First Thing Today | May 27, 2022

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Good morning!

Quiet, two-sided trade overnight... Trading ranges were much tighter overnight than recent days in corn, soybean and wheat futures. As of 6:30 a.m. CT, corn futures are trading steady to fractionally lower, soybeans are 2 to 5 cents lower and wheat futures are mixed with prices ranging from 5 cents lower to 2 cents higher. Front-month U.S. crude oil futures are around 50 cents lower and the U.S. dollar index is holding near unchanged this morning.

Memorial Day trading schedule... Grain and livestock markets will trade normal hours today ahead of the extended holiday weekend. All markets and government offices are closed for Memorial Day on Monday, May 30. Therefore, there will be no Pro Farmer market commentary next Monday. Grain markets reopen at 7:00 p.m. CT on Monday for the overnight session, while livestock markets will resume trade at 8:30 a.m. CT on Tuesday, May 31. Pro Farmer salutes all those who died serving our great country and their family members. Have a safe holiday weekend.

Russia expects big jump in wheat exports... Russian wheat exports could jump to 50 MMT in 2022-23, up sharply from around 37 MMT this year, according to the country’s ag minister. Russia is expected to harvest 130 MMT of grain, including 87 MMT of wheat. Exports of grain and other commodities from Russia continue amid a lack of vessels as many owners of large ships stopped working with the market amid Western sanctions. The country’s ag ministry is in talks with the state United Shipbuilding Corp. about construction of vessels for grain exports to address the shortage.

Rice may be India’s next food protectionism target... Rice may be India’s next food protectionism target after it restricted wheat and sugar exports, Bloomberg reports. India is the world’s largest rice exporter of rice, accounting for 40% of global trade, so any restrictions on rice exports could have a devastating impact on inflation and world food security but would support U.S. rice prices. Bloomberg notes rice stocks were discussed at an inter-ministerial committee meeting on prices of essential commodities, according to a person familiar with the matter. But the committee decided there’s no need to restrict rice shipments for now because India has huge inventories, according to the source.

China holds emergency meeting re: economy... On May 25, Chinese Premier Li Keqiang hosted an emergency teleconference led by the State Council leadership and attended by leadership from the central bank, finance ministry, the country’s chief macroeconomic planner and over 170,000 local government officials, China-based policy firm Trivium reported. At the meeting, Li explained China’s dire economic situation and urged officials to get the economy back on track in the second quarter by avoiding contraction, funding infrastructure projects, rebating taxes, supporting credit, protecting the agriculture industry, fighting unemployment and increasing coal production. Li warned that failure to effectively manage the wheat harvest over the next month could jeopardize national food security. One of our China sources says “There has never been a meeting attended by so many officials. Reasons: Local governments are critical to turning the economy around. They implement most of the economic policies Beijing decides, like tax rebates. Beijing also needs local governments to chip in to magnify support from the central government.”

French wheat crop conditions decline for third straight week... Hot, dry conditions continue to erode crop conditions in France. The country’s ag ministry rates 69% of the soft wheat crop as good/excellent, down four percentage points from the previous week and 20 points over the past three weeks.

Russian wheat export tax jumps... Russia’s wheat export tax for June 1-7 will be $121.20 per metric ton, based on an indicative price of $373.20 per metric ton. The tax is up $10.70 from the previous week and the first increase in a month.

Vilsack addresses key topics in Senate Ag hearing... USDA Secretary Tom Vilsack at Thursday’s Senate Ag Committee hearing discussed a wide array of topics critical to the ag sector. That included inflation and its impact on farmers. Senate Minority Leader Mitch McConnell (R-Ky.) said “this inflation issue” has meant “we're all hammered with amounts to well over $5,000 of increase costs annually, including $780 in additional costs for food. In a rural state like mine, and a lot of the members of this committee have similar states, small business and family farms are getting hit at both ends. Every single conversation I've had with farmers in the last year, the burden of increased input costs has been right in the forefront.” Vilsack said USDA is looking at ways to increase productive land, going into production and that if you expand supply it has a tendency to help bring costs down and potentially increase income. Secondly, in terms of the fertilizer, Vilsack said there are several things underway. “We are working with farmers to make sure that they are fully aligned with the right application, the right time, the right location, the right amount. We have also provided a new risk management tool that encourages a split application of nitrogen to reduce the cost to farmers, the loss of productivity that may occur if they are unable to fertilize twice in a year. “We also have allocated $500 million towards looking at a broad array of options, in terms of how we might be able to expand fertilizer capacity in this country and not be as reliant and as reliant as we have been on outside sources for fertilizer. And we're also looking at a number of strategies, in terms of ways in which we can better utilize precision agriculture to ensure that we are using fertilizer in the appropriate time and appropriate amount.” Click here to view the full list of topics Vilsack addressed.

Nitrogen prices plummet 30%... “Demand destruction” and the declining cost of ammonia production have led to a sharp reversal in prices, Bloomberg reports. A North American fertilizer price index tracked by Green Markets is down 21% from its peak in late March but remains elevated compared to pre-war levels. According to Bloomberg, the June spot price in Tampa, Florida, for ammonia nitrogen fertilizer settled at $1,000 per ton, a 30% drop from May’s $1,425 price. Southeast Asia and other places are seeing more buyers who are unwilling to pay the record high prices that were seen in April and May, and the cost of ammonia production has declined as European natural gas prices fell in the second quarter, Green Markets analyst Alexis Maxwell told Bloomberg.

High prices curbing gasoline demand... Gasoline demand, measured on a four-week rolling average through May 20, fell to 8.8 million barrels, according to the U.S. Energy Information Administration. Excluding 2020’s steep drop in demand during pandemic lockdowns, the last time average demand for this time of year was lower was in 2013. The drop is an early indicator that rising gas prices are prompting some Americans to change their driving habits ahead of Memorial Day weekend and what is typically the peak summer driving season. The average price for a gallon of regular unleaded gas in the U.S. reached $4.60 on Thursday, a 51% increase from a year ago and a new all-time high. A report from JPMorgan this month said retail gas prices could jump to $6.20 a gallon by August.

Some observes continue to focus on biofuels link with food needs... Håvard Halland, Rüya Perincek, and Jan Rieländer are executives at the Organization for Economic Co-operation and Development. In today’s Financial Times, they write that “links between energy and food must be weakened and that biofuels and high fertilizer prices must not lead to a hunger catastrophe.” They state: “The production of biofuels uses about 4% of arable land worldwide, corresponding to 32% of world sugar production, 12% of corn, and 15% of vegetable oils. There is significant interchangeability between crops grown for biofuels, animal feed and food, even though these are not perfect substitutes for each other. A 50% reduction in the amount of grain used for biofuels in Europe and the U.S., two leading biofuel producers, would compensate for all the lost exports of Ukrainian wheat, corn, barley and rye, according to the World Resources Institute.”

Packers slowing cattle purchases... After aggressively buying cattle the past two months, packers slowed purchases this week. With a lot of cattle bought “with time” in recent weeks and June contract supplies available next week, packer demand for cash cattle is likely to remain soft in the coming weeks. A weaker cash outlook will make it difficult to spur much buyer interest in live cattle futures – even with the big discounts summer-month contracts hold to the cash market.

Hog futures extend rally, premiums to cash index... Lean hog futures posted strong gains Thursday, led by the July contract. Summer-month hog futures now hold premiums of roughly $7 to the rising cash index. That suggests traders feel the cash market will continue to strengthen seasonally into summer, though the big premiums may trigger some profit-taking ahead of the three-day weekend.

Overnight demand news... South Korea purchased 124,700 MT of milling wheat, including 41,620 MT from the U.S., 50,000 MT from Australia and 33,080 MT from Canada.

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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