Good morning!
Wheat continues to surge overnight... Front-month SRW wheat futures rallied to the highest price since early August during overnight trade, pulling corn and soybeans higher. As of 6:30 a.m. CT, corn futures are trading 2 to 3 cents higher, soybeans are 3 to 5 cents higher and wheat futures are 8 to 12 cents higher. Front-month crude oil futures are around 60 cents lower and the U.S. dollar index is more than 150 points higher this morning.
CBO: House farm bill has big funding gap, GOP disputes estimates... Controversial cost estimates from the Congressional Budget Office (CBO) signal a funding gap in the Title I safety net programs that would boost the federal deficit by $38 billion to $39.3 billion — after accounting for the $8 billion in savings provided by suspending USDA’s Section 5 spending authority via the Commodity Credit Corporation (CCC). Meanwhile, CBO says the voluntary base update available to some producers is estimated to tally just over $9 billion to nearly $11 billion. House Ag GOP staff say the savings from the CCC suspension should total $53 billion. Some Democrats may use the CBO scoring to vote against the bill in an Ag Committee markup slated to begin 11 a.m. ET Thursday. USDA Secretary Tom Vilsack has repeatedly stated it would be a mistake to limit the Agriculture secretary’s authority via CCC to aid farmers.
Schumer nixes House GOP farm bill, says no future in Senate... Senate Majority Leader Chuck Schumer (D-N.Y.) is nixing the House GOP farm bill, saying it “falls terribly short” and “will not have a future in the Senate.” He said, “Passing a farm bill has always been — and must be — bipartisan. But once again, the path Republicans — the MAGA Republicans — are taking with their farm bill breaks with the bipartisan tradition, which is always enshrined in the Ag bill.” Democrats argue that Republicans are using “funny money” to cover the costs of a politically motivated bill. They also said Republicans will have to direct the Budget Committee to come up with a score in response to the CBO preliminary estimates. Democrats charge Republicans will have to make major cuts to projected SNAP program spending — food stamps — to make the measure appear deficit-neutral. Republicans counter that they are just slowing the rate of growth in the program while expanding eligibility.
Tour finds record wheat yield potential in Illinois... Illinois is poised to reap record wheat yields, the Illinois Wheat Association said following a one-day crop tour of the state, besting last year’s all-time high. The tour projected an average yield of 104 bu. per acre after scouting 59 fields, mostly in the state’s southern third. A year ago, the same tour projected an average yield of 97.1 bu. per acre. However, with harvest still a few weeks away, crop scouts on the tour cautioned that disease pressure, amplified by wet conditions this spring, could reduce final yields. Scouts noted the presence of fusarium head blight, a fungal disease also known as head scab, in many fields.
U.S. to release gas supplies prior to July 4 holiday... The Biden administration plans to release one million barrels (about 42 million gallons) of gasoline from the Northeast Gasoline Supply Reserve to lower retail prices before the July 4 holiday. The Energy Department aims to maximize the impact on prices, with current gas prices averaging $3.584 per gallon, down for the fourth consecutive week and 6.4 cents lower than last month. The gasoline will be delivered to retailers and terminals in 100,000-barrel quantities, with a focus on a competitive bidding process, timely supply before the July 4 holiday, and competitive pricing.
U.S. details higher China tariffs... The U.S. Trade Representative’s (USTR) office on Wednesday said some of the steep tariff increases on an array of Chinese imports including electric vehicle batteries, computer chips and medical products will take effect on Aug. 1. USTR is seeking comments for 30 days on the effects of the proposed tariff hike on the U.S. economy, including consumers. For medical products, public comment is being sought on whether the tariffs on face masks, medical gloves, syringes and needles need to be higher than proposed. USTR Katherine Tai has said the revised tariffs were justified because China was stealing U.S. intellectual property. But Tai has also recommended tariff exclusions for hundreds of industrial machinery import categories from China, including solar product manufacturing equipment.
State research body says China should hike tariffs on large gas-powered vehicles... China should raise its import tariffs on large gasoline-powered vehicles to 25%, a government-affiliated auto research body expert told China’s state-run Global Times newspaper as the country faces sharply higher U.S. auto import duties and possibly additional duties to enter the European Union. China’s current import tariff for cars is 15%. An official with China Automotive Technology & Research Center said hiking tariffs on gas-powered vehicles with 2.5 liter or larger engines would be within World Trade Organization rules and help accelerate China’s green transition, also commenting the move would be fundamentally different from protectionist measures elsewhere.
China tells banks to step up lending... China’s central bank has guided some commercial banks to accelerate the pace of lending in May, four sources with knowledge of the matter told Reuters, after broad credit growth in April hit a record low. The central bank also hinted it would be more tolerant to banks which labeled bankers’ acceptances as new loans, even though the funds do not actually flow into the real economy, a practice regulators have frowned on in past years, two of the sources said. New loan figures in May are expected to be even worse than April given lackluster credit demand, one of the sources said. Meanwhile, China’s mega banks are urging branch managers to lend to state-owned companies that buy unsold homes, offering a quick show of support for the government’s housing rescue package unveiled last week.
Strong investor demand for China’s ultra-long special bonds... The first batch of China’s 1-trillion-yuan ($138.14 billion) ultra-long special treasury bonds, which debuted on Wednesday, surged more than 20% on the Shanghai and Shenzhen stock exchanges, triggering trading suspensions. The 30-year treasury bonds jumped more than 13% at the Shanghai exchange open, prompting a 30-minute suspension by the bourse, which cited “abnormal fluctuations” and urged investors to “invest rationally” while paying attention to risks. They were suspended again until late afternoon after the bonds shot up 25% following the resumption of trade. On the Shenzhen Stock Exchange, the bonds surged 23%, triggering similar regulator-imposed suspensions. Since the stock exchanges are not the primary trading venue for bonds in China, “a small amount of money can pump up prices,” a bond trader told Reuters. In the interbank market, banks are the biggest bond investors and they tend to hold rather than trade such securities.
UK inflation eases less than expected... British annual consumer inflation eased to 2.3% in April, the lowest since July 2021, though above expectations of 2.1%. Core inflation, minus food and energy costs, slowed for a third consecutive month to 3.9%, the lowest since October 2021 though that topped expectations of 3.6%.
Japan’s 10-year gov’t bond yield tops 1%... Japan’s 10-year government bond yield climbed above 1.0% for the first time in 11 years. The yield reflects expectations for further monetary tightening by the Bank of Japan.
Beef margins in the black... After an extended period of red ink, beef packer margins pushed into the black this week thanks to surging wholesale beef prices. While boxed beef prices didn’t maintain all of their morning strength yesterday, they rose another 32 cents for Choice to $313.02 and $1.52 for Select to $300.87. Given the wholesale beef strength, feedlots are hopeful of getting firmer cash prices for a fifth consecutive week, though packers may be reluctant to raise bids given next week’s holiday-shortened slaughter schedule and their recent hefty purchases.
Cash hog index weakens, pork firms... The CME lean hog index is down 21 cents to $92.10 as of May 20, the second straight daily decline. The pork cutout value firmed for a second consecutive day, rising 92 cents as all but butts and hams posted price gains.
Overnight demand news... Indonesia purchased 210,000 MT of rice expected to be sourced mostly from Vietnam, Cambodia, Pakistan and Myanmar. Jordan tendered to buy up to 120,000 MT of optional origin milling wheat after passing on a similar tender Tuesday. Turkey provisionally sold 75,000 MT of durum wheat to trading house Casillo.
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
- 2:00 p.m. Broiler Hatchery — NASS
- 2:00 p.m. Farm Labor — NASS