First Thing Today | June 24, 2022

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Good morning!

Grain futures rebound overnight... Grain and soybean futures climbed overnight in a bounce-back from Thursday’s steep losses. As of 6:30 a.m. CT, corn futures are 1 cent lower to 11 cents higher, soybeans are 2 to 6 cents higher and winter wheat futures are 11 to 19 cents higher. Front-month U.S. crude oil futures are nearly $1.80 higher and the U.S. dollar index is about 150 points lower this morning.

Weekly Export Sales Report out this morning... For the week ended June 16, traders expect:

 

2021-22 expectations (in MT)

2021-22

last week

2022-23

expectations (in MT)

2022-23

last week

Corn

300,000-600,000

140,935

200,000-600,000

138,866

Wheat

NA

NA

150,000-400,000

236,857

Soybeans

(100,000)-300,000

317,157

50,000-500,000

407,577

Soymeal

100,000-300,000

256,324

0-50,000

35,569

Soyoil

0-25,000

6,181

0

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Fed’s Powell needs to see evidence inflation easing… Lawmakers pressed Federal Reserve Chairman Jerome Powell over how the central bank would manage trade-offs it could confront if its interest rate increases slow the economy sharply but don’t reduce inflation quickly. Powell on Thursday said that in such a scenario, the Fed would be reluctant to shift from raising rates to cutting them until it saw clear evidence that inflation was coming down in a convincing fashion. Fed governor Michelle Bowman said the central bank would need to raise interest rates aggressively this year to combat inflation.

Big banks pass Fed stress tests… Federal Reserve stress test results indicated big Wall Street banks can weather a severe recession. The banks tested demonstrated they had enough capital to handle market turmoil including surging unemployment, collapsing real-estate prices and a plunge in stocks, the Fed said in a statement Thursday. Major banks including JPMorgan Chase, Morgan Stanley and Goldman Sachs Group also faced a made-up market shock that tested the resiliency of their trading operations. The results effectively give large banks a go-ahead to return billions of dollars to investors in dividends and share buybacks.

Fiscal 2023 ag spending plan clears House panel… A House panel cleared a fiscal 2023 Agriculture/FDA spending plan by a vote of 31-26. The full House is expected to act on FY 2023 spending plans in July. But most observers predict Congress will have to clear a continuing resolution (CR) to keep the government funded when FY 2023 begins October 1 as they will be unable to work out differences between House and Senate versions of various appropriations measures by that date.

Dem Senators: Biden should consider curbing U.S. crude oil exports… Democratic Senators urged President Biden to limit crude oil exports to preserve petroleum supplies for the U.S. and allies. A “severe spike” in energy prices provides justification for the use of this authority, Senators Jack Reed (R.I.), Tammy Duckworth (Ill.), Tammy Baldwin (Wis.), and Jeanne Shaheen (N.H.) said in a letter.

U.S. mortgage rates highest since 2008… Mortgage rates reached the highest level in more than 13 years for the second straight week. The average rate on a 30-year fixed-rate mortgage rose to 5.81%, mortgage-finance giant Freddie Mac said Thursday, the highest level since November 2008. Some lenders are already quoting rates of 6% or more. The latest increase in home buyer borrowing costs comes after the Federal Reserve last week raised interest rates by the largest margin since 1994 and said it planned future increases.

Japan consumer prices exceed target… Consumer prices in Japan increased at an annual rate of 2.5% in May, remaining above the central’s bank 2% inflation target for a second successive month. The Bank of Japan believes the recent wave of inflation is driven by a temporary surge in energy prices and has kept interest rates low. Earlier this week, the yen plunged to a 24-year low against the dollar.

Prices for ethanol outpacing crude oil… Ethanol prices have risen steadily this year, boosted by a Biden administration mandate to blend more of the biofuel into gasoline and some of the highest U.S. consumer inflation in decades. The price of ethanol, the corn-based fuel that is a common gasoline additive, has risen 14% so far this quarter, outpacing crude oil, the Wall Street Journal reported.

China buying less U.S. natural gas… U.S. natural-gas sales to China have dried up as the Ukraine war disrupts energy trade. A year ago, China was racing to buy as much natural gas from the U.S. as it could get. Now, it is buying more from Russia.

Ukraine forces told to leave key city… Ukrainian forces in Severodonetsk have been told to withdraw, after withstanding months of Russian shelling in the town that has become the focal point of the invasion. About 80% of houses have been severely damaged according to Serhiy Haidai, the regional governor. Russian forces have nearly encircled the city.

Drought footprint spreads amid hot temps, limited rainfall... As of June 21, the U.S. Drought Monitor shows 62% of the country covered by some form of dryness/drought, up five points over the past week. “Much above-normal temperatures plagued much of the central and eastern contiguous U.S. (CONUS) this week from the Great Plains eastward to the Mississippi Valley and Southeast,” the Drought Monitor said. “The western third of CONUS, the Northeast, and coastal Mid-Atlantic experienced seasonal to below-normal temperatures. Precipitation was lacking in many locations that experienced excessive (in some cases record) heat, leading to widespread expansion of abnormal dryness and moderate drought conditions along the Mississippi and Ohio Valleys, the Southern Plains, and the Southeast. From the Central Plains northward, despite the excessive heat (daytime high temperatures above 100°F several days this week), recent improvements driven by an active storm track leading up to this week resulted in modest, more targeted degradations in the drought depiction.”

U.S. beef supplies up sharply from year-ago… USDA’s Cold Storage Report showed beef stocks declined less than normal in May and totaled a record for the month, while frozen pork inventories climbed contra-seasonally. Beef stocks in storage as of May 31 totaled 519.8 million lbs., down 12.3 million lbs. (2.3%) from April but shy of the five-year average decline of 34.5 million lbs. during the month. Beef stocks rose 103.2 million lbs. (24.8%) from year-ago and were 96.8 million lbs. (22.9%) above the five-year average. Pork stocks totaled 543.1 million lbs., up 9.7 million lbs. (1.8%) from April. Over the past five years, pork stocks declined an average of 28.7 million lbs. during May. Pork inventories rose 80.6 million lbs. (17.4%) from May 2021 but were still 11.2 million lbs. (2.0%) below the five-year average.

Cattle on Feed Report out this afternoon... On average, traders expect USDA to report the June 1 feedlot inventory up 1.4% from year-ago, while May placements are expected to be down 0.4% and marketings up 3.0%. Placements will be the focal point after that category topped the highest pre-report estimates the past two months.

Feedlots current, but recession concerns hang over the market... Cattle carcass weights are the lowest for the week since 2019, which should limit near-term pressure on the cash market with supplies near a seasonal peak. The biggest threat to cattle is macroeconomic. Cattle futures dropped Thursday amid the broad risk-off day in the commodity sector as recession concerns mounted.

Hog futures back below cash index... Sharp losses on Thursday dropped summer-month hog futures well below the cash index. July hogs finished $2.12 below today’s cash index quote (as of June 22), while August hogs ended at nearly a $7 discount. While the cash index is down 7 cents today, the trend is still up, which should help limit near-term pressure on summer-month hog futures.

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

 

Latest News

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After the Bell | September 29, 2022

Grain, soybean futures end mixed ahead of USDA's quarterly stocks; USDA reports further hog herd contraction.

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Pro Farmer editors provide daily updates on advice, including if now is a good time to catch up on cash sales.

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Sharp drop in cash corn and soybean prices over the past week.

Currencies
Analysts/economists keeping a close watch on major currency fluctuations

Sharp fluctuations in some of the world’s major currencies are injecting new uncertainty into the global economic outlook.