Good morning!
Price strength overnight... Soybean futures led overnight price gains, though corn and wheat actively participated in the push to the upside. As of 6:30 a.m. CT, corn futures are trading 6 to 8 cents higher, soybeans are 17 to 20 cents higher, winter wheat futures are mostly 8 to 12 cents higher and spring wheat is 3 to 8 cents higher. Front-month crude oil futures are modestly lower, while the U.S. dollar index is down around 250 points.
House easily clears debt-limit bill... The House easily passed a bipartisan debt-limit bill, 314-117, with 149 Republicans and 163 Democrats voting for the measure. The final tally was considerably above the level reflected in many major media ahead of the vote. The Fiscal Responsibility Act now goes to the Senate. Senate Majority Leader Chuck Schumer (D-N.Y.) will file cloture on the motion to proceed. That would set up a critical procedural vote on Saturday. The Senate will eventually clear the measure and send it to the White House for signature.
Soy crush, corn ethanol use expected to decline from March but rise from year-ago... USDA is expected to report soybean crush totaled 185.0 million bu. during April, which would be down 12.9 million bu. (7.0%) from March but up 4.1 million bu. (2.3%) from year-ago. Corn-for-ethanol use is expected to come in at 423.1 million bu., which would be down 14.9 million bu. (3.4%) from March but up 7.1 million bu. (1.7%) from last year.
Export sales pushed back to Friday... Due to Monday’s holiday, export sales data for the week ended May 25 will be delayed until Friday morning.
Ukraine’s grain, oilseed production and exports to fall sharply... Ukraine’s combined grain and oilseed crop production is expected to fall 5.8 MMT (7.9%) to 68 MMT this year, Ukrainian grain traders union UGA forecasts. The grain harvest could include 17.9 MMT of wheat and 23.3 MMT of corn, which would be down from 20.2 MMT and 27.3 MMT, respectively, in 2022. Oilseed production is expected to rise. UGA said combined exports of grains and oilseeds could total 43.9 MMT in 2023-24, which would be down 12.5 MMT (22.2%) from this year. Exports could include 15 MMT of wheat and 19 MMT of corn.
Lawmakers Tai to initiate formal dispute against Mexico’s GMO corn law... More than 60 House Republicans have written a letter insisting U.S. Trade Representative Katherine Tai initiate a formal dispute against Mexico over its decision to prohibit certain types of GMO corn. This issue has been a significant concern for representatives from corn-producing states since Mexican President Andrés Manuel López Obrador declared import restrictions on bioengineered corn at the end of 2020. Mexico is a crucial market for U.S. corn exports. The lawmakers argue in the letter that, given the lack of meaningful action by Mexico to change its policy, it is now time to take those additional steps. The letter, led by Rep. Adrian Smith (R-Neb.), chair of the House trade subcommittee, emphasizes that Mexico’s failure to abide by its agricultural commitments under the U.S.-Mexico-Canada Agreement (USMCA) should be addressed with the same intensity USTR has used in approaching other aspects of the agreement, including labor. The letter emphasizes USMCA must be enforced in its entirety.
Fed prepares to pause in June, may hike later... Some Federal Reserve officials are signaling they plan to keep interest rates steady in June while retaining the option to hike further in coming months. Skipping an increase would give policymakers time to assess data but not preclude future tightening, Governor Philip Jefferson said Wednesday. The message was echoed by Philadelphia Fed President Patrick Harker, who also urged a June pause. After the remarks, traders scaled back the odds of a rate hike at the June monetary policy meeting to about 35%, from nearly 60% a day earlier.
Beige Book: Inflation easing, but still a concern along with other warning signs... Wednesday’s Beige Book, which highlights economic activity in the 12 Fed districts, contained several references to the slowing pace of inflation, but also mentioned price pressures are still too high. Consumer activity has generally been robust in recent weeks, but the report noted a rise in loan and credit card defaults and delinquencies, although these levels are approaching, but not yet exceeding, pre-pandemic levels. As expected with the Fed’s recent interest rate hikes, demand for credit is falling. Despite these challenges, the U.S. economy continues to mostly advance, though at a slowing pace. Two of the 12 Fed districts reported slight to moderate declines and six reported no change. The report underscores that inflationary pressures continue to be a primary concern for Fed officials.
Unexpected rise for Chinese factory activity... China’s Caixin/S&P Global manufacturing purchasing managers index (PMI), which tracks smaller privately owned factories, rose to 50.9 in May from 49.5 in April, a stark contrast to a deeper contraction seen in the official PMI that gauges larger and state-owned manufacturers. Output rose the most in 11 months, new order growth was at two-year high and foreign sales continued to increase.
Euro zone inflation drops more than expected... Consumer inflation in the euro zone eased to 6.1% annual growth in May, down from a 7.0% rise the previous month. Core inflation, which excludes volatile food and fuel prices, fell to 5.3% from 5.6%.
Cattle traders remain relatively conservative... June live cattle futures scored a new contract high for a fifth consecutive session on Wednesday, but the lead contract finished nearly $9.00 below last week’s average cash price. So far this week, light cash cattle trade has been reported around steady prices in the Southern Plains, though activity has been quiet in the northern market, which has been the price driver given tighter supplies in those states.
Hog futures forging technical bottom... Hog futures followed up Tuesday’s strong gains with a gap-higher open and additional corrective gains yesterday, forming a potential “v” bottom reversal on the daily price chart. Hog futures like to post dramatic reversals, especially after prolonged trending moves. But with summer-month contracts back at premiums to the cash index, which is down for a third consecutive day, the cash market must strengthen to build sustained buyer interest in futures.
Overnight demand news... South Korea purchased 64,000 MT of optional origin feed wheat. Saudi Arabia tendered to buy 480,000 MT of hard milling wheat.
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
- 8:00 a.m. Food Expenditure Series — ERS
- 9:30 a.m. Weekly Ethanol Production — EIA
- 2:00 p.m. Cotton System Consumption and Stocks — NASS
- 2:00 p.m. Fats & Oils: Oilseed Crushings — NASS
- 2:00 p.m. Grain Crushings and Co-Products Production — NASS