First Thing Today | May 24, 2023
Good morning!
Grains weaker overnight... Soybeans faced followthrough selling during overnight trade, while corn and wheat pulled back from Tuesday’s gains. As of 6:30 a.m. CT, corn futures are trading fractionally to 3 cents lower, soybeans are 5 to 8 cents lower and wheat futures are 6 to 11 cents lower. Front-month crude oil futures are more than $1.00 higher and the U.S. dollar index is around 150 points higher.
Debt-limit update... House Speaker Kevin McCarthy (R-Calif.) and his top GOP allies said the two sides aren’t close to an agreement. McCarthy said President Joe Biden is trying to add provisions on prescription drug prices to the talks, something Republicans oppose. “You don’t add something like that and taxes at the end of negotiation.” But Senate Minority Leader Mitch McConnell (R-Ky.) said, “Everybody needs to relax. The president and the speaker will reach an agreement. It will ultimately be passed on a bipartisan vote.”
China facing new Covid strain... China is facing a new wave of Covid-19 infections that could see as many as 65 million cases per week by the end of June, predicted respiratory disease specialist Zhong Nanshan. The latest omicron variant, XBB, has been fueling a resurgence in cases across China since late April. According to a Bloomberg report, XBB is expected to result in 40 million infections per week by the end of May before peaking at 65 million a month later. In response to this new threat, China is rushing to bolster its vaccine arsenal with new immunizations that specifically target XBB. The country’s drug regulator has already given preliminary approval to two such vaccines, with another three or four expected to be cleared soon.
Russia, China sign bilateral pacts... Russian Prime Minister Mikhail Mishustin – the highest ranking Russian official to visit Beijing since Moscow started the war in Ukraine – signed a set of agreements with China on Wednesday. The memorandums of understanding signed included an agreement to deepen investment cooperation in trade services, a pact on export of agricultural products to China, and another on sports cooperation. The agreements come amid pressure from the West to isolate Russia and after Group of Seven leaders over the weekend singled out both countries on a number of issues, including the war in Ukraine. Mishustin told Chinese President Xi Jinping in China on Wednesday Moscow and Beijing would push back against attempts by countries to use sanctions to “impose their will,” Russia’s RIA news agency reported.
Copper flashing warning signs... The price of copper is showing signs of a sudden weakening in global demand, with the largest discount against its futures equivalent in nearly two decades. This drop indicates concerns over China’s stalled economic rebound and faltering industrial activity. The spot price for copper, a metal often used as a gauge for the health of the global market due to its widespread use, has seen a rapid decrease as stockpiles outside China increase in London Metal Exchange warehouses. This is amid a slowdown in U.S. and European industrial activity after a year of quick interest rate rises. Natalie Scott-Gray, a base metals analyst at StoneX, suggested copper prices were increasingly being influenced by real-world indicators of weak demand rather than large macroeconomic factors such as the U.S. dollar or sentiment towards China’s reopening. She added, “It’s the first physical evidence we're seeing that demand is being impacted worse than expected in the West... It’s the pace of change that has caused the gap.”
California seeks EPA approval to ban gas powered vehicles by 2035... California has asked the Biden administration to approve its plan to require all new vehicles sold in the state by 2035 to be either electric or plug-in electric hybrids, according to a letter seen by Reuters. The California Air Resources Board (CARB), which approved the plan last August, asked EPA on Monday to approve a waiver under the Clean Air Act to implement its new rules that set yearly rising zero emission vehicle rules starting in 2026 and would end the sales of vehicles only powered by gasoline by 2035. EPA spokesperson Tim Carroll said, “As with all waiver requests from California, we’ll follow an open public process in considering it, as the agency routinely does.”
Talk of further Federal Reserve tightening is back... Fed hawks are in full voice and some senior bankers such as JPMorgan boss Jamie Dimon this week mulled risks that rates could push above 6% before peaking, a level some had feared they might reach before the banking stress hit in March. “Five percent is not high enough for Fed Funds — I’ve been advising this to clients, and banks, you should be prepared for six, seven,” Dimon said on Monday. Minutes of the Fed’s most recent policy meeting are due out later today and will be scoured for clues about where the center of gravity among policymaking lies.
U.K. inflation slows less than expected... The inflation rate in the U.K. fell to 8.7% in April, the lowest since March 2022, due to a sharp slowdown in electricity and gas prices. Still, it exceeded market expectations of 8.2% and remained well above the Bank of England’s (BOE) target of 2%. The core rate, which excludes food and energy, jumped to 6.8%, the highest since 1992 and above forecasts of 6.2%. This puts pressure on BOE to hike interest rates another 25 basis points in June.
Hay prices convey drought problems, too... The market for hay is overshadowed by wheat and other crops hit by a drought in the Plains, but it can have a similar impact on food prices, the Wall Street Journal reports. This year’s average seasonal price for all types of alfalfa and grass hay was pegged at $235 a ton, up nearly 22% from last year.
U.S. contemplating bird flu vaccination strategy for turkeys... The U.S. is working on a bird flu vaccination scenario focusing on turkeys in the few states with the largest number of turkey farms, a move that would best meet a benefit-cost strategy, its chief veterinary officer said on Tuesday. However, no decision to vaccinate has yet been made, Rosemary Sifford, who is also deputy administrator of the Veterinary Services program at the Department of Agriculture (USDA), told Reuters. “Any vaccination strategy would need to be a very focused strategy... I would certainly not expect to do a widespread vaccination if we were to choose that path,” Sifford said. She sees “no positive impact” in vaccinating chickens since they have a short lifespan.
Cold Storage Report out this afternoon... USDA will detail frozen meat stocks at the end of April. The five-year average is a 15.1-million-lb. decline in beef stocks and a 16.9-million-lb. increase in pork stocks during the month.
Retailer buying picks up as Choice beef fades in afternoon trade... Choice boxed beef prices traded 18 cents high on Tuesday morning but faded to a $3.16 loss for the day. The afternoon price dive sparked a pickup in movement, which totaled 126 loads on the day. Retailers continue to show they are selective buyers with Choice beef prices above $300.00.
Hog futures premiums continue to narrow... June lean hog futures briefly traded below the cash index on Tuesday but finished the day 58.5 cents above today’s quote of $80.09 (as of May 22). The cash index has risen $8.91 since its low on April 24, while June hogs have fallen $6.90 during that span, virtually erasing all of the premium traders had built in.
Overnight demand news... Taiwan purchased 65,000 MT of corn expected to be sourced from Brazil.
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
- 9:30 a.m. Weekly Ethanol Production — EIA
- 2:00 p.m. Broiler Hatchery — NASS
- 2:00 p.m. Cold Storage — NASS
- 2:00 p.m. Farm Labor — NASS
