First Thing Today | June 27, 2022
Corn lower, soybeans and wheat firmer this morning... Corn futures traded lower throughout the overnight session, while soybeans and wheat rebounded from initial losses. As of 6:30 a.m. CT, corn futures are trading 8 to 15 cents lower, soybeans are 3 to 9 cents higher, SRW wheat futures are 5 to 6 cents higher, while HRW and HRS wheat are mostly 1 to 2 cents higher. Front-month U.S. crude oil futures are around 25 cents higher and the U.S. dollar index is around 150 points lower this morning.
Beneficial rainfall across parts of the Corn Belt... Rainfall during the weekend was a little greater than expected in Illinois, northeastern Iowa and in a few areas of far northwestern Iowa and northeastern Nebraska, according to World Weather Inc., while lighter than expected in southern Minnesota. A relatively good mix of showers and sunshine is expected both this week and next week, but rainfall is expected to be light in both weeks and there is potential for some areas to be missed by rains.
Russia defaults on some debt... Russia defaulted on its foreign-currency sovereign debt for the first time in a century, following significant Western sanctions that shut down payment routes to overseas creditors. For months, the country found paths around the penalties imposed after the Kremlin’s invasion of Ukraine. But on Sunday, the grace period on about $100 million of interest payments due May 27 expired, a deadline considered an event of default if missed. Focus shifts to what investors do.
G7 make new commitments on Russia/Ukraine... Group of Seven (G7) leaders said Sunday they would stop buying gold from Moscow and discussed a new U.S. proposal to undercut its oil revenues, even as Russian forces rained missiles on Kyiv for the first time in weeks. The group will commit to providing indefinite support to Ukraine for its defense against Russia’s invasion, according to the text of a draft statement from their summit in Bavaria. Members of the alliance are concerned about the war dragging on and some, including Germany and France, have hinted they may be more open to the idea of a negotiated cease-fire. The G7 leaders are also weighing the possibility of using revenues from tariffs on imports from Russia to support Ukraine. G7 leaders are expected to agree to start work on a mechanism to cap the purchase price of Russian oil, with the U.S. also announcing a new round of military aid for Ukraine and sanctions against Moscow, Biden administration officials said today. “The goal here is to starve Russia, starve [Russian President Vladimir] Putin of his main source of cash and force down the price of Russian oil to help blunt the impact of Putin’s war at the pump,” the official said. Ukrainian President Volodymyr Zelenskyy is expected to address the leaders today via video.
U.S. imposes higher tariffs on Russian goods... The U.S. will implement a higher tariff rate on more than 570 groups of Russian products worth approximately $2.3 billion to Russia in line with Congress revoking Russia’s trade status, according to a government fact sheet distributed Monday.
G7 tries to counter China’s Belt and Road project... G7 leaders pledged on Sunday to raise $600 billion in private and public funds over five years to finance needed infrastructure in developing countries and counter China's older, multitrillion-dollar Belt and Road project. President Joe Biden and other G7 leaders relaunched the newly renamed “Partnership for Global Infrastructure and Investment,” at their annual gathering being held this year at Schloss Elmau in southern Germany. Biden said the U.S. would mobilize $200 billion in grants, federal funds and private investment over five years to support projects in low- and middle-income countries that help tackle climate change as well as improve global health, gender equity and digital infrastructure. Europe will contribute 300 billion euros ($317.28 billion) to the initiative.
China pledges supportive monetary policy... China’s monetary policy will remain accommodative to support economic recovery, People’s Bank of China Governor Yi Gang was quoted by state media as saying. China’s real interest rates are relatively low considering inflation, Yi told China Global Television Network. China’s outstanding green loans exceeded 18 trillion yuan ($2.69 trillion) as of March, while outstanding green bonds reached about 1.3 trillion yuan, Yi said.
The week ahead in Washington... The House Appropriations Committee approved six fiscal year (FY) 2023 spending bills last week, setting them up for possible floor action in July. The remaining measures — Energy and Water, Commerce-Justice-Science, State and Foreign Operations, Interior-Environment, Transportation-HUD, and Labor-HHS-Education — advanced in subcommittee and are scheduled for full committee markup this week. The House has committee work days this week and is out next week. The Senate is on its state work period through July 8. After the July Fourth recess, key will be whether Democrats can find enough votes on getting a modified stimulus/tax increase/green energy bill via a reconciliation approach. On the economic front, U.S. trade data for May and the Conference Board’s consumer confidence index for June are both out Tuesday, while final first quarter U.S. GDP will be released on Wednesday and the PCE price index (the Fed’s preferred inflation gauge) for May is scheduled for Thursday. Key on the ag front will be Thursday’s Acreage and Quarterly Grain Stocks Reports from USDA.
Supreme Court expected to announce ruling this week in West Virginia v. EPA... The case, which includes 27 Republican attorneys general, argues the executive branch of government does not have the authority to establish rules and regulations for greenhouse gas emissions, and that the task should instead be handled by Congress. A ruling in favor of West Virginia could severely weaken the Biden administration’s efforts to curb emissions and combat climate change. Meanwhile, the war has hampered the fight against climate change as countries focus on finding fossil fuels — even coal — to make up for lost Russian oil.
House Friday approved a school meals waiver plan... The plan would give schools flexibility to operate summer feeding programs and to continue the pandemic waivers on reimbursement rates. The Senate removed language in the bill that would have provided free meals for the 2022-2023 school year for low-income children who qualified. Under the revised provision, those students would have to pay a share of their meal costs. The House approved the measure via a voice vote, sending it to Biden for his signature. The current waiver authority expires June 30.
COF data should support cattle futures... Last Friday’s Cattle on Feed Report showed May feedlot placements below what traders expected. USDA reported the June 1 feedlot inventory up 1.2% from year-ago (1.4% rise expected) with May placements down 2.1% (0.4% drop expected) and marketings up 2.4% (3.0% increase expected). The data should support live cattle futures this morning given the drop in prices ahead of the report and the big discount they hold to the cash market.
Hog traders stick with conservative approach... July lean hog futures finished last Friday nearly in line with today’s CME lean hog index quote (as of June 23). August hogs finished more than $4 below the cash index. That price structure signals traders sense the cash index is close to peaking.
Weekend demand news... Saudi Arabia purchased 495,000 MT of wheat, with the seller having the option of sourcing from the EU, Black Sea region, North America, South America or Australia. Bangladesh tendered to buy 50,000 MT of optional origin milling wheat. Jordan tendered to buy 120,000 MT of optional origin milling wheat. Taiwan tendered to buy 40,000 MT of U.S. milling wheat and up to 65,000 MT of corn that can be sourced from the U.S., Brazil, Argentina or South Africa. Egypt contracted to buy 180,000 MT of wheat from India.
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.