First Thing Today | May 25, 2022

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Good morning!

Active followthrough selling in wheat, corn... Wheat futures sharply extended Tuesday’s hefty losses in overnight trade. Corn and soybeans followed wheat lower. As of 6:30 a.m. CT, winter wheat futures are trading 25 to 30 cents lower, spring wheat is mostly 24 to 26 cents lower, corn is 8 to 9 cents lower and soybeans are 4 to 10 cents lower. Front-month U.S. crude oil futures are around $1.25 higher, while the U.S. dollar index is more than 400 points higher.

Russia ready to allow food exports from Ukraine, with conditions... Russia is ready to provide a humanitarian corridor for vessels carrying food to leave Ukraine, in return for the lifting of some sanctions, the Interfax news agency cited Russian Deputy Foreign Minister Andrei Rudenko as saying. “We have repeatedly stated on this point that a solution to the food problem requires a comprehensive approach, including the lifting of sanctions that have been imposed on Russian exports and financial transactions," Rudenko was quoted as saying. “And it also requires the demining by the Ukrainian side of all ports where ships are anchored. Russia is ready to provide the necessary humanitarian passage, which it does every day.” Russia is in touch with the United Nations on the issue, Rudenko was quoted as saying by RIA news agency. The U.S. and Britain have floated the idea of using Western ships to escort Ukrainian vessels out of the Black Sea. Rudenko says that would “seriously exacerbate the  situation.”

Covid lockdowns cut China’s soyoil use... Plunging demand for soyoil in China is expected to cut consumption of soybeans. A two-month lockdown in Shanghai and Covid restrictions in several other major cities have cut soyoil consumption, as restaurants account for about half of the country’s soyoil use per year. Demand for all edible oils in 2021-22 is forecast to drop 8.5% from a year ago to 39 MMT, the first decline this century, according to state-run National Grain & Oils Information Center. Soyoil consumption fell 11% and 15%, respectively, the past two months from the same periods in 2019, before the Covid pandemic, according to estimates from Mysteel, a China-based commodity consultancy. It forecasts soyoil use at 16.7 MMT this year, down about 500,000 MT from 2019.

India’s palm oil imports could hit 11-year low as soyoil use increases... India’s palm oil imports could drop by nearly a fifth as cheaper soyoil takes more market share, following Indonesia’s curbs on palm oil exports and New Delhi allowing duty-free imports of soyoil. Palm oil imports by the world’s biggest vegetable oil importer in its marketing year ending on Oct. 31 will fall 19% to 6.7 MMT, the lowest since 2010-11, according to the average forecast from five dealers surveyed by Reuters. Soyoil imports could jump 57% to a record 4.5 MMT, they said. India will duty-free imports of 2 MMT each of crude soyoil and crude sunflower oil for the current and the next fiscal year to March 2024, a government order said on Tuesday, as part of efforts to keep a lid on local prices.

Indonesia to tighten governance of palm oil sector... Indonesia will audit all palm oil companies operating in the country and require them to move their headquarters onshore amid efforts to improve governance of the sector, a senior cabinet minister said. The government will audit companies’ land size, partnership with nearby smallholder farmers, tax reports and other data. The government will also get palm oil companies to set up headquarters in Indonesia. Several Indonesian palm oil companies are listed or headquartered in neighboring Singapore while some Malaysian companies operate plantations in Indonesia through local subsidiaries.

U.S. moves could push Russia to default on debt obligations... The U.S. Treasury Department moved to cut off Russia’s ability to make payments on its dollar-denominated sovereign debt, putting the country on a path toward defaulting on its foreign debts this summer and deepening its economic isolation. Economists estimate the costs associated with sovereign defaults to be roughly equal to between 2% to 3% of the size of the country’s economy — and hurt economic growth in the long-run. Not only do such moves typically elevate a country’s borrowing costs, they also put pressure on the banking system.

Ukraine suffers huge losses from Russia’s invasion... Ukraine’s economy has lost about $1 trillion because of Russia’s invasion, the New York Times (NYT) reports, citing Oleh Ustenko, an economic adviser to the Ukrainian president. He said the estimate was based both on direct losses, such as destruction of infrastructure, and indirect losses such as reduced investment and exports. Ukraine’s GDP stood at $155.6 billion in 2020, according to the World Bank. Meanwhile, the European Central Bank said Russia’s war in Ukraine has increased risks to the euro zone’s financial stability. The bank cited higher commodity prices and sluggish growth. Its bi-annual report on financial risks stated that “virtually all” aspects of economic activity and financial conditions have been impacted by the war.

A harsh winter could force Europe to ration gas, a global energy leader warns... Fatih Birol, the executive director of the International Energy Agency, said Tuesday he was warning leaders in Europe to create backup plans in case harsh winter weather forced countries to conserve natural gas. “I’m afraid that I cannot exclude the risk this winter that we are facing a rationing of gas,” Birol said during an interview with the NYT at the World Economic Forum, the annual gathering of global business leaders in Davos, Switzerland. “I’m advising several European governments to prepare a contingency plan.”

Some California gas prices top federal minimum wage... Several gas stations scattered throughout the state, including the Bay Area, Southern California and the Yosemite region, are charging at least $7.25 for a gallon of fuel, according to the Gas Buddy website. The federal minimum hourly wage of $7.25 per hour has been unchanged since 2009, when it was raised from $6.55 per hour. California residents are subject to state law which mandates the minimum wage be set at $14 per hour. As of Tuesday, Californians were paying the highest gas prices in the country, according to AAA.

U.S. reshaping Taiwan’s defenses for a possible war with China... The U.S. is using lessons from Ukraine in how to fend off a larger military. NYT reports, “The aim is to turn Taiwan into what some officials call a ‘porcupine’ — a territory bristling with armaments and other forms of U.S.-led support that appears too painful to attack.”

Recap of Tuesday’s primary elections...

  • Brian Kemp easily defeated David Perdue, a Donald Trump-backed challenger, in the Republican primary for Georgia governor. Kemp will face Stacey Abrams, a rematch from 2018.
  • Brad Raffensperger, Georgia’s Republican secretary of state, won his primary for re-election. He and Kemp rebuffed Trump’s efforts to overturn the state’s 2020 election results.
  • In Georgia’s Senate race, the Democratic incumbent Raphael Warnock will face Herschel Walker, a former football star and a friend of Trump’s.
  • House Ag Chairman David Scott (D-Ga.) easily held off his progressive primary opponents.
  • Ken Paxton, the incumbent and a Trump ally, easily defeated George P. Bush in the runoff for Texas Attorney General.
  • In South Texas, a Democratic house race between Henry Cuellar, the incumbent, and Jessica Cisneros, a progressive candidate, is too close to call.
  • Rep. Mo Brooks of Alabama will face Katie Britt, a former lobbyist, in a Republican primary runoff for the Senate next month.
  • Sarah Huckabee Sanders, Trump’s former press secretary, won the Republican nomination for Arkansas governor.
  • Sen. John Boozman (R-Ark.) won the Arkansas GOP Senate primary, fending off right-wing challengers. Boozman’s main opponent in the race was former NFL player Jake Bequette.

Choice beef eases, but movement improves... After strong gains late last week and Monday, Choice boxed beef prices dropped 63 cents yesterday, though movement improved to 165 loads, including 92 loads of Choice. Wholesale beef trade continues to signal retailers are being selective buyers of beef, which is likely to continue into summer unless Memorial Day beef clearance is strong.

Cash hog index picking up steam... The CME lean hog index is up another 95 cents today (as of May 23), marking the strongest gain in the current five-day price advance. Summer-month hog futures faced heavy pressure yesterday given their premiums to the cash index. While those contracts are still around $6 above the cash index, firming cash prices should limit followthrough seller interest.

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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