First Thing Today | May 24, 2022

Good morning!

Followthrough buying in wheat... Spring wheat futures led gains in the wheat markets overnight as planting progress fell shy of expectations. Soybeans firmed, while corn traded slightly lower overnight. As of 6:30 a.m. CT, corn futures are trading fractionally to 2 cents lower, soybeans are 1 to 5 cents higher, SRW wheat is 10 to 12 cents higher, HRW wheat is 5 to 6 cents higher and spring wheat is 16 to 18 cents higher. Front-month crude oil futures are around 35 cents higher and the U.S. dollar index is trading just below unchanged.

White House considers waiving smog rules on gasoline... The White House is considering waiving U.S. gasoline environmental rules aimed at reducing summertime smog, hoping the waiver will combat rising pump prices, Reuters reported, citing three sources involved in the discussions. Retailers are required to sell summer-blend gas from June 1 to Sept. 15. In the past, the U.S. government has waived those requirements regionally or nationally to deal with hurricanes or other supply issues. The Biden administration has already lifted the restriction on summer sales of E15. The waiver under consideration would apply to all grades of gasoline, the sources said.

Consultant trims corn acres... Planting delays are an increasing concern in the northwestern Corn Belt with the final crop insurance planting date for corn on May 25 for all but far southeastern areas of both North Dakota and South Dakota and the northern third of Minnesota. The final plant date is May 31 for the remainder of those states. While farmers will likely plant corn past the final plant dates, some of the intended corn acres will get switched to other crops or taken as prevent-plant. As a result, Crop Consultant Dr. Michael Cordonnier cut his corn planted acreage estimate by 1 million acres to 89 million acres. He left his soybean acreage forecast at 91 million acres for now but says that could increase by 1 million to 2 million acres. Cordonnier left his yield projections at 177 bu. per acre for corn and 51.5 bu. per acre for soybeans.

Crop progress & Condition Report highlights… Following are highlights from USDA’s crop progress and condition update for the week ended May 22.

• Corn: 72% planted (79% five-year average), 39% emerged (51% average)
• Soybeans: 50% planted (55% average), 21% emerged (26% average)
• Spring wheat: 49% planted (83% average), 29% emerged (50% average)
• Winter wheat: 63% headed (65% average), 28% rated good/excellent (27% last week)
• Cotton: 54% planted (51% average)

HRW, SRW CCI rating improve... When USDA’s weekly crop condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the HRW crop improved 2.3 points to 255.0, though that’s still 70.7 points behind the five-year average. The HRW crop improved slightly in Kansas, Oklahoma and Texas over the past week after rains. The SRW crop improved 1.8 points to 358.9, which is now 1.7 points above average for the third week of May. Click here to view details.

Firm sharply increases Ukraine grain production forecast... APK-Inform raised its forecasts for Ukraine’s 2022-23 grain production and exports. The firm increased its grain production forecast by 6.9 MMT to 48.3 MMT, including 25.2 MMT of corn (up 6.7 MMT from its previous forecast) and 17.1 MMT of wheat (up 140,000 MT). The firm now expects Ukraine to export 46.4 MMT of grain in 2022-23, including 21.2 MMT of corn and 18.8 MMT of wheat.

European Union ‘within days’ of agreeing on an embargo on Russian oil... That’s according to Germany’s Economy Minister Robert Habeck. However, he warned the action would not immediately weaken the Kremlin because of the elevated price of the fuel. He also said the EU was working with the U.S. on an “unusual measure” to cap global oil prices.

Californians could face mandatory statewide water restrictions this summer... Residents and businesses must scale back on their water use to avoid mandatory restrictions, Gov. Gavin Newsom said. California is facing its third year of drought and the state’s reservoirs are dropping to critically low levels. In July 2021, Newsom announced a drought emergency, calling on residents and businesses to voluntarily cut their water usage by 15%. Yet in March, not only had the target not been met, but urban water usage rose by 19% from March 2020, according to the State Water Resources Control Board.

Biden comments on U.S. tariffs imposed on China... President Joe Biden in Tokyo Monday said his administration is considering whether to reduce tariffs on goods imported from China. He indicated he would be discussing the matter with Treasury Secretary Janet Yellen. U.S. Trade Representative Katherine Tai is reportedly against lifting the tariffs, thinking it would lessen any leverage on China’s trade policy.

Fed officials weighing future rate policy shift... Federal Reserve Bank of St. Louis President James Bullard said that while he sees no reason to slow down rate increases now, it is possible the U.S. central bank may be able to pull back on some of its rate rises in future years. Bullard says the Fed should front-load rate an aggressive series of rate hikes, which if successful would push down inflation and could lead to policy easing in 2023 or 2024. The U.S. economy needs supply-side interventions rather than interest-rate hikes by the Fed that will fail to bring inflation under control, said Nobel laureate economist Joe Stiglitz. “Raising interest rates is not going to solve the problem of inflation,” the Columbia University professor said. “It’s going to make it more difficult because you aren’t going be able to make the investments.”

Bearish meat demand implications in Cold Storage Report... USDA's Cold Storage Report showed beef stocks at the end of April were a record for the month at 531.7 million pounds. While that was down 4.1 million lbs. (0.8%) from March, the five-year average was a 15.5-million-lb. decline during the month. Frozen beef inventories increased 82.9 million lbs. (18.5%) from year-ago and stood 74.1 million lbs. (16.2%) above the five-year average. Pork stocks at 530.2 million lbs. rose 44.3 million lbs. (9.1%) from March, far greater than the five-year average of a 16.4-milllion-lb. increase during the month. Pork stocks rose 73.3 million lbs. (16.0%) from last year but were still 52.7 million lbs. (9.0%) under the five-year average.

Cash cattle trade starts early... Cash cattle trade started unusually early with a Nebraska regional planting buying some animals around $138 out of Kansas on Monday. With supplies tighter in the northern market, some plants there are extending down in the Southern Plains, where market-ready numbers are more ample. Most packers in the Southern Plains started bids around $135, suggesting cash prices will soften again this week after the average fell more than $3 over the past two weeks.

Hog futures, cash index build on recent gains... Hog futures posted strong gains on Monday, building on last week’s sharp price rally. The CME lean hog index extended its gain streak to four days, rising 91 cents today (as of May 20). After briefly trading at rare discounts to the cash index at this time of year, summer-month hog futures now hold premiums of $8-plus.  

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

• No USDA reports scheduled