Good morning!
Followthrough selling in grains overnight... Wheat futures posted sharp losses overnight amid followthrough selling, while corn and soybeans faced lesser selling pressure. As of 6:30 a.m. CT, corn futures are trading 4 to 7 cents lower, soybeans are 4 to 6 cents lower, SRW wheat is 12 to 13 cents lower, HRW wheat is 23 to 24 cents lower and HRS wheat is 18 to 22 cents lower. Front-month crude oil futures are trading just below unchanged, while the U.S. dollar index is more than 250 points higher.
Russia says ‘qualified result’ allowed Black Sea grain deal renewal... The Kremlin said a deal had been reached to extend the Black Sea grain deal for two months after what it called “a qualified result” for Russia in negotiations over easing restrictions on Russian agricultural exports. Kremlin spokesman Dmitry Peskov said “various options” were being worked out regarding easing restrictions on Russia’s state agricultural bank, a key demand of Moscow in the renewal talks. Russian Foreign Minister Sergei Lavrov said Russia agreed to extend the deal to bolster world food security, despite not seeing results in improving its grain and fertilizer exports. Russian Ag Minister Dmitry Patrushev said Russia could export 50 MMT to 55 MMT of grain in 2023-24.
More heavy drought/freeze damage on Day 2 of HRW tour... On Day 2 of the Wheat Quality Council’s HRW wheat tour, scouts found an average yield of 27.5 bu. per acre on samples taken from western and south-central Kansas. That was down from an average yield of 37 bu. per acre in the same areas last year and the 2017-22 average of 44.7 bu. per acre. Scouts found freeze damage, along with the impacts from the prolonged and severe drought. Separately, the Oklahoma Wheat Commission estimated the Oklahoma wheat crop at 49.4 million bu., down from last year’s drought-shortened crop of 68.6 million bushels. Scouts will sample fields in central and eastern Kansas today on routes from Wichita to Manhattan. A final tour yield estimate along with a scout guesstimate of Kansas crop size will be released this afternoon.
Weekly Export Sales Report out this morning... For the week ended May 11, traders expect:
| 2022-23 expectations (in MT) | 2022-23 last week | 2023-24 expectations (in MT) | 2023-24 last week |
Corn | (500,000)-300,000 | 257,279 | 50,000-300,000 | 83,062 |
Wheat | 50,000-150,000 | 26,263 | 200,000-400,000 | 333,624 |
Soybeans | 0-300,000 | 62,170 | 0-300,000 | 50,052 |
Soymeal | 50,000-400,000 | 277,843 | 0-125,000 | (11,040) |
Soyoil | 0-10,000 | 266 | 0-10,000 | 0 |
Temps expected to soar to record highs over next five years... Temperatures are likely to soar to record highs over the next five years, driven by human-caused warming and the El Niño climate pattern, World Meteorological Organization forecasters said. There is also a two-thirds chance that one of the next five years could be 1.5 degrees Celsius (2.7 degrees Fahrenheit), hotter than the 19th-century average, the organization reported. There is a 98% chance at least one of the next five years will exceed the temperature records set in 2016, the forecasters said, while the average from 2023 to 2027 will almost certainly be the warmest for a five-year period ever recorded. Even small temperature increases can exacerbate the dangers from heat waves, wildfires, drought and other calamities. El Niño conditions can cause further turmoil by shifting global precipitation patterns. The meteorological organization said it expected increased summer rainfall over the next five years in places like Northern Europe and the Sahel in sub-Saharan Africa and reduced rainfall in the Amazon and parts of Australia.
Debt-limit talks update... House Speaker Kevin McCarthy (R-Calif.) said he won’t accept a deal without increased work requirements for social safety-net programs. President Joe Biden expressed modest willingness to enact new work requirements but not for Medicare. House Democrats are firmly opposed to any additional work requirements. House Democrats are against budget caps that revert spending to fiscal year 2022 levels — another McCarthy demand. President Joe Biden will be back in Washington on Sunday to oversee the debt limit negotiations after cutting short the rest of his international trip, which was supposed to include stops in Papua New Guinea and Australia.
Malaysia keeps crude palm oil export duty at 8%... Malaysia will maintain its export tax for crude palm oil at 8% in June. The country calculated a reference price of 4,144.31 ringgit ($934.46) per metric for June, up from 4,063.58 ringgit ($916.25) this month. The maximum tax rate is set at 8% when prices exceed 3,450 ringgit per metric ton.
NPPC outlines pork industry priorities in House Ag Subcommittee hearing... Scott Hays, President of the National Pork Producers Council (NPPC), told the House Ag Subcommittee on Livestock, Dairy, and Poultry struggles for hog farmers can be attributed to significantly moderated hog prices, record-high production costs that have increased by about 50% since 2020, trade retaliation, supply chain issues, labor shortages, threats from foreign animal diseases, and unfavorable legislation like California Proposition 12. He warned these challenges may lead to industry consolidation as many farmers might be forced to exit the industry. Key policy priorities outlined by Hays for the 2023 Farm Bill include:
- Full funding for programs ensuring animal health, given the increasing threat of foreign animal diseases like African swine fever.
- Extension of Livestock Mandatory Price Reporting for one year while the industry gathers producer input for full reauthorization.
- Opposition to proposed changes under the Packers and Stockyards Act, with a call for meaningful reforms that provide greater transparency for pork producers.
- Increased funding for the Market Access Program and Foreign Market Development Program to build commercial export markets for U.S. ag products in the absence of meaningful trade access.
- Addressing labor shortage by improving the H-2A visa program to grant access to year-round agriculture industries.
Brazil boosts bird flu defense... Brazil is taking extra precautions to protect its poultry industry from a highly pathogenic avian influenza virus that was detected among wild birds in the country earlier this week. The Brazilian government this year raised investments 19-fold to increase testing capacity at its network of six federal laboratories, and increased the overall budget of its Animal and Plant Health and Inspection Services by some 12% to 209 million reais ($42 million). The ag ministry told Reuters increased testing may be required within a 10-km (6.2-mile) radius of the Espirito Santo outbreaks, including of commercial flocks, and that it will maintain surveillance of potential cases in wild birds nationwide.
Slow developing cash cattle market... Packers so far have attempted to buy cash cattle at lower prices, though feedlots aren’t interested after last week’s average cash price ticked up 20 cents. With neither side seemingly in a hurry to get active cash trade underway, cash negotiations could go deep into the week – potentially after Friday afternoon’s Cattle on Feed Report.
Cash hogs climb, pork cutout slumps... The CME lean hog index is up another 63 cents to $77.80 (as of May 16), extending its seasonal price climb. The pork cutout value fell 68 cents on Wednesday as packers continue to struggle to find sustained retailer buying. Traders remain hesitant buyers in hog futures given their premiums to the cash index.
Overnight demand news... Japan purchased 113,555 MT of wheat from its weekly tender, including 21,055 MT U.S., 66,607 MT Canadian and 25,893 MT Australian. South Korea tendered to buy up to 70,000 MT of optional origin corn.
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
- 7:30 a.m. Weekly Export Sales — FAS
- 10:00 a.m. Fruit and Tree Nuts Data — ERS
- 10:00 a.m. Vegetables and Pulses Data — ERS
- 2:00 p.m. Livestock, Dairy, and Poultry Outlook: May 2023 — ERS
- 2:00 p.m. Sugar and Sweeteners Outlook: May 2023 — ERS