First Thing Today | April 14, 2022

Good morning!

Corn and soybeans higher overnight... As of 6:30 a.m. CT, corn futures are 5 cents higher, soybeans are 14 to 15 cents higher and wheat futures are unchanged to a penny lower. Front-month U.S. crude oil futures are around $1 lower and trading around $103. The U.S. dollar index is 250 points lower this morning

Happy Easter! Good Friday trading schedule... Government offices are open tomorrow, but markets are closed for Good Friday. As a result, there will be no Pro Farmer updates. We’ll resume our normal market commentary on Monday, April 18. Happy Easter from Pro Farmer!

Russia/Ukraine update... President Joe Biden said the U.S. would send an additional $800 million in military and other security aid to Ukraine. The package will include “new capabilities tailored to the wider assault we expect Russia to launch in eastern Ukraine,” he said. Ukraine says Russian soldiers have laced large swaths of the country with land mines and booby traps that can kill or injure civilians. Meanwhile, Russia said its Black Sea Fleet flagship was damaged and evacuated after ammunition on board blew up. Ukraine said it hit the vessel with cruise missiles.

Russia looking for new oil buyers... Russian President Vladimir Putin told top officials this week that Russia will begin seeking new customers and markets for oil as its traditional buyers have slowed purchases. Nations have been weaning off Russian energy since the war in Ukraine started. S&P Global highlighted that a "trade rupture" between Russia and Germany could trigger a financial shock to the German economy. The U.S. urged India Tuesday not to ramp up imports from Russia. 

Weekly Export Sales Report out this morning… For the week ended April 7, traders expect:

Commodities in supercycle early innings... Jeff Currie, Goldman Sachs Group Inc.’s head of commodities research, says commodities are in a “volatility trap.” He characterizes a “volatility trap” in which “higher vol discourages more investment, which then reinforces higher vol.” On the latest episode of the Odd Lots podcast, Currie argues that this dynamic means we’re just in the early innings of the new commodities supercycle he began forecasting last year. He explained investment is the only thing that can end a supercycle.  Resolving underinvestment in commodities is one of the key economic challenges of our time and the pace of new investment will be crucial for any longer-term commodity market forecasts. The financing isn’t there for the type of scale investments needed.

E15 to have positive effects in farm states... In states like Iowa and Minnesota, which have increased E15 pumps over the recent years, the recent E15 announcement is positive for ethanol consumption and corn demand. Following the Biden administration’s move, E15 consumption is expected to increase by about 300 million gallons in 2022 from the 814 million gallons of E15 sold in 2021, according to the Renewable Fuels Association. More than 15 billion gallons of ethanol were produced in 2021, according to the U.S. Energy Information Administration. The E15 announcement is expected to increase U.S. corn demand by 25 million to 45 million bushels, according to some initial estimates from some analysts. The National Chicken Council (NCC) warns increased ethanol use could contribute to cost inflation for food companies and meat processors because producers rely heavily on grains such as corn to feed livestock and poultry.

Fertilizer price impact doubled... Texas A&M University economists will soon deliver a report to Congress that will show the surging fertilizer price impact on U.S. farmers is over double the drag estimated in a report late last year. Lawmakers may use the information to decide whether or not to push a program that would temper some of the price implications. 

Eight new HPAI commercial flocks confirmations... USDA’s Animal and Plant Health Inspection Service has confirmed new cases of highly pathogenic avian influenza (HPAI) in eight commercial flocks in Nebraska (1,746,853 commercial layer chickens in Dixon County), Minnesota (214,277 commercial layer chickens in Morrison County; 43,286 commercial broiler chickens in Morrison County; 50,000 commercial turkeys in Yellow Medicine County; 38,000 commercial turkeys in Kandiyohi County; and 45,000 commercials turkeys in Morrison County), and Wisconsin (52,000 commercial turkeys in Barron County). This brings the commercial flocks confirmed with HPAI to 121.

Bird flu raises egg prices...  Severe bird flu outbreaks in the United States and France are tightening global egg supplies and raising prices. Wholesale prices for large eggs in the U.S. Midwest topped $3 per dozen in March and reached the second-highest level ever, up nearly 200% from a year earlier on the spot market, data firm Urner Barry said. Prices remained below the record of $3.09 per dozen set at the beginning of the COVID-19 pandemic. Egg products like liquid whole eggs are at record highs, though, Urner Barry said. In France, wholesale shell egg prices have climbed 69% from last year, French farm office FranceAgriMer said. As a result, consumers could see higher prices for food products made with eggs. The outbreak of war, not just disease, is disrupting supply chains for Middle East buyers.

Texas reaches truck inspection agreement with one Mexican state... Texas Gov. Greg Abbott will stop state police inspections of commercial trucks at one U.S.-Mexico border crossing that has been hit by massive delays. Abbott said Wednesday that he had reached an agreement with Samuel Alejandro García Sepúlveda, the governor of the state of Nuevo León, which borders Texas for 9 miles that include the Colombia Solidarity Bridge. Under the agreement, Nuevo León will perform safety inspections of trucks. Additional bridges would see relief, Abbott said, if the governors of other neighboring Mexican states — Tamaulipas, Coahuila and Chihuahua — participated in similar agreements.

Argentina trucker protests to continue... A strike by Argentine truckers of grains and oilseeds is set to continue after a three-hour meeting mediated by authorities failed to yield an agreement over freight rates. “We hope that in the coming days it can be resolved,” Transport Secretary Diego Giuliano said in a statement. Crop exporters say stockpiles at ports would run out next week if the strike continues, disrupting shipments. 

Egypt wheat costs surge... The latest purchase by top wheat buyer Egypt laid bare the mounting costs importers are facing due to the war in Ukraine. Prices in a tender Wednesday surged 44% from mid-February, just before Russia invaded Ukraine. The large volume bought, even at high prices, signals Egypt’s urgency to build reserves. Many nations in the Middle East and North Africa greatly depend on Black Sea grain, leaving their food supplies particularly vulnerable to the war. Russia has continued to ship grain to Egypt since the war began, with the country ranking among its leading destinations in March. Russian wheat has traditionally dominated sales in Egyptian tenders.

China sticking with Covid policy... Chinese President Xi Jinping says his government will stick to its zero-tolerance approach to Covid even as public anger simmers in Shanghai and economic costs mount. “Prevention and control work cannot be relaxed,” Xi said during a trip to the island province of Hainan, the official Xinhua News Agency reported late Wednesday, the same day the financial hub saw a record 27,719 new cases. Officials implementing Covid Zero need to adhere to the principle of “people first and life first,” Xi said. “Persistence is victory,” he added. Residents short of groceries, medical care and patience have been making a rare display of pushback as they’ve been barred from leaving their homes.

China’s central bank expected to cut rates... China’s central bank is expected to cut its key policy interest rate for the second time this year on Friday and reduce the reserve requirement ratio within days to help bolster a faltering economy under strain from Covid lockdowns. Sixteen of the 22 economists surveyed by Bloomberg predict the People’s Bank of China will lower the interest rate on one-year policy loans -- 12 of them forecast a ten basis-point reduction to 2.75% and four expect a 5-point drop. The rest see no change. The PBOC is also likely to reduce the RRR -- the amount of cash banks must hold in reserve -- after the State Council, China’s cabinet, hinted strongly on Wednesday of a cut.

Higher cash cattle trade extends... More cash cattle traded at $1 higher prices around $139 in the Southern Plains on Wednesday, while trade in the northern dressed market occurred in the $225 to $227 range, up $2 to 4 from last week. Cattle futures responded to the stronger-than-expected cash trade, though traders were hesitant to build much premium into front-month April live cattle.

Cash hog index ends slide... The CME lean hog index is up 9 cents today. While that’s not enough of a gain for market bulls to get too excited about, it ended a nine-day slide in the cash index. But it will take multiple days of price gains to signal a low is in place and the index is on its way to a seasonal peak sometime during summer.

Overnight demand news... Taiwan bought 47,120 MT of U.S. milling wheat. Japan purchased 114,645 MT of milling wheat in its weekly tender, including 61, 620 MT U.S., 22,640 MT Canadian and 30,385 MT Australian. South Korea purchased 69,000 MT of optional origin corn. Jordan tendered to buy 120,000 MT 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

• 7:30 am Weekly Export Sales — FAS
• 2:00 pm Livestock, Dairy, and Poultry Outlook: April 2022 — ERS
• 2:00 pm Sugar and Sweeteners Outlook: April 2022 — ERS
• 2:00 pm Peanut Prices — NASS
• 2:00 pm Potato Stocks — NASS