Evening Report | June 22, 2022

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Soybean producers: Add 2022-crop hedge… Soybean futures are breaking down technically after failing to the produce an upside breakout from the extended, broad sideways trading range. With downside risk to the $14.00 area, we advise hedgers to hedge 10% of expected 2022-crop production in short November soybean futures. Our fill was $14.73.

Wheat producers: Increase 2022- and 2023-crop sales... With seasonal pressure likely as winter wheat harvest advances and bullish factors already built into the market, there’s sharp downside risk now that futures have broken down technically. We advise all wheat producers to sell another 20% of 2022-crop to get to 85% sold in the cash market. We also advise hedgers to add a 15% hedge in short December SRW futures to get to 100% covered. Our fill on that position was $10.22. In addition, hedgers and cash-only marketers should sell another 20% of expected 2023-crop for harvest delivery next year to get to 30% forward-priced.

Cotton cash-only marketers: Finish 2021-crop sales... With July cotton futures moving into delivery on Friday, it’s time for cash-only marketers to finish 2021-crop sales by selling the final 10% of old-crop inventories to get to 100% sold. We’ll wait on a corrective bounce before advancing new-crop sales.

Powell: Fed ‘strongly committed’ to reining in inflation... Federal Reserve Chair Jerome Powell told the Senate Banking Committee the U.S. central bank is “strongly committed” to bringing down inflation but not trying to “provoke” a recession. “We are not trying to provoke, and I don't think we will need to provoke, a recession,” Powell said. But he acknowledged that a recession was “certainly a possibility” given the global situation. He noted the Fed will be looking for “compelling evidence” of slowing price pressures before it eases up on the interest rate increases.

“Inflation has obviously surprised to the upside over the past year, and further surprises could be in store,” Powell stated, repeating that policymakers would need to be nimble in response to the incoming data.

Overall, Powell did not stray far from his remarks in his news conference following the Fed’s latest Federal Open Market Committee meeting, but his assertion that financial conditions had “tightened significantly” was noted by some economist. Overall, Wall Street was relieved Powell wasn’t any more hawkish than his recent statements.

Yellen: Fed can tame inflation without significant labor market impacts... Treasury Secretary Janet Yellen said the Fed can combat inflation without unemployment rising significantly. The tight labor market that formed over the past two years, as the economy recovered rapidly from a brief pandemic recession, could aid the Fed in combating inflation, Yellen said.

Biden’s call for gas tax holiday faces uphill battle... President Joe Biden’s push to get Congress to wave the 18.4 cents-a-gallon federal tax on gas and the 24.4 cents-a-gallon tax on diesel fuel for three months faces hurdles in Congress. Many economists view the idea of a gas tax holiday with skepticism.

Senator John Thune of South Dakota, the second-ranking Republican in the Senate, said the request was “dead on arrival.” He said, “What the administration, of course, is coming up with is yet another gimmick, another Band-Aid and something they know is dead on arrival up here in Congress.”

Senate Republican leader Mitch McConnell (Ky.) labeled the gas tax holiday as an “ineffective stunt.” He said, “the administration’s big new idea is a silly proposal that senior members of their own party have already shot down well in advance.”

House Speaker Nancy Pelosi (D-Calif.) and other congressional Democrats have long worried that suspending the gas tax would simply allow oil companies to reap additional profits with no guarantee the savings would be passed along to consumers at the pump. Rep. Peter DeFazio (Ore.), the Democratic chairman of the House Transportation and Infrastructure Committee, said he would not support suspending the gas tax. “I’m going to be working against it. I have the largest committee in Congress, so we’ll see,” he said.

Tai reiterates stance on tariffs against Chinese goods... U.S. Trade Representative Katherine Tai told a Senate Appropriations subcommittee she views tariffs on Chinese goods as “a significant piece of leverage” in the U.S./China trade relationship, a stance she has previously stated. Tai noted, “a trade negotiator never walks away from leverage. We need to be keeping our eye on the ball on this bigger picture.”

Tai has pushed Biden to maintain tariff leverage over China as he deliberates over whether to lift some of the so-called Section 301 duties on Chinese imports as a way to try to ease inflation, which is at a 40-year high. She said removing the tariffs on Chinese goods would likely have a limited effect on controlling short-term inflation.

Biden is intensifying White House discussions on whether to scrap tariffs on a range of Chinese goods, but no decision is likely before next week’s Group of Seven summit, people familiar with the matter told Reuters. The cuts are potentially substantial, but the scale has not been decided, according to the sources.

Placements key in Cattle on Feed Report... Cattle placements have topped the highest pre-report estimates in each of the past two Cattle on Feed Reports as drought pushed calves into feedlots at a higher rate than anticipated. As a result, that category will be the primarily focal point in Friday afternoon’s report. While rains improved pasture conditions in the Southern Plains in late May, it remains to be seen if they came in time to slow placements in this report.

EPA will stay with court timeline for 2023 RFS proposal... EPA will release its proposed rule on the 2023 volume standards for biofuel under the Renewable Fuel Standard (RFS) in September, the same timeline the agency negotiated in a court decision. The agency committed specifically to Sept. 16, but a regulatory agenda from the Biden administration lists the proposed plan as coming in September 2022 with a finalized rule in April 2023.

EPA has not yet determined a timeline for an effort to finalize options on E15 fuel dispenser labels that would modify the text and color of the label and then remove it entirely. EPA has also proposed requiring future underground storage tanks to be compatible with higher blends of ethanol and provide additional options for determining compatibility with higher ethanol blends for existing storage tanks.