First Thing Today | May 31, 2022
Good morning!
Wheat and corn weaker, soybeans firmer... Wheat futures faced heavy pressure coming out of the extended weekend, which pulled corn lower. Soybeans favored the upside for much of overnight trade. As of 6:30 a.m. CT, winter wheat futures are trading 28 to 32 cents lower, spring wheat is 18 to 23 cents lower, corn is 4 to 5 cents lower and soybeans are 7 to 8 cents higher. Front-month U.S. crude oil futures are nearly $4 higher, topping $119 overnight, and the U.S. dollar index is around 300 points higher this morning.
Russia will work with Turkey on Ukrainian grain exports... Russian President Vladimir Putin said his country was ready to facilitate the unhindered export of grain from Ukrainian ports in coordination with Turkey, according to a Kremlin readout of talks with Turkish President Tayyip Erdogan. “During the discussion of the situation in Ukraine, emphasis was placed on ensuring safe navigation in the Black and Azov seas and eliminating the mine threat in their waters,” the Kremlin said of Putin’s call with Erdogan. “Vladimir Putin noted the readiness of the Russian side to facilitate the unhindered sea transit of goods in coordination with Turkish partners. This also applies to the export of grain from Ukrainian ports.” Putin, according to the Kremlin, added that if sanctions were lifted, then Russia could “export significant volumes of fertilizers and agricultural products.” Erdogan told Ukrainian President Volodymyr Zelenskyy he “especially valued the project to create a secure sea route for exporting Ukrainian agricultural products,” his office said, adding he welcomed, in principle, the idea of making Istanbul a headquarters for the “observation mechanism.”
EU reaches deal on cutting Russian oil imports... European Union leaders agreed in principle on Monday to cut 90% of oil imports from Russia by the end of this year. Diplomats said the agreement would clear the way for other elements of a sixth package of EU sanctions on Russia to take effect, including cutting Russia’s biggest bank, Sberbank, from the SWIFT messaging system. EU sanctions against seaborne imports of Russian oil will be imposed with a phase-in period of six months for crude oil and eight months for refined products, a European Commission spokesperson said. That timeline would kick in once the sanctions are formally adopted.
Countries seeking wheat from India... India has banned private wheat exports but will sell to countries on a government-to-government basis. “More than half a dozen countries have approached India for more than 1.5 MMT of wheat and we will see how to go about these requests,” said a government official told Reuters. The bulk of the request has come from Bangladesh, a regular buyer of Indian wheat, the source said.
China allocates more grain subsidies to ensure food security... China’s finance ministry allocated another 10 billion yuan ($1.5 billion) to grain farmers to ensure food security, which Beijing has identified as its top priority. The move is part of a broader program by Beijing to stabilize its economy through subsidies and issuance of special bonds.
Firm hikes EU sunflower seed crop forecast... Strategie Grains raised its forecast for this year’s European Union sunflower seed crop due to an increase in planted area. It projects EU sunseed output at a record 10.9 MMT, up 200,000 MT from last month and 500,000 MT above last year’s all-time high production. Strategie Grains held its 2022 EU production forecast at 18.2 MMT, which would be around a 7% increase from last year.
Gas prices hit another record... As of Memorial Day, gas prices have surged to a national average of $4.619 a gallon. Not only is that a new record, it is close to half a buck higher than one month ago and up 40% from the beginning of the year. Motorists in California are feeling the strongest pinch, with some gas stations in parts of Los Angeles, the San Francisco Bay area and the Yosemite region charging in excess of $7.25 per gallon. President Joe Biden will meet with Fed Chair Jerome Powell today to discuss problematic price inflation, including consumers’ pain at the pump.
Euro zone inflation hits another high... Euro zone inflation accelerated 8.1% above year-ago in May from 7.4% in April, beating expectations for 7.7%. Excluding food and energy prices, core inflation jumped 4.4%. Headline inflation is now four times the European Central Bank’s 2% target and policymakers may be worried by what was once seen a transitory jump in prices is now embedded.
China’s manufacturing PMI rises in May but still below contraction threshold... China’s official manufacturing purchasing managers index (PMI) rose to 49.6 in May from a 26-month low of 47.4 in April amid some easing of Covid-19 restrictions in key cities. While factory activity fell at a slower pace, this marked the third straight month of contraction in factory activity.
China announces detailed economic stimulus measures... China’s cabinet announced a package of 33 measures covering fiscal, financial, investment and industrial policies to revive its pandemic-ravaged economy. In terms of monetary and financial policies, China will boost financing efficiency via capital markets, by supporting domestic firms to list in Hong Kong, and promote offshore listings by qualified platform companies. The State Council also vowed to further reduce real borrowing costs and strengthen financial support for infrastructure and major projects. Other measures include policies to ensure energy and food security and stabilize supply chains. Meanwhile, Shanghai offered some tax rebates for companies and allowed all manufacturers to resume operations from June as authorities rolled out policies to revitalize an economy impacted by Covid lockdowns, as part of a 50-point plan for accelerating an economic recovery.
The week ahead in Washington... Congress is on recess this week. EPA must set biofuels blending levels for 2022 and 2021, and retroactively revise 2020 quotas by June 3. Yearly biofuel quota-setting is fraught, as EPA navigates dueling refining and rural interests. This year, the war in Ukraine and inflation are amplifying the challenges. Focus also remains on Russia and any additional actions on that front. The economic focus this week is Friday’s employment data for May, which is expected to show jobs growth slowed from April, though the unemployment rate is anticipated to drop to 3.5%.
Weekend beef clearance a focal point... Traders will gauge weekend beef clearance by how actively retailers buy product in the wholesale market this week. Given domestic beef demand concerns, bulls need a strong performance in the wholesale market. But even if retailers are active buyers of beef, the cash market may face more pressure as slaughter numbers are building seasonally and packers have June contract supplies available this week.
Hogs firming seasonally... The seasonal rally in the hog market was delayed but is now firmly underway with the cash index stringing together solid daily gains and futures building off their extended decline. But with futures well out in front of the cash index, near-term buying may be limited unless traders are convinced the cash market will continue to post strong gains.
Weekend demand news... Pakistan purchased around 500,000 MT of optional origin milling wheat. Algeria tendered to buy an unspecified amount 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
- 10:00 a.m. Export Inspections — AMS
- 2:00 p.m. Agricultural Prices — NASS
- 3:00 p.m. Crop Progress — NASS
