First Thing Today | May 13, 2022
Good morning!
Followthrough buying overnight in corn, beans and spring wheat... Spring wheat futures built on Thursday’s limit-up performance overnight, while corn and soybeans also traded higher. Winter wheat futures eased a bit from yesterday’s strong gains. As of 6:30 a.m. CT, corn futures are trading around 2 cents higher, soybeans are 7 to 9 cents higher, SRW wheat is 4 to 6 cents lower, HRW wheat is near unchanged and HRS wheat is 7 to 10 cents higher. Front-month U.S. crude oil futures are around $1.75 higher and the U.S. dollar index is about 150 points lower after reaching the highest level since December 2002 on Thursday.
EC proposes plan to accelerate exports of Ukrainian wheat... The European Commission (EC) proposed helping Ukraine export its wheat and other grains by rail, road and river to get around Russia’s blockade of Black Sea ports, which is preventing those critical supplies from reaching parts of the world at risk of food insecurity. According to the Associated Press, the EC said the plan aims to establish “alternative routes and ease congestion between borders that also should facilitate getting humanitarian aid and other goods into the war-torn country.” AP says “the blockade of Ukrainian ports has been particularly harmful, having accounted for 90% of grain and oilseed exports before the war,” and “the potential loss of affordable grain supplies that Africa, the Middle East and parts of Asia rely on has raised the risk of global food shortages and political instability.” David Beasley, head of the U.N. World Food Program, said: “Millions of people around the world will die” if Ukraine’s Black Sea ports aren’t reopened in a plea to Russian President Vladimir Putin to end the blockade of the export channels.
Diesel prices reach another record high... Retail diesel prices hit another record of $5.62 per gallon, as prices at the pump surpassed $6 in some markets. The price of the fuel that powers heavy-duty trucks has increased by more than $1.50 a gallon in roughly two months, according to the U.S. Energy Information Administration. The record diesel costs are straining operations of trucking companies, wrecking the transportation budgets of businesses that need to ship goods, and adding still more costs for U.S. farmers. Bottom line: The extended surge in diesel (and gasoline) prices is challenging Wall Street bets that inflation is peaking.
Ratio between agriculture and equity markets is at its highest level since August 2017... The Bloomberg Commodity Agriculture Index is up 24.5% in 2022 while the S&P 500 is down 17.4%, Peak Trading Research said in a note. Agriculture’s relative strength has come at a time when other commodity markets have softened on supply-chain issues and a lack of demand, Peak says. “Agriculture futures are benefiting from tight balance sheets, significant weather problems (Corn Belt delayed planting, U.S. Plains drought, India heat), Black Sea export concerns, new export taxes/bans, strong demand, and bullish seasonals,” the firm said.
China new bank loans plunge amid Covid lockdowns... Chinese banks extended 645.4 billion yuan ($95.14 billion) in new yuan loans in April, down about 80% from March, as Covid lockdowns slowed credit demand. Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, slowed to 10.2% in April from a year earlier and from 10.6% in March. This is the latest data suggesting the People’s Bank of China will soon announce new monetary easing moves to support its economy. China’s central bank said earlier this week it would step up support for the slowing economy, while closely watching domestic inflation and policy adjustments by other major economies.
Russian wheat export tax declines again... Russia’s wheat export tax for May 20-24 will be $111.90 per metric ton, based on an indicative price of $359.90 per metric ton. The tax is down $2.40 from the previous week and this marked a second straight weekly decline.
French wheat crop ratings dive... France’s wheat crop ratings dropped to 82% “good” to “excellent” as of May 9, down seven points from the previous week, according to the country’s ag ministry. France’s wheat crop is struggling with dryness, with the ag ministry warning rain was urgently needed to avoid production losses to this year’s crop.
China soybean auctions to continue... China will auction another 500,000 MT of imported soybeans from state-owned reserves on May 20.
Powell confirmed for second term as Fed chair... The Senate confirmed Jerome Powell to a second four-year term to lead the Federal Reserve. President Joe Biden’s other nominees, Philip Jefferson and Lisa Cook, were confirmed as Fed governors earlier this week. Lael Brainard was also earlier confirmed to the No. 2 spot at the central bank. Rounding out Biden’s picks for the Fed is Michael Barr, whose confirmation hearing will take place May 19. New presidents of the Fed regional banks in Boston (Susan M. Collins) and Dallas (Lorie Logan) are set to take over this summer, and there will soon be vacancies at the helm of the Chicago and Kansas City Fed due to mandatory retirements. Separately, Powell said, “The process of getting inflation down to 2% will also include some pain, but ultimately, the most painful thing would be if we were to fail to deal with it,” speaking on the Marketplace radio program. He repeated his view that further half-percentage point increases would likely be appropriate at coming meetings, but said the central bank could consider larger increases if economic data call for such steps.
Traders not impressed with pickup in beef demand... Packers moved another 137 loads of beef on Thursday. Though that was down sizably from the two previous days, it still represented better retailer demand than recent weeks. The questions are how long with the pickup in retailer demand last and would any appreciable increase in price choke off the demand? Cattle traders are unimpressed, with futures continuing to face heavy selling and August live cattle making a new low for the year.
Attitudes in hog market turn more pessimistic... Traders extended the rare discount for this time of year June lean hog futures hold to the cash index on Thursday. The contract finished $3.565 below today’s cash index quote (as of May 11). July and August hog futures are also now at discounts to the cash index. The downside is heavily overdone, but it’s likely going to take strength in the cash market to lead a price recovery – and there are no signs of that happening at the moment.
Overnight demand news... Taiwan purchased 40,000 MT of U.S. 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
- 11:00 a.m. Feed Grains Database — ERS
- 2:00 p.m. Dairy Monthly Tables and Dairy Quarterly Data — ERS
- 2:00 p.m. Season Average Price Forecasts — ERS
- 2:00 p.m. Wheat Data — ERS
- 2:00 p.m. Agricultural Chemical Usage - Field Crops — NASS
- 2:00 p.m. Peanut Prices — NASS
- 2:30 p.m. Commitments of Traders — CFTC
