Good morning!
Grain, soy markets face heavy pressure overnight... Corn, soybean and wheat futures pulled back from recent strong gains overnight, while soyoil faced heavy followthrough selling after yesterday’s limit-down performance. As of 6:30 a.m. CT, corn futures are trading 6 to 10 cents lower, soybeans are 14 to 24 cents lower, winter wheat futures are 6 to 8 cents lower and spring wheat is 2 to 3 cents lower. Front-month crude oil futures are around $1.50 lower and the U.S. dollar index is near unchanged.
Export sales data pushed back to Friday... Due to Monday’s government holiday, export sales data for the week ended June 15 will be released Friday morning.
EPA will stop granting SREs... The Clean Air Act (CAA) allowed for exemptions to be granted for small refiners, a topic that has become controversial in recent years, prompting EPA to reverse some prior granted small refinery exemptions (SREs) and halt granting them. EPA said the final volume requirements “are based on our projection that no gasoline or diesel produced by small refineries will be exempt from RFS requirements pursuant to CAA” based on the agency’s current statutory requirements. And if that were to change in the future, EPA said it would not alter the requirements spelled out in this rule. “Even were EPA to grant an SRE in the future for 2023-2025, we do not plan to revise the percentage standards to account for such an exemption,” EPA stated.
California postpones Prop 12 implementation date... California pushed back the implementation date for its Proposition 12 law by six months to Jan. 1, 2024. National Pork Producers Council CEO Bryan Humphreys said, “It is welcome news to America’s pig farmers and consumers that California recognized the challenging situation the July 1 Proposition 12 implementation date will have on our industry and food supply. Granting six months of additional relief for products in the supply chain allows grocery stores to remain stocked so the 40 million Californians have uninterrupted access to affordable, safe and nutritious pork products, especially with rising food prices... While this temporary solution does not solve the challenges and uncertainty California Proposition 12 brings to our industry, NPPC looks forward to working with Congress to find a permanent solution to this problem.”
Ukraine nearly 100% certain Russia will exit Black Sea grain deal... Olga Trofimtseva, Ukraine’s foreign ministry ambassador, said she is 99.9% certain Russia will exit the Black Sea grain deal in mid-July, as it no longer needs Ukrainian ports to export ammonia. Ukraine’s “Plan B” if Russia exits the deal includes a special insurance fund of around $547 million for companies whose ships would come to Ukrainian Black Sea ports under a new arrangement. Ukraine has also said it can export grain via its small Danube river ports as well as through its Western border with the European Union. But Trofimtseva expressed doubt about how much the insurance fund would help with exports.
India’s wheat crop much lower than gov’t estimate... India’s wheat crop is at least 10% lower than the government’s estimate, a leading trade body told Reuters. “Availability of wheat is very poor in the market. It suggests production was around 101 MMT to 103 MMT,” said Pramod Kumar S, president of the Roller Flour Millers’ Federation. A New-Delhi based trader with a global trade house also said India’s ag ministry had overestimated this year’s wheat output, while a Mumbai-based trader said the government had failed to take into account heatwaves in February and March and untimely heavy rainfall in April. India’s government forecasts the wheat crop at a record 112.74 MMT.
Is the renewable diesel industry headed for a cliff?... That’s the title of a Wall Street Journal (WSJ) article today. Low-carbon trucking fuel industry witnessed a boom due to government incentives; however, a new federal rule may hinder its growth, the article states. EPA’s new biodiesel mandates through 2025 are significantly lower than the growing renewable diesel industry’s expectations. The total required volume for renewable diesel and biodiesel in 2024 is 3.04 billion gallons, while the Energy Information Administration estimates that 3.4 billion gallons will be produced this year, with projections of 5.5 billion gallons of production capacity next year. This discrepancy might lead to “significant financial chaos,” as it would affect the value of credits that producers depend on to make their products profitable, the WSJ article notes. State-level government programs in California, Oregon, Washington and potentially New York could offer some relief to producers.
Biden’s trade challenge... The Biden administration’s trade change is kicking the China habit. China has many sources of geopolitical leverage, from its military to its vast market. Potentially, the most potent and least appreciated is the choke-point position it has built in global supply chains. President Joe Biden has devoted a lot of his foreign policy to addressing that vulnerability, from cultivating closer ties to India to negotiating critical minerals deals with Europe. But he hasn’t used a more obvious tool: trade deals. The rationale: U.S. Trade Representative Katherine Tai argues that free trade increased rather than decreased China’s influence over the world’s production networks, the Wall Street Journal’s Greg Ip writes.
Banking regs get a lot of attention... Lawmakers on Wednesday pressed Chair Jerome Powell on the Fed’s plans to strengthen supervision and regulation for regional and big banks in the wake of several bank failures earlier this year. Powell said the Fed board hadn’t yet voted on changes to bank rules, but staff had been briefed on some tweaks that are under consideration. He said the biggest U.S. lenders were “very well capitalized” and the central bank must be careful not to harm the business model of smaller lenders. Fed governors Philip Jefferson and Lisa Cook said any updates to bank regulations following the collapse of four lenders this spring should be tailored according to an institution’s size.
BOE hikes interest rates more than expected... The Bank of England (BOE) raised interest rates by a bigger-than-expected 50 basis points, the 13th consecutive increase. The hike in rates came after data on Wednesday showed British consumer inflation was unchanged in May and core prices rose. At 5%, the benchmark rate is now the highest since 2008. BOE said it will continue to raise rates if there are fresh signs that inflation is set to stay high for longer than it expects.
U.S. approves first ‘lab-grown’ meat... U.S. regulators for the first time have authorized two California-based companies, Upside Foods and Good Meat, to sell lab-grown chicken products in restaurants and (eventually) supermarkets. Both have said they have already begun production for sale. Good Meat, the cell-based division of Eat Just, can now begin production for sale at two facilities. It has received a grant of inspection from USDA for its demonstration plant at its Alameda, California, headquarters; its contract manufacturer, Joinn Biologics, received the same for its facility. Upside also got a grant of inspection and can begin commercial production at its innovation center in Emeryville, California.
Cattle futures holding up despite weakening cash fundamentals... Live cattle futures finished narrowly mixed on Wednesday despite lower cash cattle prices and additional pressure on the wholesale beef market. Cash cattle started trading around $2.00 lower than last week, while wholesale beef prices fell another $2.66 for Choice and $3.68 for Select. Futures’ big discounts to the cash market helped limit selling, though there’s still near-term downside risk.
Cash hog fundamentals continue to strengthen... The CME lean hog index is up another 87 cents to $89.62 (as of June 20). After Wednesday’s corrective declines, July lean hog futures still held a $5.13 premium to today’s cash index quote. The pork cutout value bounced back from Tuesday’s decline with a $1.46 gain yesterday amid strength in all cuts, extending its seasonal rally.
Overnight demand news... Japan purchased 92,529 MT of wheat in its weekly tender, including 32,106 MT U.S., 25,978 MT Canadian and 34,445 MT Australian.
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
- 9:30 a.m. Weekly Ethanol Production — EIA
- 2:00 p.m. Cost-of-Production Forecast — ERS
- 2:00 p.m. Coffee: World Markets and Trade — FAS
- 2:00 p.m. Livestock Slaughter — NASS