First Thing Today | May 20, 2022
Good morning!
Wheat leads overnight price declines... Wheat futures faced followthrough selling pressure overnight, while corn also traded lower. Soybeans traded lower for much of the overnight session but has turned mixed this morning. As of 6:30 a.m. CT, wheat futures are trading 9 to 14 cents lower, corn is 6 to 7 cents lower and soybeans are fractionally higher to 3 cents lower. Front-month U.S. crude oil futures are around 25 cents higher and the U.S. dollar index is up a little more than 150 points this morning.
EPA plans ‘flexibility’ for refineries on old biofuel quotas... The Biden administration will soon announce a plan to give small oil refineries more flexibility in fulfilling older biofuel-blending quotas when the facilities are denied exemptions from the requirements, according to reports. The plan, now under White House review, comes as EPA prepares to deny scores of refinery waivers from 2019, 2020 and 2021 biofuel-blending quotas. It also follows a decision to revoke 31 previously granted exemptions from 2018 targets. The move could help address concerns there are not sufficient valid biofuel credits, known as RINs, for refineries to satisfy the old quotas. A draft proposed rule would create an “alternative RIN retirement schedule for small refineries.” EPA will finalize biofuel-blending quotas for 2022 and 2021, and retroactively revise 2020 requirements, by June 3.
House clears bill banning ‘excessive’ gasoline prices; hurdles in Senate... Legislation that would allow the president to bar selling gasoline at “excessive” prices passed the House Thursday, as Democrats seek to address record prices at the pump. The bill isn’t expected to garner the Republican support needed in the Senate. So, the House measure is mainly a talking point as House Democrats return home for a two-week recess with the average price of a gallon of regular unleaded gasoline setting a new record every day for the past 10 days.
China cuts 5-year LPR... China cut its benchmark reference rate for mortgages by a bigger-than-expected margin Friday, the second reduction this year, as Beijing tries to revive credit demand to prop up the economy. The five-year loan prime rate (LPR) was lowered by 15 basis points to 4.45%, while the one-year LPR was unchanged at 3.70%. Meanwhile, loan growth in China in April was at its lowest level in almost five years.
Japan’s core inflation tops BOJ target, but not due to demand... Japan’s consumer price index (CPI) rose 2.5% from year-ago in April, while core consumer inflation (minus energy and food prices) rose 2.1%. It was the first time since September 2008 inflation topped 2%, excluding the impact of sales-tax increases, and the fastest rise since 1991. But the increase in consumer inflation was due to higher import costs, not stronger domestic demand the Bank of Japan (BOJ) has been trying to stoke. Still, the rise in consumer inflation reinforces skepticism BOJ will maintain its ultra-loose monetary policy, especially with households suffering from rising costs without substantial wage growth.
Yellen rejects idea of Fed raising its 2% inflation target... Treasury Secretary Janet Yellen rejected any idea the Federal Reserve and its counterparts should boost their inflation targets given the importance of stable price expectations at a time when living costs are surging.
Malaysia keeps palm oil export tax at 8%... Malaysia maintained its June export tax for crude palm oil at 8% and raised its reference price, the Malaysian Palm Oil Board said. The world’s second-largest palm exporter calculated a reference price of 6,816.05 ringgit ($1,552.63) per metric ton for June, up from the May reference price of 6,759.22 ringgit per metric ton. The maximum tax rate is set at 8% when prices exceed 3,450 ringgit per metric ton. Malaysia is still reviewing the viability of a temporary cut of the tax to 4% to 6%, the commodities ministry said.
Russian wheat export tax falls for third straight week... Russia’s wheat export tax for May 25-31 will be $110.50 per metric ton, based on an indicative price of $357.90 per metric ton. The tax is down $1.40 from the previous week and the third straight weekly decline.
Another sharp drop in French wheat crop ratings... France’s wheat crop ratings deteriorated sharply for a second straight week amid drought stress, dropping nine points to 73% “good” to “excellent,” according to the country’s ag ministry. The crop is now rated lower than last year’s at this stage.
China to auction more soybean reserves... China will auction another 500,000 MT of imported soybeans from state-owned reserves on May 27. China has been releasing soybean reserves on a weekly basis recently to boost supplies on the domestic market.
Placements key in Cattle on Feed Report... USDA’s Cattle on Feed Report this afternoon is expected to show the May 1 feedlot inventory up 1.3% from year-ago, which would mark the fifth consecutive month of year-over-year gains in feedlot supplies. But the figure traders keenly await is April placements after the March figure greatly topped expectations. On average, analysts expect April placements to have declined 4.6% from year-ago. Marketings are expected to be down 2%.
Retailers remain reluctant buyers of beef... Boxed beef prices firmed Thursday, with Choice up $1.23 and Select 4 cents higher. But packers moved only 86 loads of beef on the day. With Memorial Day features completed and Father’s Day a month away, there doesn’t appear to be much retailer interest in aggressively buying beef. And there are growing concerns retailers won’t cut beef prices enough to attract strong consumer demand during summer.
Cash hog index starting to firm... The CME lean hog index is up 29 cents today (as of May 18), its second straight day of gains, potentially signaling the start of a delayed seasonal rally. But with the index at $100.37, June hogs are around $5 above it, while July and August futures hold premiums of nearly $6 and $7, respectively. It’s unlikely traders will aggressively build those premiums until the cash index shows stronger and sustained gains.
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
- 2:00 p.m. Cattle on Feed — NASS
- 2:00 p.m. Chickens and Eggs — NASS
- 2:00 p.m. Peanut Prices — NASS
- 2:30 p.m. Commitments of Traders — CFTC
