Good morning!
Grains under pressure overnight... Corn, soybeans and SRW wheat faced followthrough selling overnight, while HRW and HRS wheat futures pulled back from Tuesday’s gains. As of 6:30 a.m. CT, corn futures are trading 5 to 6 cents lower, soybeans are 5 to 10 cents lower, SRW wheat is mostly 9 cents lower, HRW wheat is 12 to 14 cents lower and HRS wheat futures are mostly 9 to 10 cents lower. Front-month crude oil futures are around 75 cents lower and the U.S. dollar index is more than 150 points higher.
Russia: Our stance on Black Sea grain deal well known... Russia says its “position is well known... and consistent” as talks to extend the Black Sea grain deal beyond the current May 18 deadline are scheduled to get underway in Istanbul. Senior officials from Russia, Ukraine, Turkey and the United Nations are scheduled to meet over the next two days in hopes of reaching an agreement to continue Ukraine’s grain shipments under the deal and also facilitate greater shipments of Russian grains and fertilizers.
Debt limit talks yield little progress... House Speaker Kevin McCarthy (R-Calif.) said he saw no “new movement” on raising the federal debt ceiling, after concluding the first round of negotiations with President Joe Biden and other party leaders in the House and Senate. McCarthy and other Republicans insist on spending cuts in exchange for lifting the government’s borrowing limit, which Biden wants raised without conditions. The president did agree to negotiate on the budget levels for fiscal 2024, however. The officials will meet again on Friday and have instructed staff to keep in touch. White House and congressional leadership aides plan to meet beginning today to discuss whether there’s any common ground for negotiations. Of note: Biden mentioned possibly invoking the 14th Amendment to lift the borrowing cap but noted that approach would be litigated and is more an option for future debt limit hikes.
China expanding gold reserves, may be abandoning U.S. dollar... Nigel Green of deVere Group says such may be occurring after news China’s gold reserves increased by 8.09 tons in April. Total gold stockpiles in China reached 2,076 tons after that nation added 120 tons in the five months through March. “Historically, China has been a major buyer of U.S. Treasuries, but this has seen a marked cooling off as Beijing swaps them out in favor of gold.” Green said this strategic move will limit China’s dependence on the U.S. dollar, as trade and political relations with the U.S. deteriorate. “Buying gold rather than dollars may also signal moves by China that it is eventually seeking to replace the U.S. dollar as the world’s reserve currency. Building stocks of the precious metal and allowing the Chinese yuan to be traded freely would weaken the U.S. dollar’s dominance as the global reserve currency.”
U.S. households still have more liquid funds than pre-pandemic... U.S. households built up record levels of savings when the Covid-19 pandemic hit and the government pumped billions of dollars into the economy. They’ve still got quite a bit left, even after a spending splurge and rocketing inflation. “Despite recent rapid drawdowns of those savings, a large amount — around $500 billion — remains in the overall economy... Data on household assets and checking account balances support the view that households across the income distribution generally have considerably more liquid funds at their disposal compared with the pre-pandemic period. Overall, we expect the aggregate stock of excess savings will continue to support consumer spending at least into the fourth quarter of 2023,” the Federal Reserve Bank of San Francisco’s Hamza Abdelrahman and Luiz Oliveira write in a new report.
Fed’s Williams: Premature to call end to rate hikes... New York Fed chief John Williams said yesterday it’s too soon to say the central bank is done. “We haven’t said we are done raising rates,” he said. “If additional policy firming is appropriate, we’ll do that. In my forecast I see a need to keep a restrictive stance of policy in place for quite some time to make sure we really bring inflation down from 4% all the way to 2%. I do not see in my baseline forecast any reason to cut interest rates this year.”
Lagarde: Still work to do on inflation... European Central Bank (ECB) President Christine Lagarde says the central banks moves have been deliberate and decisive in the fight against inflation but there’s still more work do to on that front. She told Nikkei ECB must “be extremely attentive to those potential risks... in particular, in relation to wage increases in various European countries.” Lagarde said there are emerging signs of weakness in demand for manufactured goods and there is still a lot of uncertainty, including the war in Ukraine.
Biden administration: Restocking SPR will resume after maintenance done later this year... The Department of Energy (DOE) said it will start buying oil to put into the Strategic Petroleum Reserve (SPR) once maintenance work is completed later this year. The SPR is at its lowest level in 40 years after the Biden administration withdrew 180 million barrels from the supply to bring down gasoline prices. DOE said it is “committed to refilling the SPR in a manner that will deliver the best value for American taxpayers and protect U.S. national (and economic) security interests, while abiding by congressional mandates and undertaking necessary maintenance that is also part of good stewardship.” DOE said its strategy includes returning oil from previous exchanges requested by refiners and avoiding “unnecessary sales unrelated to supply disruptions,” a reference to sales mandated by Congress.
Lab-grown meat far worse for environment than beef... Lab-grown meat could be 25 times worse for the climate than beef unless researchers find ways to overhaul energy-intensive steps in its production, according to New Scientist. Analysis found the carbon footprint of cultivated meat is likely to be higher than beef if current production methods are scaled up because they are still highly energy-intensive.
Wholesale beef prices drop but movement improves... Wholesale beef prices fell $1.18 for Choice boxes and 23 cents for Select on Tuesday, though movement improved to 121 loads. Despite recent weakness, Choice beef prices remain strong, still trading well above $300.00 and the Choice/Select spread is wide at $22.49 amid tight market-ready supplies.
Big days ahead technically for hog futures... Most lean hog futures contracts posted key bullish reversals on Tuesday. Active followthrough buying the remainder of the week would suggest lows are in place and the delayed seasonal rally has begun. A lack of followthrough buying, however, would signal traders are still looking for fresh selling opportunities.
Overnight demand news... Taiwan purchased 65,000 MT of Brazilian corn. Japan is seeking 60,000 MT of feed wheat and 20,000 MT of feed barley.
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
- 11:00 a.m. Meat Price Spreads — ERS
- 2:00 p.m. Broiler Hatchery — NASS