First Thing Today | June 6, 2023

Wheat futures posted strong gains overnight after a major dam in Ukraine was destroyed. Corn and soybeans traded solidly higher on lower-than-expected crop condition ratings.

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Pro Farmer’s First Thing Today
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Wheat leads overnight price gains... Wheat futures posted strong gains overnight after a major dam in Ukraine was destroyed. Corn and soybeans traded solidly higher on lower-than-expected crop condition ratings. As of 6:30 a.m. CT, corn futures are trading 5 to 9 cents higher, soybeans are 2 to 4 cents higher and wheat futures are 14 to 20 cents higher. Front-month crude oil futures are more than $1.50 lower and the U.S. dollar index is around 150 points higher.

Ukrainian dam destruction could impact crops... Ukraine’s Nova Kakhovka dam was damaged in a blast, resulting in reduced water supply crucial for agriculture in southern Ukraine. The act has been characterized as “ecocide” by an official in Kyiv, implying intentional environmental destruction. While crops weren’t directly at risk, wheat prices surged. The dam’s destruction “looks like a big escalation with dire consequences and huge headline risk,” SovEcon Managing Director Andrey Sizov tweeted.

Consultant trims corn yield... Crop Consultant Dr. Michael Cordonnier lowered his corn yield by 1 bu. to 179 bu. per acre, citing a drier bias across the Corn Belt. He now forecasts corn production at 14.94 billion bushels. Cordonnier left his soybean yield and production forecasts at 52 bu. per acre and 4.53 billion bu., respectively, noting dry conditions in early June do not necessarily translate to lower yields if weather turns more favorable later in the growing season.

Corn CCI rating falls, soybeans start below year-ago... When USDA’s weekly condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn crop dropped 10.9 points to 365.7. Ratings dropped in each of the top five corn production states – Iowa, Illinois, Nebraska, Minnesota and Indiana. The CCI rating stood 16.9 points below year-ago at this time. USDA’s initial soybean conditions equated to a CCI rating of 357.8, down 13.1 points from last year, though that was a week later. The first spring wheat CCI rating of 370.2 stood 16.8 points above last year, though that too was one week later. Click here for details.

Crop Progress Report highlights… Following are highlights from USDA’s crop progress and condition update as of June 4.

  • Corn: 96% planted (91% average); 85% emerged (77% average); 64% good/excellent (69% last week).
  • Soybeans: 91% planted (76% average); 74% emerged (56% average); 62% good/excellent (65% expected).
  • Cotton: 71% planted (75% average); 6% squaring (10% average); 51% good/excellent (48% last week).
  • Spring wheat: 93% planted (93% average); 76% emerged (74% average); 64% good/excellent (66% expected).
  • Winter wheat: 82% headed (81% five-year average); 4% harvested (4% average); 36% good/excellent (34% last week).

Big drop expected in Aussie wheat production... Australia’s wheat production is forecast to plunge 34% from the record 2022-23 crop to 26.2 MMT, according to the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES). Planted area is forecast 2% lower than last year, while reduced yields are likely amid the development of El Niño. Australia’s weather bureau said there was a 70% chance of El Niño developing, typically associated with hotter, drier weather in Australia.

China again asks big banks to cut deposit rates... China asked the country’s largest banks to lower their deposit rates for at least the second time in less than a year in an effort to boost the economy, Bloomberg News reported on Tuesday, citing people familiar with the matter. China’s “big four” state-owned banks reportedly were advised to cut rates on a range of products. The banks were urged to cut rates on demand deposits by 5 basis points and three-year and five-year time deposits by at least 10 basis points. China last month told its “big four” state-owned banks to reduce the ceiling on interest rates they pay on some deposits, three sources with knowledge of the matter told Reuters. Meanwhile, China will likely further cut banks’ reserve ratio and interest rates in the second half of this year to support the economy, the China Securities Journal reported, citing policy advisors and economists.

ERP Phase 2 payments near $1 billion... Payments under Phase 2 of the Emergency Relief Program (ERP) neared $1 billion as of June 4, with USDA reporting that 513 payments have been made totaling $924,785, up from $823,626 the prior week. Payments under ERP Phase 1 and both Coronavirus Food Assistance Program (CFAP) efforts changed little over the week.

Republicans express concerns about EU’s ESG rules... House Oversight Chair James Comer (R-Ky.) and Sen. Tim Scott (R-S.C.) expressed concern in a letter to the Treasury Department and SEC about the potential impact of EU Environmental, Social, and Governance (ESG) rules on U.S. companies. They are worried that as the EU’s regulations for climate change and global labor standards develop more quickly than those in the U.S., the EU may become the global standard-setter, which could disadvantage U.S. firms. An “EU-style climate regulatory regime” would harm the U.S. energy, agriculture and financial sectors,” the lawmakers wrote. Comer and Scott are seeking information on whether the U.S. is coordinating with the EU on ESG matters.

Cash cattle surge to new high... Cash cattle trade averaged $182.03 last week, up $4.06 from the previous week and a record high. While packers purchased a large amount of cattle the past two weeks, the first couple weeks of June are typically some of the largest slaughters of the year. Given tight market-ready supplies, another increase in cash prices is possible – even with fresh contract supplies available – though packers will likely try to string out cash negotiations as long as possible in hopes of getting feedlots to move animals at lower prices.

Cash hogs post new high for the year... The CME lean hog index is up 69 cents to $81.21 (as of June 2), the highest level since mid-December. This year’s seasonal rally in the cash hog market was delayed, but appears to be picking up steam as market-ready supplies gradually tighten.

Overnight demand news... Japan is seeking 86,922 MT of Canadian and Australian milling wheat in its weekly tender. Egypt tendered to buy an unspecified amount of wheat from multiple sources.

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

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