First Thing Today | June 13, 2023

Good morning!

Corn and soybeans firmer, wheat weaker overnight... Corn and soybeans were supported overnight by the bigger-than-expected declines in crop condition ratings, while wheat faced price pressure. As of 6:30 a.m. CT, corn futures are trading 3 to 4 cents higher, soybeans are mostly 10 to 16 cents higher, SRW wheat is 2 to 3 cents lower, HRW wheat is 6 to 7 cents lower and HRS wheat is 4 to 7 cents lower. Front-month crude oil futures are around $1.25 higher and the U.S. dollar index is more than 300 points lower.

Consultant lower corn, soybean yield forecasts... Crop consultant Dr. Michael Cordonnier cut his corn yield forecast by 1 bu. to 178 bu. per acre, noting moisture stress across 45% of U.S. corn acres. He now projects the U.S. corn crop at 14.86 billion bushels. Cordonnier also trimmed his soybean yield by 0.5 bu. to 51.5 bu. per acre. He now forecasts the soybean crop at 4.48 billion bushels.

Corn, soybean and spring wheat CCI ratings decline... When USDA’s weekly condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn crop fell 4.8 points to 360.9, while the soybean crop dropped 7.3 points to 350.6. The CCI ratings are now 18.8 points below year-ago for corn and 20.4 points below for soybeans. The spring wheat CCI rating declined 13.6 points over the past week to 356.6, though that was still 3.2 points above year-ago at this time. Click here for more details.

Crop Progress Report highlights… Following are highlights from USDA’s crop progress and condition update as of June 11.

• Corn: 93% emerged (87% average); 61% good/excellent (64% last week).
• Soybeans: 96% planted (86% average); 86% emerged (70% average); 59% good/excellent (62% last week).
• Cotton: 81% planted (86% average); 11% squaring (14% average); 49% good/excellent (51% last week).
• Spring wheat: 97% planted (97% average); 90% emerged (87% average); 60% good/excellent (63% expected).
• Winter wheat: 89% headed (88% average); 8% harvested (9% average).

Renewable diesel industry urging EPA to increase biofuel targets... Renewable diesel industry officials are urging EPA to increase biofuel targets for 2023-2025 to avoid negatively affecting Renewable Identification Number (RIN) prices and renewable diesel producer margins. EPA’s proposed RVOs are considered outdated, as they don’t take into account the expected growth in renewable diesel production capacity. Current predictions suggest capacity will reach 4.1 billion gallons by the end of 2023, 5.5 billion in 2024 and 5.9 billion by 2025. Dave Kettner, president of Virent, warns that not adjusting the EPA proposal could endanger the burgeoning low carbon fuels market by devaluing advanced biofuels. The Advanced Biofuels Association (ABFA) will be presenting their concerns to the White House Office of Management and Budget. However, Michael McAdams, ABFA President, does not anticipate congressional involvement in the issue in the coming years. EPA by court order is expected to make its decisions by June 14.

China cuts short-term lending rate... China’s central bank lowered a short-term lending rate for the first time in 10 months to help restore market confidence and prop up a stalling post-pandemic recovery. The People’s Bank of China (PBOC) cut its seven-day reverse repo rate by 10 basis points to 1.90% from 2.00% and injected 2 billion yuan ($279.97 million) through the short-term bond instrument. The next adjustment to rates could come as soon as Thursday, when the central bank is due to roll over 200 billion yuan ($27.93 billion) in medium-term lending facility (MLF) loans. Bloomberg reported China was considering at least a dozen stimulus measures including cuts to interest rates to support areas such as real estate and domestic demand.

China’s new loans rise but shy of expectations... China’s new bank loans rose to 1.36 trillion yuan ($190.18 billion) in May, up from 718.8 billion yuan in April but shy of the 1.6 trillion yuan economists expected. Outstanding yuan loans in May grew 11.4% from last year, which was shy of the 11.6% expected. Broad M2 money supply in May grew 11.6% on year, below 12.1% forecast in a Reuters poll.

Xi prepares China for ‘extreme circumstances’... Chinese President Xi Jinping is urging the nation to prepare for potential extreme scenarios or conditions amidst escalating tensions between the U.S. and China, the Wall Street Journal reports. Xi’s emphasis on “extreme circumstances” comes as U.S. Secretary of State Antony Blinken plans to visit China this month to rebuild lines of communication. Although both countries are attempting to mend ties, Xi’s focus on withstanding prolonged tensions with the West indicates his main priority is to create a geopolitically resilient economy less reliant on foreign markets and technology. This strategy includes preparing for the possibility of increased U.S. and Western sanctions. Additionally, there seems to be a growing emphasis on China’s eventual reunification with Taiwan, which the Chinese government considers part of its goal for national revival.

El Niño threatens economic destruction... The first El Niño in almost four years threatens an already fragile global economy struggling with Covid-19 recovery and Russia’s war in Ukraine. The warming phase can result in widespread challenges, such as power grid strain, public health emergencies, increased fire risks and devastation to infrastructure. Bloomberg Economics modeling shows previous El Niño events significantly affected global inflation and GDP growth, with countries like Brazil, Australia and India hit the hardest. The combination of this El Niño cycle with extreme weather and accelerated climate change may lead to the costliest cycle on record, exacerbating stagflation risks. Central banks are limited in what they can do in response to El Niño’s supply-side effects.

USDA announces over 1 million acres deemed eligible for CRP via general signup... Producers submitted offers to reenroll 891,000 acres of land currently under CRP contracts, along with an additional 295,000 acres for new offers. Around 84% of submitted acreage was approved for new contracts.  However, the level of acres that are actually enrolled can decline from the level deemed eligible as sometimes producers do not opt to follow through with the enrollment. CRP acres amounted to 23 million at the end of April 2023, with contracts on 1.98 million acres set to expire by the end of September. A total of 1.186 million acres were submitted for new contracts, indicating that over 1 million acres may exit CRP. Meanwhile, 761,000 acres were offered through the continuous signup process, though only 60,359 acres were enrolled by the end of April.

Packer demand for cash cattle may slow... Packers bought 110,000 head of cattle last week, with 35,000 head of that total purchased for deferred delivery – the largest negotiated cash trade this year. As a result, demand for cash cattle is likely to be reduced this week, especially with packers slowing weekly kills to control inventories amid tightening market-ready supplies. That’s likely to slow the cash cattle advance, though feedlots will be reluctant to sell at lower prices.  

Cash hogs rise, pork cutout slips... The CME lean hog index is up another 45 cents to $84.73 (as of June 9), extending its seasonal rise. The pork cutout value slipped 19 cents on Monday to $88.20, as weakness in loins and hams offset gains in the other cuts. Summer-month contracts led gains in hog futures on Monday, though the market may have to pause to let cash fundamentals catch up.

Overnight demand news... Iran tendered to buy 120,000 MT of corn from Brazil, Europe or the Black Sea region and 120,000 MT of soymeal from Brazil or Argentina. Japan tendered to buy 60,000 MT of feed wheat and 20,000 MT of feed barley.

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

• 11:00 a.m. Cotton and Wool Outlook: June 2023 — ERS
• 11:00 a.m. Meat Price Spreads — ERS
• 11:00 a.m. Oil Crops Outlook: June 2023 — ERS
• 2:00 p.m. Dairy Monthly Tables — ERS
• 2:00 p.m. Feed Outlook: June 2023 — ERS
• 2:00 p.m. Rice Outlook: June 2023 — ERS
• 2:00 p.m. Wheat Outlook: June 2023 — ERS
• 2:00 p.m. Fresh Apples, Grapes, and Pears: World Markets and Trade — FAS