Good morning!
Quiet trade overnight... Corn, soybean and wheat futures held in tight ranges in quiet, two-sided overnight trade. As of 6:30 a.m. CT, corn futures are trading fractionally lower to a penny higher, soybeans are fractionally to 3 cents lower and wheat futures are 1 to 4 cents lower. Front-month crude oil futures are around $1.50 lower and the U.S. dollar index is about 200 points higher.
Debt-limit update... House Republican leadership feels confident they can reach a deal with the White House to raise the debt limit and pare back federal spending. Republicans expect the compromise will come together sometime in the next few days. GOP leadership believes they can garner the support of the majority of the House Republican Conference for this eventual package which some say will increase or suspend the debt limit through 2024. Whenever an agreement is announced, it will likely take two days to get it into legislative form. House members plan to leave Washington later today as debt-limit talks continue, saying they could vote next week — or even come back over the weekend — if negotiators strike a deal. Waiting until next week to vote in the House would either require the Senate to achieve unanimous consent for a time agreement to hold a vote quickly, or it could require a stopgap debt-limit extension, unless the deadline to act turns out to be later than the early June projections from Treasury Department officials.
Fitch places U.S. AAA credit rating on watch... Fitch Ratings placed the U.S. AAA credit rating on “rating watch negative,” a sign of growing unease about the country’s ability to avert a default. The U.S. received a credit downgrade during similar turmoil in 2011. Fitch still expects a resolution to the debt limit before the June 1 so-called “X-date.” A White House spokesperson said the Fitch report demonstrated the urgency of reaching a speedy resolution to the debt ceiling standoff.
Weekly Export Sales Report out this morning... For the week ended May 18, traders expect:
| 2022-23 expectations (in MT) | 2022-23 last week | 2023-24 expectations (in MT) | 2023-24 last week |
Corn | (500,000)-400,000 | (338,974) | 0-300,000 | 73,998 |
Wheat | (75,000)-100,000 | (42,136) | 200,000-500,000 | 336,761 |
Soybeans | (50,000)-300,000 | 16,950 | 100,000-675,000 | 663,801 |
Soymeal | 150,000-400,000 | 202,542 | 0-150,000 | 88,970 |
Soyoil | 0-10,000 | 856 | 0-10,000 | 0 |
Rains improve wheat prospects in Argentina... The Buenos Aires Grain Exchange said heavy rains in recent days across Argentina’s main production areas improved expectations for the 2023-24 wheat crop. The exchange expects wheat production to rebound to 18 MMT from the drought-ravaged 12.4 MMT crop produced the previous year.
Smaller Malaysian palm oil production expected next year amid El Niño... Malaysia’s crude palm oil production could drop between 1 MMT and 3 MMT next year due to the El Niño weather pattern, the Malaysian Palm Oil Board (MPOB) said. The weather event is unlikely to have a major impact on this year’s crop as it typically takes 15 to 18 months for effects to show. This year’s production is estimated at 19 MMT.
Fed using new Twitter Financial Sentiment Index... Federal Reserve economists built a new way to measure credit and financial conditions: the Twitter Financial Sentiment Index. The index uses natural language processing — a mix of artificial intelligence and linguistics — to comb through tweets. “We document that overnight Twitter financial sentiment helps predict next day stock market returns. Most notably, we show that the index contains information that helps forecast changes in the U.S. monetary policy stance: a deterioration in Twitter financial sentiment the day ahead of an FOMC statement release predicts the size of restrictive monetary policy shocks,” Travis Adams, Andrea Ajello, Diego Silva and Francisco Vazquez-Grande wrote.
Germany’s economy slipped into recession in Q1... Germany’s economy contracted 0.3% in the first quarter of 2023, revised down from the initial estimate of no growth as household consumption and government spending shrank. This revised figure marked a second consecutive quarter of GDP decline, pointing to a recession, due to strong inflationary pressures and a rise in borrowing costs.
Cold Storage Report shows exaggeration of seasonal trends... Beef stocks declined more than average, while pork inventories climbed more than normal during April. That not only speaks to slaughter levels over the past month, but also demand. Beef stocks in frozen storage totaled 448.0 million lbs. at the end of April, down 29.8 million lbs. (6.2%) from March, nearly double the five-year average decline of 15.1 million lbs. during the month. Pork stocks at 565.5 million lbs. increased 31.6 million lbs. (5.9%) from March compared with the five-year average rise of 16.9 million pounds.
Cash cattle trade higher... Cash cattle trade got underway with higher prices on Wednesday. Cash sources reported trade as high at $182 live and $286 dressed in northern locations and around $171 in the Southern Plains. Those levels were sharply higher in the northern market, and steady/$1 higher in the Southern Plains.
June hogs at rare discount to cash index... June lean hog futures settled at $79.80 on Wednesday, 87 cents below today’s cash index quote (as of May 23). It’s extremely unusual for the June contract to trade below the cash index, especially just three weeks from expiration. As of Wednesday’s close, July hogs held just a modest premium to the cash market.
Overnight 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
- 7:30 a.m. Weekly Export Sales — FAS
- 8:00 a.m. Food Price Outlook — ERS
- 2:00 p.m. Sugar: World Markets and Trade — FAS
- 2:00 p.m. Floriculture Crops — NASS
- 2:00 p.m. Livestock Slaughter — NASS
- 2:00 p.m. Poultry Slaughter — NASS