First Thing Today | May 26, 2022

Good morning!

Wheat, corn continue to weaken... Wheat and corn futures faced heavy selling pressure overnight but remained above Wednesday’s lows. Selling in soybeans was lighter. As of 6:30 a.m. CT, winter wheat futures are trading 20 to 25 cents lower, spring wheat is mostly 4 to 7 cents lower, corn is 8 to 11 cents lower and soybeans are fractionally to 2 cents lower. Front-month U.S. crude oil futures are around 75 cents higher and the U.S. dollar index is almost 200 points lower this morning.

Russia: West to blame for Ukraine grain crisis... The Kremlin rejected U.S. and European Union claims that Russia had blocked grain exports from Ukraine and accused the West of creating such a situation by imposing sanctions. “We categorically do not accept these accusations. On the contrary, we blame Western countries of taking actions that have led to this,” Kremlin spokesperson Dmitry Peskov said. The Kremlin called for the West to remove the sanctions to free up Ukrainian grain exports. Kyiv and some Western leaders have accused Russia of using food exports as a weapon and stealing grain from Ukraine. Meanwhile, Turkey is in negotiations with Russia and Ukraine to open a corridor via the Bosphorus for grain exports from Ukraine, a senior Turkish official told Reuters.

Brazil corn exports to China will require ‘biotechnology equivalence’ agreement... China and Brazil agreed to corn export protocols earlier this week, but Brazilian corn exports to China require an agreement about approved GMO varieties before effectively beginning, Brazilian corn growers association Abramilho said. The Chinese are keen to sign a “biotechnology equivalence” agreement for GMO corn to allow trade with Brazil, according to Abramilho’s Executive Director Glauber Silveira. “Now the second step is the approval of biotechnologies, which needs to be more agile,” Silveira said.

Chinese premiere: Some conditions worse than 2020... Chinese Premier Li Keqiang gave a dour warning about the world’s second-largest economy as it struggles from Covid-19 outbreaks and lockdowns. The premier said the situation in some cases is worse than 2020 when the pandemic first emerged. He urged more efforts to reduce a soaring unemployment rate. China will strive to get its economy back on a “normal track” in the second quarter, Li said. Beijing announced a package of policy steps earlier this week, including broader tax credit rebates and postponing social security payments and loan repayments to support the economy. It is also encouraging banks to extend loans to small businesses and those hit by tight Covid restrictions. Pandemic-hit Shanghai, China’s financial hub, unveiled more post-lockdown plans on Thursday as it moves towards a return to normalcy.

Blinken to address China relations today... The U.S. does not seek to sever China from the global economy, but wants Beijing to adhere to international rules, U.S. Secretary of State Antony Blinken is expected to say in a long-awaited speech today. “This is not about a new Cold War. This is not about dividing the world into rigid ideological blocks,” a senior U.S. administration official told reporters in a briefing call in advance of the speech outlining the U.S. strategy to deal with China’s rise as a great power. “It is about upholding and, just as importantly, revitalizing international order in a way that protects core principles that have enabled peace and prosperity for decades,” the official said. Blinken will make it clear that Washington’s “unwavering focus” remains on the Indo-Pacific and China, officials said, while laying out the contours of the strategy, which is to invest in U.S. competitiveness and align with allies and partners to compete with China. Blinken will reiterate the U.S. commitment to the one-China policy, even though President Joe Biden earlier this week said the U.S. would get involved militarily should China attack Taiwan, a statement that was later walked back by other officials.

Weekly Export Sales Report out this morning… For the week ended May 19, traders expect:

Russia’s central bank cuts key interest rate, citing decreased stability risks... The Central Bank of Russia (CBR) on Thursday cut its key interest rate from 14% to 11%, citing a slowing in inflation and the recovery of the ruble. “The latest weekly data point to a significant slowdown in the current price growth rates. Inflationary pressure eases on the back of the ruble exchange rate dynamics as well as the noticeable decline in inflation expectations of households and businesses,” the CBR said. “In April annual inflation reached 17.8%, however, based on the estimate as of 20 May, it slowed down to 17.5%, decreasing faster than in the Bank of Russia’s April forecast.” Having plunged to a record low of 150 against the U.S. dollar on March 7, the CBR’s capital control measures have brought the currency surging back to a two-year high, briefly touching 53 rubles to the dollar on Tuesday. The ruble weakened against the greenback on this morning to trade at 60.80 to the dollar.

China to continue state soybean reserve sales... China will auction another 500,000 MT of imported soybeans from state-owned reserves on June 1, the National Grain Trade Center said. Beijing has been holding the weekly auctions as a way of increasing domestic supplies.

Poultry regs coming from USDA, perhaps today... The Office of Management and Budget (OMB) on Wednesday finished reviewing a proposed rule from USDA’s Agricultural Marketing Service (AMS) on Transparency in Poultry Grower Contracting and Tournaments, and a pre-rule on Poultry Growing Tournament Systems: Fairness and Related Concerns. The proposed rule on poultry grower contracting and tournaments is one of three regulations the Biden administration has promised to pursue. The pre-rule on concerns and fairness in poultry growing tournament systems is a search for alternative solutions to determine whether the benefits of a regulation justify the costs. USDA Secretary Tom Vilsack could unveil the results as he appears today before the Senate Agriculture Committee. He could also unveil new CRP rules at today's hearing. If so, they could involve early out without penalty and earlier field work than current rules provide.

USDA making $200 million available for new meat processing capacity expansion program... The $200 million will “provide much-needed financing to independent meat and poultry processors to start up and expand operations,” USDA said. The funding will include $25 million for workforce training. The program will provide grants of up to $15 million to qualifying recipients that will use the funding to create a revolving loan fund to finance capacity expansion.

Ideas Choice beef has topped... Choice boxed beef prices fell 72 cents to $262.93 on Wednesday and some industry sources believe the market has topped, falling around $8 short of the usual April high and far below the January peak, which topped $290. The cash sources that feel beef prices have topped are now fearing the summer low will drop below the expected $240 level.

Cash hog index continues to climb... The CME lean hog index is up another 84 cents to $103.88 (as of May 24), marking the sixth straight daily gain. Summer-month lean hog futures faced pressure on Wednesday as traders waited on the cash index to catch up a little. But with daily gains averaging more than 66 cents on the current firming streak and nearly 88 cents the last four days, there shouldn’t much apprehension about premiums in summer hog futures.

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

• 7:30 a.m. Weekly Export Sales — FAS
• 2:00 p.m. Outlook for U.S. Agricultural Trade: May 2022 — ERS
• 2:00 p.m. Sugar: World Markets and Trade — FAS