Good morning!
Light, two-sided trade overnight... Overnight price action in the grain and soy markets was quiet and choppy. As of 6:30 a.m. CT, corn futures are trading steady to a penny lower, soybeans are 2 cents lower to 2 cents higher, winter wheat futures are mostly 1 to 4 cents lower and spring wheat futures are steady to fractionally lower. Front-month U.S. crude oil futures are around $1.50 lower and the U.S. dollar index is around 110 points higher.
HRW CCI rating declines, SRW improves... When USDA’s weekly crop condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the HRW crop declined 6.3 points to 271.5, which is 59.4 points below the five-year average for mid-April. The Kansas crop improved slightly but the CCI ratings deteriorated in other six states. The SRW crop improved 4.8 points on the week to 350.2, led by Illinois and Michigan, though that’s still 9.0 points below the five-year average for the date. Click here for more details.
World Bank: ‘Exceptional uncertainty’... World Bank Chief Economist Carmen Reinhart said the global economy is passing through a period of “exceptional uncertainty” and added that she wouldn’t rule out further downgrades to the growth outlook. The Washington-based institution lowered its estimate for global growth in 2022 to 3.2% from 4.1% in January as Russia’s invasion of Ukraine — a major grain producer —shows no sign of ending, and China’s lockdowns to combat Covid are stressing supply chains. The World Bank is also looking to discuss a new crisis-response package of about $170 billion. The International Monetary Fund releases its updated global GDP forecasts today.
Russia/Ukraine update... President Joe Biden will hold a call with allies today to discuss Ukraine, including on how to coordinate on holding Russia accountable. China told Russia it will continue to increase “strategic coordination” with it regardless of international volatility, the Chinese foreign ministry said. Russia’s invasion has damaged or destroyed up to 30% of Ukraine’s infrastructure at a cost of $100 billion, a Ukrainian minister said, adding reconstruction could be achieved in two years using frozen Russian assets to help finance it. “Researchers from the Centre for Economic Policy Research (CEPR), a network of economists, have used data on property damage, figures on the country’s capital stock and historical analogies to estimate the overall cost of what will have to be done to rehabilitate the country after the war at €200 billion to €500 billion ($220 billion to $540 billion). The upper bound is over three times Ukraine’s pre-war GDP; the lower number is roughly four times the EU’s foreign-aid budget,” the Economist writes.
International sanctions are beginning to choke Russia’s economy... Moscow’s mayor warned that 200,000 people risked losing their jobs in the capital alone, while the head of the country’s central bank warned the effects of Russia’s isolation were just starting to be felt. Russia said it is taking legal steps to recover its frozen foreign currency. The U.S. sanctions on about $300 billion of Russian assets are “unprecedented,” according to the head of the country’s central bank.
Russia/Ukraine war trigger food shortage concerns... Ukraine and Russia together account for about a quarter of the world’s grain trade, and disruption to shipments from the Black Sea region is bringing turmoil to the global market. With the price of corn at a decade high and wheat soaring, the United Nations has warned an additional 13 million people could be left undernourished. Drought-affected countries across the Horn of Africa are likely to be the hardest hit, the World Food Program says. The World Food Program is spending $70 million more a month to buy the same amount of food as last year. Meanwhile, an official with the World Food Program says Ukraine has insufficient storage capacity even for will be a reduced 2022 grain harvest. An estimated 15 MMT of grains will not have space in the silos around the country,” the official said.
Session organized by Yellen on global food situation set for today... U.S. Treasury Secretary Janet Yellen has organized a high-level panel of officials to address global food security issues in the wake of the Russian invasion of Ukraine. Yellen first suggested the session last week, and the U.S. Treasury Monday announced she would meet with the heads of the International Monetary Fund, World Bank and International Fund for Agricultural Development, along with ministers from the G7 and G20 countries and technical exports from the global financial institutions. Reuters quoted senior Treasury officials as saying Yellen’s focus for the session is to make sure international financial institutions are sharing their knowledge on rising food insecurity and there was no specific target in mind relative to aid to countries affected by the situation. Yellen is expected to urge countries do not impose export restrictions and take action to boost local food production in areas like Africa and other areas dependent on food imports. An action plan is expected to be released after the event to help structure the global response, Reuters said.
Report: Indonesia launching corruption probe on palm oil exports... Indonesia’s Attorney General Sanitiar Burhanuddin released a televised statement Tuesday announcing a corruption case relative to issuing palm oil export permits, naming four suspects in the matter, according to a report from Reuters. “We have conducted an investigation and have found strong indications of the criminal offence of corruption relating to the issuance of export permits for palm oil,” Burhanuddin said, noting there was evidence that permits were issued for companies that had not met requirements of meeting locally supplies. Suspects in the case include a director general of international trade at the trade ministry and officials at three companies — Permata Hijau Group, PT Wilmar Nabati Indonesia and Musim Mas.
Will the dollar be dethroned as the world’s major currency?... Russia’s invasion of Ukraine and the resulting U.S. decision to restrict Moscow from its own U.S. dollar holdings has prompted talk the greenback’s days as the world’s reserve currency may be numbered. But most dollar watchers and analysts say the U.S. dollar will prevail for the foreseeable future. While China and Russia are conducting more trade in yuan (China’s currency), the dollar continues as the preferred currency for nearly half of cross-border transactions, even though the U.S. accounts for just 10% of global trade. Meanwhile, around 60% of foreign exchange reserves held by central banks are denominated in dollars versus only 20% denominated in euros and just 2.5% in yuan.
Yen continues sharp depreciation... Flying under the radar of the marketplace has been the severe depreciation of the Japanese yen on the foreign exchange market the past few months. Bloomberg reports the yen has extended its longest losing streak in at least 50 years. “The currency is plunging even after Japanese Finance Minister Shunichi Suzuki stepped up verbal defense of the currency, with traders looking for more concrete signs of intervention. Selling the yen has become a favorite trade as the dovish Bank of Japan keeps policy rates anchored to the floor while the Federal Reserve starts on a hiking cycle,” Bloomberg said. The U.S. dollar on Monday hit a 20-year high against the yen near ¥127 per dollar, with some signaling it could hit ¥130.
Supreme Court won’t hear challenge to key SALT tax deduction... The Supreme Court on Monday declined to review a challenge to the $10,000 ceiling imposed on the state and local tax (SALT) deduction, one of the most controversial provisions of the 2017 tax bill ushered into law by President Trump and a GOP-led Congress. The court’s move, via a brief unsigned order without noted dissent, effectively ended a legal challenge brought by several high-tax, Democratic-led states. The Republican-led tax cuts capped at $10,000 the amount of state and local taxes that individuals could deduct from their federal income taxes, a move that effectively increased the tax burden on high-earners in states like New York and California.
USDA lists more details on Pennsylvania HPAI... USDA’s Animal and Plant Health Inspection Service (APHIS) lists the confirmed highly pathogenic avian influenza (HPAI) case in Lancaster County, Pennsylvania as involving 1,443,000 commercial layer chickens. The agency also said there was another commercial operation in Wisconsin confirmed with HPAI — 20,000 commercial turkeys in Polk County. Other confirmed HPAI cases listed by APHIS for April 15 and April 16 were in backyard mixed species (non-poultry).
China to auction beef, mutton reserves... China will auction 3,000 lbs. of frozen beef and mutton from state reserves on Thursday.
Higher cash cattle hopes, but recent trend suggests otherwise... Cash cattle averaged $141.02 last week, up $2.20 from the previous week. Bullish traders and feedlots have hopes of higher cash prices again this week, though that would require breaking the pattern of up-and-down cash prices every other week over the past six weeks. As is typical, packers and feedlots didn’t establish bids or asking prices on Monday and active cash trade isn’t likely until midweek at the earliest. With the Cattle on Feed Report out Friday afternoon, cash trade may be pushed until after that data is released.
Pork cutout unable to hold strong morning gains... The pork cutout value firmed $6.05 Monday morning on strength in all cuts except ribs. But a sharp drop in hams during afternoon trade pulled the cutout value 72 cents lower for the day. With Easter done an already choppy ham market could become even more volatile.
Overnight demand news... Japan is seeking 27,320 MT of Australian wheat in its weekly tender.
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
- 10:00 am Fruit and Tree Nuts Data — ERS
- 10:00 am Vegetables and Pulses Data — ERS