Good morning!
Soybeans weaker, corn and wheat firmer overnight... Soybean futures extended last Friday’s price pressure overnight, while corn and wheat favored the upside amid two-sided trade. As of 6:30 a.m. CT, corn futures are trading 4 to 5 cents higher, soybeans are 15 to 18 cents lower and wheat futures are mostly 9 to 12 cents higher. Front-month U.S. crude oil futures are around $2 lower and the U.S. dollar index is about 650 points higher.
Heat builds across U.S. crop areas... Heat advisories are in effect for the central U.S. today and tomorrow as temps rise well above normal across the Corn Belt, Southern Plains and Delta, though there will be some rain activity in northern areas early this week before a high-pressure ridge moves in late-week. Soil moisture should be ample to avoid crop stress, but there will be a need for rains in some areas by late June/early July.
Economist says most U.S. inflation ‘could have been avoided’... Most of the current inflation could have been avoided had the Federal Reserve acted earlier and shown humility after it wrongly described inflation as “transitory,” economist Mohamed El-Erian said Sunday. El-Erian, chief economic advisor at Allianz, appeared on CBS’s Face the Nation to discuss what caused the current inflation and where it was likely to be heading. “We got here because we got a combination of things happening,” El-Erian said, citing the war in Ukraine, the energy transition, and how the Fed incorrectly judged inflation and fell behind. “All these things came together and are feeding now this everything inflation. The price of nearly everything is going up and making us feel really insecure,” he said. El-Erian said most of the inflation “could have been avoided if early action had been taken” by the Fed, which must now regain credibility to ease long-term inflation expectations. “I was very puzzled when a year ago so many people were so confident that inflation was transitory,” he said. “There was so much we didn’t understand about the post-Covid inflation that humility would have been a good idea.”
Yield curve flashes recession warning sign... The closely watch yield curve inverted for the first time since early April as the U.S. two-year yield exceeded the 10-year on concerns aggressive rate hikes will lead to an economic slowdown. Concern has been mounting that surging inflation will require more rapid policy tightening by the Fed, which in turn will reduce consumer spending and business activity.
The week ahead in Washington... The House today is expected to approve the Senate-passed Ocean Shipping Reform Act, which includes language for the Federal Maritime Commission to take steps to clear port bottlenecks and reduce shipping rates. The bill isn’t as strong as a previous version passed by the House. President Joe Biden, speaking at the Port of Los Angeles on Friday, said the foreign-owned ocean carriers that control U.S./Asia routes have raised rates by as much as 1,000% in one year. American Farm Bureau Federation President Zippy Duvall told Biden farmers have “lost out on more than $25 billion in agricultural exports over the past six months due to ocean shipping constraints. That’s unacceptable.” House Agriculture Committee holds a hearing Tuesday on “A 2022 Review of the Farm Bill: Stakeholder Perspectives on Non-SNAP USDA Nutrition Programs.” On the economic front, the Federal Open Market Committee concludes its two-day session on Wednesday, at which time it is widely expected to raise interest rates another 50 basis points.
Food price increases show few signs of slowing down... Some of the biggest U.S. food suppliers and restaurants, such as Kraft Heinz Co. and some McDonald’s Corp. franchises say they plan to keep on raising prices to offset starkly higher costs, the Wall Street Journal reports. The food industry has been hit by cost increases for labor, packaging, ingredients, energy and transportation. Besides raising consumer prices, the companies have tried selling smaller packages, raising the per-unit price and improving their operations’ productivity.
Ukraine grain harvest starts in Odesa region... Farmers have started harvesting winter grains in the southwestern Odesa region of Ukraine, according to regional officials. Farmers in the region are expected to harvest 1.06 million hectares of winter grains, including 551,000 hectares of winter wheat and 244,0000 hectares of barley. Ukraine’s ag ministry says spring planting across the country is completed. The ministry previously said farmers planned to sow 14.2 million hectares of spring grains, down from 16.9 million hectares in 2021, due to the war. The ag ministry provided no crop outlook.
Iraq plans to buy U.S., Aussie wheat... Iraq plans to sign contracts this week to import 1.5 MMT of wheat from the U.S. and Australia, Mohamed Hanoun the general manager of state grains board told local newspaper Al-Sabah on Sunday. The Iraqi News Agency cited a statement issued by the Ministry of Trade earlier explaining the country is moving forward to allocate 2 MMT of wheat as a strategic stockpile for six months.
India has no plans to curb rice exports... India, the world’s biggest rice exporter, has ample stocks of rice and there is no plan to restrict exports, the country’s food minister said. There has been speculation the country could ban rice exports after earlier restricting wheat shipments.
UK economy contracts more than expected... Britain’s economy shrank by 0.3% in April compared with March, a sharper contraction than most forecasts. Production across sectors fell as firms struggled with high energy prices and supply-chain shortages. There was a reduction in services output as well. GDP is now only 0.9% higher than it was before the pandemic. Economists also expect weak performances for May and June, meaning a contraction is likely in the second quarter.
Shanghai locked down almost everyone in the city over the weekend to conduct mass testing... The effort was triggered by a rebound of Covid infections found in the community less than two weeks after the financial hub exited a bruising two-month shutdown. There were six such cases on both Thursday and Friday, up from none the day before. Many Beijing schools scrapped plans to reopen on Monday. Shanghai, which ended a two-month lockdown on June 1, ordered most of its 25 million residents into mass-testing after an outbreak at a hair salon.
Based on emails from ERP-eligible producers, payments are being made quickly... USDA still has not released payment information regarding the Emergency Relief Program (EPA/WHIP+) but based on emails from Members, a significant number of eligible producers have already received their payouts under Phase 1 of the renamed program.
Food and fuel costs aid... New loan and waiver authorities and emergency funding would be provided to address food and fuel prices under an expanded version of HR 7606. The legislative package would provide $700 million for, among other things, competitive grants to expand biofuel infrastructure. It also would also allow for higher percentage ethanol-based fuels (E15) to be sold year-round.
Seasonal cash weakness built into cattle futures... The cash cattle market unexpectedly firmed last week, but seasonals suggest the advance will be short-lived. Front-month live cattle futures are trading below the cash market, suggesting traders will take a cautious approach. But that also means the downside should be limited – even if the cash market trends mildly weaker this week.
Cash hog index weakens for third straight day... The CME lean hog index is down 12 cents to $107.19 (as of June 9), the third straight daily decline. Based on the discounts in July and August hogs, traders sense the cash market has topped seasonally. Unless those attitudes change, traders are likely to be comfortable with small discounts in summer-month contracts.
Weekend 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
- 10:00 a.m. Export Inspections — AMS
- 11:00 a.m. Feed Grains Database — ERS
- 2:00 p.m. Dairy Monthly Tables — ERS
- 2:00 p.m. Season Average Price Forecasts — ERS
- 2:00 p.m. Wheat Data — ERS
- 3:00 p.m. Crop Progress — NASS