South Africa.

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
• 11:00 a.m. WASDE — ERS
• 11:00 a.m. Cotton Ginnings - Ann. — NASS
• 11:00 a.m. Crop Production — NASS
• 11:15 a.m. Cotton: World Markets and Trade — FAS
• 11:15 a.m. Grain: World Markets and Trade — FAS
• 11:15 a.m. Oilseeds: World Markets and Trade — FAS
• 11:15 a.m. World Agricultural Production — FAS
• 2:00 p.m. CE: Cotton — NASS
• 2:00 p.m. CE: Peanuts — NASS
• 2:00 p.m. Turkey Hatchery — NASS