Good morning!
Weaker tone ahead of USDA reports... Corn, soybean and winter wheat futures faced mild price pressure overnight as traders awaited USDA’s reports later this morning. As of 6:30 a.m. CT, corn futures are trading 4 to 5 cents lower, soybeans are 5 to 8 cents lower, winter wheat futures are 4 to 7 cents lower and spring wheat futures are mostly 1 to 3 cents higher. Front-month crude oil futures are around $1 higher and the U.S. dollar index is more than 300 points higher.
June S&D, Crop Production Reports out later this morning... USDA is expected to fine tune its old- and new-crop balance sheets, with just minor changes expected to U.S. and global ending stocks. USDA will also update its U.S. winter wheat production estimates, though it typically makes minor adjustments in June. A potential wild card is the U.S. corn yield projection. In May, USDA cut its corn yield projection by 4 bu. per acre from trendline due to planting delays. As of June 5, the planting pace had surpassed the five-year average. That could prompt USDA to raise its yield some, though there’s no precedent of that happening in June, and we doubt there will be an upward revision. The July Supply & Demand and Crop Production Reports will be released at 11 a.m. CT.
Vilsack to use $1 billion from CCC to help fund school lunch program... The aid will be announced soon and will continue the increased funding the Biden administration has provided the program. Apparently, the aggressive use of the Commodity Credit Corporation (CCC) for funding nontraditional programs still leaves enough funding for traditional program functions before Congress replenishes its funds.
Average gas price hits $5... The national average price at the pump reached $5 a gallon on Thursday, according to price-tracking site GasBuddy. The average price of regular gas is about 26 cents higher than last week and nearly $2-a-gallon higher compared with this time last year, according to AAA. Gasoline prices could reach a national average of $6.20 a gallon by August, JPMorgan Chase estimated. Drivers are buying fewer gallons on each visit to gas stations but making more frequent trips to fuel up. High gasoline prices cut consumption because drivers shift their routines. A 10% rise in gasoline prices leads to a 2% to 3% decline in gasoline consumption in the short term, Lucas Davis, an economist at the University of California, Berkeley, told the Wall Street Journal.
Yellen: High fuel prices here to stay; doesn’t see recession... Treasury Secretary Janet Yellen said elevated gasoline prices are likely to persist, but she doesn’t see a slowing U.S. economy slipping into recession. Disruptions in global oil markets caused by Russia’s war against Ukraine and the subsequent sanctions imposed on Russia are likely to keep oil prices elevated, she said Thursday, which will inflate gasoline costs. Meanwhile, Yellen said that “it’s amazing how pessimistic” Americans are about the economy, “given that we have the strongest labor market we’ve had in the entire postwar period.”
Biden to visit busiest U.S. port as he seeks to head off supply chain woes... President Joe Biden will visit the port of Los Angeles today with the White House closely watching talks on a new union contract for 22,000 West Coast dockworkers. A collapse of the negotiations risks a work stoppage during the port’s busiest time of year, one that would snarl U.S. supply chains still suffering pandemic disruptions. The International Longshore and Warehouse Union and the Pacific Maritime Association, which represents more than 70 terminal operators and ocean carriers, are negotiating in San Francisco over a contract for workers at 29 ports in California, Oregon and Washington. The current pact expires July 1. Some progress has been made to reduce massive backlogs at the twin ports of Los Angeles and Long Beach that contributed to inflation across the U.S. Together, the two ports handle the most container traffic in the country. However, industry sources signal backlogs are expected to increase with China reopening parts of its country and ports. Biden, who’s pledged to be the most pro-union president in U.S. history, has directed Cabinet members and supply-chain experts to smooth negotiations between the ports and dockworkers in hopes of avoiding a repeat of the months-long disruptions that followed a 2014 labor dispute. Highlighting the stakes, Biden will discuss the latest data on U.S. inflation while at the port and argue that cutting shipping costs will curb price increases, a White House official said.
China’s PPI eases, consumer inflation unchanged... China’s producer price index (PPI) eased to a 14-month low of 6.4% above year-ago in May from 8.0% the prior month. This marked the 17th straight month of year-over-year gains in producer prices. Chinese consumer prices held at 2.1% above year-ago, unchanged from April. Food prices rose 2.3% from year-ago, up from a 1.9% increase in April and the most since September 2020. Non-food prices increased 2.1%, down from 2.2% the previous month.
China’s new bank loans surged in May... New bank lending in China jumped far more than expected in May and broader credit growth also quickened, as policymakers try to pull the world’s second-largest economy out of a Covid-induced slump. Chinese banks extended 1.89 trillion yuan ($282.62 billion) in new yuan loans in May, nearly tripling April’s tally. However, 38% of the new monthly loans were in the form of short-term bill financing, which was down from 80% in April but still higher than 10% in the first quarter, suggesting real credit demand remains weak.
Indonesia eases palm oil export rules... Indonesia is further easing rules to allow more companies to export palm oil, aiming to ease bottlenecks and swelling inventories caused by an export ban and regulatory changes implemented to maintain domestic supply. The country allowed palm oil exports to resume on May 23, but confusion over procedural issues and new requirements for firms to join a government bulk cooking oil distribution program have limited shipments. Companies that have not joined the program will be allowed to ship palm oil if they pay a $200-per-MT charge on top of the export tax. Indonesia aims to export at least 1 MMT of palm oil products by July 31.
French wheat crop ratings continue to slide... The condition of France’s soft wheat crop deteriorated for a sixth consecutive week. The country’s ag ministry rated the crop 66% good/excellent, down a point from the previous week. Crop ratings have plunged 23 percentage points since the beginning of May.
China continues soybean auctions... China will sell another 500,000 MT of imported soybeans from its state reserves on June 17. Beijing has been releasing the oilseed from its reserves in weekly sales in an effort to boost supplies in the domestic market. Demand for the soybean reserves has been relatively low, however.
Bullish attitudes in cattle... All but June live cattle futures ended lower on Thursday, but the market has shown unusual strength so far this month, led by firming cash prices. With feedlots current, packers are having to be more aggressive with cash bids than traders anticipated. As long as feedlots retain the upper hand in cash negotiations, the market will stay fundamentally supported.
Hog attitudes turn more bearish... Lean hog futures faced heavy selling pressure on Thursday, suggesting traders believe the cash index has topped. The CME lean hog index is down 17 cents today (as of June 8) to $107.31. June hogs finished 33 1/2 cents below that level, while the July and August contracts ended with discounts of $2.31 and $4.21, respectively.
Overnight demand news... Exporters reported no tenders or sales.
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. Meat Price Spreads — ERS
- 11:00 a.m. WASDE — ERS
- 11:00 a.m. Crop Production — NASS
- 11:15 a.m. Cotton: World Markets and Trade — FAS
- 11:15 a.m. Grain: World Markets and Trade — FAS
- 11:15 a.m. Oilseeds: World Markets and Trade — FAS
- 11:15 a.m. World Agricultural Production — FAS
- 2:00 p.m. Peanut Prices — NASS
- 2:30 p.m. Commitments of Traders — CFTC