Good morning!
Wheat futures drop overnight... Wheat futures faced pressure overnight, while corn was mostly weaker and soybeans favored the upside. As of 6:30 a.m. CT, corn futures are trading fractionally to 2 cents lower, soybeans are mostly 1 to 2 cents higher and wheat futures are 8 to 10 cents lower. Front-month crude oil futures are around $1.75 lower and the U.S. dollar index is about 150 points higher.
Cool week ahead for Corn Belt... Temperatures will trend cooler than normal across the Corn Belt, with scattered showers and rains expected early this week. Warmer temps will start to move into the Plains the second half of the week and spread eastward during the weekend. HRW wheat areas of the Plains will be mostly dry over the next 10 days.
Record March soybean crush expected... USDA this afternoon is expected to report soybean crush totaled a record 197.2 million bu. in March, which would be the second highest total ever for any month. Corn-for-ethanol production is expected to total 441.3 million bu., which would be up 41.5 million bu. (10.4%) from February but 4.2% below year-ago.
Ukraine grain exports running behind year-ago... Through the first 10 months of the 2022-23 marketing year, Ukraine exported 41.6 MMT of grain, 4.3 MMT (9.4%) behind year-ago. That total included 24.4 MMT of corn, 14.4 MMT of wheat and 2.5 MMT of barley.
China’s factory activity unexpectedly shrinks in April... China’s official manufacturing purchasing managers index (PMI) unexpectedly fell to a four-month low of 49.2 in April, down from a reading of 51.4 in March. That marked the first contraction in China’s vast manufacturing sector since December. New orders and buying activity contracted after rising in the prior three months, while export sales fell for the first time since January.
Brazil to study raising gasoline blend to E30... Brazil will create a working group to study raising the mandatory blend of ethanol content in gasoline to 30% from the current 27%. The government would first have to raise the ceiling of the permitted ethanol content in gasoline, which currently ranges from 18% to 27.5%. Brazil Energy Minister Alexandre Silveira said, “Increasing the ethanol content will undoubtedly contribute to our country’s energy security, by reducing gasoline imports and to the energy transition, by reducing greenhouse gas emissions.”
The week ahead in Washington... The House is on recess this week, while the Senate is in session. On the farm policy front, Senate Ag subcommittees hold two hearings on a new farm bill (farm safety net and crop insurance). But the writing of the farm bill will depend on 1) Settlement of the lingering debt-limit issue; 2) May 12 forecasts updates from the Congressional Budget Office (CBO); and 3) whether the Ag panels will get additional funding from party and Budget panel leaders. The economic focus will be the Fed’s monetary policy decision on Wednesday, with another 25-basis-point hike to interest rates widely expected. March employment data will be released on Friday.
Construction supporting shaky U.S. economy... Construction spending and employment have risen to new records this year, boosted by government outlays for infrastructure, a domestic manufacturing renaissance and a wave of apartment building. Construction jobs from airport overhauls to bathroom renovations are helping boost employment, the Wall Street Journal reports, and giving momentum to industrial supply chains in an economy coping with brittle consumer demand. Construction-equipment maker Caterpillar recently reported sharply stronger sales and operating margins, one sign of how the boom is reaching suppliers. Still, there are slowdown signals in logistics networks. Spot prices for flatbed truck transport have slipped from last year’s high levels, load board DAT Solutions reports. And rail transports of lumber and wood products fell 6.4% in the first quarter, according to the Association of American Railroads.
Commercial real estate headed for tough times... The U.S. commercial property market is headed for some rough times, according to Berkshire Hathaway’s Charlie Munger. “It’s not nearly as bad as it was in 2008,” he told the Financial Times, referring to the housing meltdown and subsequent financial crisis of that era. “But trouble happens to banking just like trouble happens everywhere else.” Munger said banks are loaded up with “bad loans” that will be vulnerable if the economy hits a bad patch. “A lot of real estate isn’t so good anymore,” Munger added. “We have a lot of troubled office buildings, a lot of troubled shopping centers, a lot of troubled other properties. There’s a lot of agony out there.”
Cautious trade likely to continue in cattle futures... Cattle futures continue to trade below the cash market despite bullish supply-side fundamentals. With fresh contract supplies available to packers with the flip of the calendar, it’s likely this week’s cash cattle negotiations will drag deep into the week. As a result, we expect traders to remain cautious about aggressively adding to long positions in futures.
Cash hog index starting to firm... The CME lean hog index is 20 cents higher to $71.49 (as of April 27). The cash index has firmed three of the last four days, though the net gain over that span is only 31 cents. May hog futures finished $8.16 above today’s cash quote, while the June contract held a $20.21 premium. The cash market must show greater daily gains for traders to actively extend the corrective rebound in hog futures.
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
- 2:00 p.m. Annual milk production and factors affecting supply — ERS
- 2:00 p.m. Commodity Costs and Returns — ERS
- 2:00 p.m. Milk Cost of Production Estimates — ERS
- 2:00 p.m. Cotton System Consumption and Stocks — NASS
- 2:00 p.m. Fats & Oils: Oilseed Crushings, Production, Consumption and Stocks — NASS
- 2:00 p.m. Flour Milling — NASS
- 2:00 p.m. Flour Milling - Ann. — NASS
- 2:00 p.m. Grain Crushings and Co-Products Production — NASS
- 3:00 p.m. Crop Progress — NASS