First Thing Today | May 5, 2022

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Good morning!

Wheat sharply extends Wednesday’s price strength... Wheat futures led price gains overnight amid active followthrough buying to yesterday’s strong gains. Corn and soybeans followed wheat higher. As of 6:30 a.m. CT, winter wheat futures are 20 to 23 cents higher, spring wheat is 14 to 16 cents higher, corn is 1 to 3 cents higher and soybeans are 7 to 11 cents higher. Front-month U.S. crude oil futures are around 50 cents higher and the U.S. dollar index is about 650 points higher.

Weekly Export Sales Report out this morning… For the week ended April 28, traders expect:

 

2021-22 expectations (in MT)

2021-22

last week

2022-23

expectations (in MT)

2022-23

last week

Corn

500,000-1,200,000

866,755

700,000-1,200,000

843,440

Wheat

0-200,000

32,324

100,000-250,000

124,320

Soybeans

200,000-575,000

481,317

400,000-1,050,000

580,000

Soymeal

100,000-300,000

202,985

0-35,000

0

Soyoil

0-25,000

3,480

0-5,000

0

New normal for economy... Wall Street Journal Chief Economics Commentator Greg Ip writes the economy has arrived at a new post-pandemic normal — and it isn’t as lucrative as investors had hoped. The pandemic catalyzed a once-in-a-generation change in consumer, worker and company behavior: a shift to remote life and work accompanied by the digitization of business models, from e-commerce to telehealth. Companies that drove this shift saw their sales, profits and especially stock prices skyrocket. That shift is now largely complete. While the pandemic is still with us, Americans are learning to live with it. Ip says Wall Street was too optimistic about how long and how far this transformation would go.

Yellen: U.S. economy strong but outlook ‘very uncertain’ amid high inflation, war... Treasury Secretary Janet Yellen said the U.S. economy remains strong but both persistently high inflation and spillovers from the war in Ukraine present economic risks. “The outlook is very uncertain. The dangers at the global level are high,” she said. “I do worry about commodity prices, I am worried about spillovers from Russia and Ukraine that can have adverse impacts not just on the U.S. that is strongly positioned, but on Europe, on emerging markets.” Yellen spoke virtually at the Wall Street Journal’s CEO Council Summit in London as the Biden administration grapples with the Russian invasion of Ukraine and the highest inflation in decades.

BOE follows Fed with another rate hike... A day after the U.S. Federal Reserve raised interest rated by 50 basis points, the Bank of England (BOE) increased its benchmark rate by 25 basis points to 1% — the highest in 13 years in a bid to combat soaring inflation. BOE expects inflation to peak at slightly over 10% in the fourth quarter of this year. The rate-setting arm of BOE noted, “Global inflationary pressures have intensified sharply following Russia’s invasion of Ukraine. This has led to a material deterioration in the outlook for world and UK GDP growth.”

India raises rates for first time since 2018... The Reserve Bank of India (RBI) characterized the 40-basis-point hike as a defense against inflation driven by imported food and fuel. RBI caught investors off-guard with its increase in interest rates.

PBOC pledges more support for slumping economy... China’s central bank pledged monetary policy support to ensure ample liquidity to help businesses badly hit by the latest Covid-19 outbreak. “(We shall) waste no time planning incremental policy tools to support steady economic growth, stabilize employment and prices... to provide a fair monetary and financial environment,” the People’s Bank of China (PBOC) said in a statement on Wednesday. It did not detail what measures it could take. Financial institutions should aim to meet the needs of the general economy, PBOC said, such as boosting financing for small firms with lower costs, helping import and export firms, as well as the service sector and aviation companies which have been badly hit by the pandemic. The bank also called for “stable and orderly” growth in financing the real estate sector, which has experienced a prolonged slowdown in recent months. In a separate statement, the PBOC said it had allocated an additional 100 billion yuan ($15.13 billion) worth of loans dedicated to coal production and storage, part of Beijing’s efforts to boost energy security and stabilize supply chains.

OPEC+ meeting today... OPEC and allied oil-producing countries, including Russia, are weighing conflicting forces today as they decide how much crude oil should flow to volatile global markets. Europe's proposal to phase out Russian oil and other Western sanctions are choking back supply, while Covid-19 shutdowns in China are cutting demand. Analysts expect the 23-country alliance known as OPEC+ to stick with a set schedule of modest increases in production, amounting to 432,000 additional barrels of oil per day in June. The gradual increases are aimed at making up deep production cuts made during the depths of the pandemic in 2020.

EU targets Russia’s global oil trade with shipping sanctions... The bloc is proposing to ban European vessels and companies from providing services — including insurance — linked to the transportation of Russian oil and products globally as part of its new sanctions package. While member states are still wrangling over the terms, it’s a potentially powerful tool because Bloomberg notes that 95% of the world’s tanker liability cover is arranged through a London-based insurance organization called the International Group of P&I Clubs that has to heed European law.

War giving group of EU countries incentives to speed up work on free-trade agreements... At least nine nations including Germany and Spain are planning to send a letter to the EU seeking to speed up delayed trade talks, according to a draft obtained by Bloomberg. The signatories want faster negotiations with New Zealand, Australia, India and Indonesia, while speeding the implementation of accords agreed with Chile, Mexico and the Mercosur bloc of countries, which include Argentina, Brazil, Uruguay and Paraguay. The letter also says the process to negotiate, sign and implement trade deals is too long, and points out that the massive Regional Comprehensive Economic Partnership was signed in late 2020 and will enter into force this year for most members.

USTR formally publishes notice on review of China Section 301 tariffs... The Office of the U.S. Trade Representative (USTR) today published the notice in the Federal Register announcing the statutory review of the Section 301 tariffs deployed against China on July 6, 2018, and Aug. 23, 2018. The notice sets in motion a 60-day period for those benefiting from the trade actions to request they be continued. For the July 6, 2018, tariffs, the 60-day period is May 7-July 5 and for the Aug. 24, 2018, tariffs it will be June 24-Aug. 22. If there are one or more requests to continue the tariffs, USTR will then move to the next phase which will provide the opportunity for public comments from all interested parties. The second phase of the review will be announced in “one or more subsequent notices,” USTR said.

U.S. adds Chinese firms to ‘non-compliance’ list... U.S. regulators added more than 80 Chinese companies to a “non-compliance” list, meaning they could be expelled from Wall Street’s stock exchanges. The move is in retaliation for China’s refusing to share the businesses’ financial audits. The affected companies — including the e-commerce giants JD.com and Pinduoduo as well as Sinopec, a petrochemical giant — have three years to comply.

Correction to ag trade surplus... In “Evening Report” on Wednesday, we incorrectly reported the ag trade surplus through the first six months of fiscal year 2022. The ag trade surplus stands at $9 billion instead of the $8.7 billion figure we reported.

Cash cattle trade starts around steady prices... Cash cattle trade started around $140 in the Southern Plains and $232 in the northern dressed market – roughly steady with last week’s prices. Many feedlots were still holding out for firmer prices, especially in the northern market where supplies are tighter. Last week’s cash price moved higher through the week as more northern trade developed.

Cash hog index declines again... The CME lean hog index is down another 11 cents today (as of May 3), marking the sixth straight daily decline. After yesterday’s strong gains, May lean hog futures moved back to a premium to the cash index and summer-month contracts built their premiums. Further corrective gains in futures may not be seen until the cash index halts its recent slide.  

Overnight demand news... Exporters reported no tenders or sales.

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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