First Thing Today | May 4, 2023
Good morning!
Price pressure overnight... Corn, soybean and wheat futures were unable to build on Wednesday’s strong gains and faced pressure overnight. As of 6:30 a.m. CT, corn futures are trading 2 to 3 cents lower, soybeans are 4 to 6 cents lower, SRW wheat futures are 4 to 5 cents lower, HRW wheat is 8 to 9 cents lower and HRS wheat is 3 to 4 cents lower. Front-month crude oil futures are just below unchanged, while the U.S. dollar index is more than 150 points lower.
What the Fed pause means for markets... Sevens Report said: “The Fed met market expectations for the first half of the “hike/pause/pivot/cut” policy script, as the Fed hiked rates a final time and clearly signaled it’s pausing further rate hikes (which for all intents and purposes means they are done with this hiking cycle, and the next move will be a cut, it’s just a question of when). We started 2023 saying this would be the year of economic data, and that’s playing out now. We will remain focused on the important economic data that will tell us, as early as possible, if the economy is headed for a soft landing or hard landing and that includes telling you how outside events like regional banking stress and the debt ceiling (and anything else) impacts the outlook for a hard vs. soft landing. That will be the key to getting the remainder of 2023 ‘right.’”
Weekly Export Sales Report out this morning... For the week ended April 27, traders expect:
|
|
2022-23 expectations (in MT) |
2022-23 last week |
2023-24 expectations (in MT) |
2023-24 last week |
|
Corn |
(450,000)-600,000 |
399,972 |
0-200,000 |
0 |
|
Wheat |
0-250,000 |
155,733 |
50,000-300,000 |
202,090 |
|
Soybeans |
100,000-400,000 |
311,252 |
0-100,000 |
0 |
|
Soymeal |
75,000-300,000 |
153,437 |
0-75,000 |
0 |
|
Soyoil |
0-20,000 |
134 |
0-10,000 |
0 |
Turkish bank could be intermediary for Russian grain export payments... Turkish state lender Ziraat Bank could work as an intermediary to process payments for Russia’s grain exports, a senior Turkish official said, adding the U.S. and the United Nations would need to approve each transaction. Ziraat would not be involved unless all sides sign off on the agreement, the official said. He failed to comment on whether the bank could be involved in payments for Russian fertilizer. Ziraat would serve in a similar role as JPMorgan, which has processed one payment and reportedly been given approval for around another 40 such transactions.
Another sign of contraction in China’s factory sector... China’s Caixin/S&P Global manufacturing purchasing managers index (PMI) fell to 49.5 in April from 50.0 in March amid a slowdown in orders and weak domestic demand. That marked the first contraction since January and was similar to the official PMI reading, which also showed unexpected tightening in the factory sector.
China approves safety certificate for gene-edited soybean... China approved the safety of a gene-edited soybean, its first approval of the technology in a crop, as the country increasingly looks to science to boost food production. The soybean, developed by privately owned Shandong Shunfeng Biotechnology Co., has two modified genes, significantly raising the level of healthy fat oleic acid in the plant. The safety certificate has been approved for five years from April 21, according to the ag ministry.
Limited demand for Chinese wheat, rice reserves... In its latest auctions, China sold 16,060 MT (40.4%) for wheat and 43,025 MT (4.7%) of rice from state-owned reserves put up for sale. The average sales prices were 2,398 yuan ($346.69) for wheat and 2,515 yuan ($363.60) for rice.
USDA announces funding to strengthen food supply chain infrastructure... USDA announced the creation of 12 new USDA Regional Food Business Centers that “will provide national coverage coordination, technical assistance, and capacity building to help farmers, ranchers, and other food businesses access new markets and navigate federal, state and local resources.” USDA also announced $420 million Resilient Food Systems Infrastructure Program (RFSI) to fund projects to invest in processing and distribution capacity to build resilience across the middle of the supply chain and strengthen local and regional food systems.
Weaker cash cattle trade, but futures too bearish... Cash cattle traded steady (northern market) to $1 lower (Southern Plains) so far this week. While the average cash price will fall for a third consecutive week and wholesale beef prices are also weakening, the selloff in cattle futures is exaggerated. June live cattle finished Wednesday $15.50 below last week’s average cash price. Because money flow is dictating price action, we can’t rule out more pressure on futures, but prices are too pessimistic.
Premiums in hog futures continue to narrow... The CME lean hog index is up another 76 cents to $73.78 (as of May 2), continuing the recent string of gains as the seasonal rally is finally underway. After Wednesday’s losses, the premium in May lean hog futures was down to $4.37 to today’s cash quote, while June hogs finished $14.22 above the cash index.
Overnight demand news... Tunisia tendered to buy 100,000 MT of durum wheat and 75,000 MT of feed barley – both optional origin.
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. Milk cows and production by State and region (Annual) — ERS
