Good morning!
New contract highs for soybeans... Soybean futures scored new contract highs amid strong followthrough buying overnight. Corn and wheat futures also firmed. As of 6:30 a.m. CT, soybeans are trading 13 to 23 cents higher, corn is 7 to 11 cents higher and wheat futures are 13 to 17 cents higher. Front-month crude oil futures are around $1.25 higher and the U.S. dollar index is trading just above unchanged this morning.
Report: Grain shipments resume from Ukraine’s Berdyansk port... Grain shipments will resume from Ukraine’s Russian-occupied Black Sea port of Berdyansk this week after work was completed to de-mine it, Russia’s TASS news agency cited local authorities as saying. Meanwhile, Turkey’s foreign minister said on Wednesday a United Nations plan to restart Ukrainian grain exports along a sea corridor was “reasonable” and requires more talks with Moscow and Kyiv to ensure ships would be safe. But the head of Ukraine grain traders union UGA says Turkey is not powerful enough to guarantee the safety of ships leaving Ukrainian ports. Russian Foreign Minister Sergei Lavrov says the onus is on Ukraine to solve the problem of resuming grain shipments by de-mining its ports and no action was required by Russia because it had already made the necessary commitments.
India may soon clear out some wheat stuck at ports... India could soon allow traders to ship out around 1.2 MMT of wheat as it seeks to clear cargoes stuck at ports since last month’s sudden ban of exports. But even if those exports are allowed, it would still leave around 500,000 MT of wheat sitting at ports, as some exporters have failed to secure required export permits.
Euro zone GDP revised up... The euro zone economy grew much faster in the first quarter of the year than in the previous three months despite the impact of the war in Ukraine, the European Union statistics office reported. Euro zone first-quarter GDP was revised to a 0.6% increase from the fourth quarter versus the previous estimate of a 0.3% rise. Year-on-year, first quarter GDP was up 5.4% versus the previous estimate of 5.1%.
American consumers using credit cards to keep spending amid rising prices... The Federal Reserve on Tuesday said revolving credit outstanding, which includes credit cards, surpassed its pre-pandemic peak for the first time this spring. “While this is good in the sense that it points to strong demand despite high prices, it could be bad if it puts households behind the 8-ball in terms of staying current on their debt,” said Wells Fargo economist Tim Quinlan.
Yellen: Higher inflation, slower growth... Treasury Secretary Janet Yellen warned the U.S. is likely facing a prolonged period of elevated inflation. Yellen, speaking Tuesday on Capitol Hill, said the White House would likely revise upward its U.S. inflation forecast, which already showed prices rising this year at nearly twice the pre-pandemic rate. “I do expect inflation to remain high, although I very much hope that it will be coming down now,” Yellen said, adding that the Biden administration was updating its forecast from March that inflation would average 4.7% this year. In recent months, consumer inflation has trended above 8%. Yellen will appear before the House Ways and Means Committee today.
OECD slashes economic growth outlook, but sees limited stagflation risk... The Organization for Economic Cooperation and Development (OECD) slashed its world GDP forecast to 3% this year from 4.5% growth it expected in December. Growth will then slow to 2.8% next year, down from a previous forecast of 3.2%. “Russia’s war is indeed posing a heavy price on the global economy. Global growth will be substantially lower with higher and more persistent inflation,” OECD Secretary General Mathias Cormann said. Despite the lower growth and higher inflation outlook, OECD sees limited risk of “stagflation” like that of the mid-1970s, when the oil price shock triggered runaway inflation and surging unemployment. As we reported in “Evening Report” on Tuesday, the World Bank warned of potential for 1970s-style stagflation developing.
Merkel: Isolating Russia not possible long term... Former German Chancellor Angela Merkel warned that isolating Russia isn’t possible long term even if President Vladimir Putin made a “big mistake” by invading Ukraine. Merkel also said she had “at no time given in to illusions” that Germany’s Change through Trade policy would really alter Putin’s behavior. “I was not naive,” Merkel insisted, arguing that she repeatedly warned that Putin “wants to destroy the EU because he sees it as a precursor to NATO.” She added: “Diplomacy isn’t wrong just because it doesn’t succeed. “So I don’t see why I should say that was wrong, and I won’t apologize for it.” Of the war, she said: “Looking back, I’m glad that I can’t accuse myself of trying too little to prevent such an event from happening.”
China to keep buying pork for reserves... China will buy another 40,000 MT of frozen pork for state reserves on June 10. China has bought more than 200,000 MT of pork for its reserves so far this year in an effort to support hog farmers facing weak prices and soaring costs.
Cash cattle expectations improve... Traders came into the week anticipating further weakness in cash cattle prices. But given strength in wholesale beef prices and currentness of feedlot supplies, cash sources now expect steady-at-worst cash prices. With packers offering lower bids and feedlots seeking higher prices, this week’s cash negotiations are likely to run deeper into the week than recent weeks.
Cautious tone in summer-month hogs... The CME lean hog index is up another 46 cents today (as of June 6) to $107.80. June hogs finished Tuesday just 62 1/2 cents above that level, while the July contract ended at only a $1.475 premium. August hogs finished at a 70-cent discount to the cash index. The price relationship between summer-month contracts and the cash index signals traders are taking a cautious approach after the cash market underperformed through spring.
Overnight demand news... Jordan tendered to buy 120,000 MT of optional origin 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
- 7:00 a.m. Brazilian Crop Production — Conab
- 10:00 a.m. Livestock and Meat International Trade Data — ERS
- 2:00 p.m. U.S. Agricultural Trade Data Update — ERS
- 2:00 p.m. Broiler Hatchery — NASS