First Thing Today | May 8, 2023

Soybeans and wheat extended last week’s gains amid followthrough buying during overnight trade, while corn posted two-sided trade.

Pro Farmer's First Thing Today
Pro Farmer’s First Thing Today
(Pro Farmer)

Good morning!

Mostly firmer tone to start the week... Soybeans and wheat extended last week’s gains amid followthrough buying during overnight trade, while corn posted two-sided trade. As of 6:30 a.m. CT, corn futures are trading a penny lower to 2 cents higher, soybeans are 2 to 6 cents higher, SRW wheat futures are 1 to 2 cents higher, HRW wheat is 6 to 11 cents higher and HRS wheat is 10 to 11 cents higher. Front-month crude oil futures are nearly $2.00 higher and the U.S. dollar index is more than 100 points lower this morning.

Rainy, warm week ahead... Weekend rains favored northern areas of the Plains and Midwest. World Weather Inc. says all major crop areas will receive some rainfall during the next 10 days, though amounts will be lightest across the eastern Midwest and Southeast. Temps will remain above normal across the Plains and western Corn Belt.

Russia still not satisfied with its end of Black Sea grain deal... Russia remains unsatisfied with how the issue of its agricultural exports as part of the Black Sea grain deal is being resolved, TASS news agency quoted Deputy Foreign Minister Sergei Vershinin as saying on Saturday after the latest talks with a top United Nations official. The Kremlin said Russian President Vladimir Putin had not yet responded to proposals from UN Secretary-General Antonio Guterres on how to extend and improve the deal. Meanwhile, Ukrainian officials say Russia has effectively stopped the Black Sea grain deal by refusing to register incoming vessels.

The week ahead in Washington... President Joe Biden on Tuesday will meet with House Speaker Kevin McCarthy (R-Calif.) and other congressional leaders to discuss raising or suspending the debt ceiling, setting the stage for a current standoff between the White House and House Republicans. A Washington Post editorial stated: “The best course of action is a short-term debt limit hike. This averts an immediate crisis and gives Republicans and Democrats time to negotiate.” Of note: There are ag spending issues involved and Senate Ag Chair Debbie Stabenow (D-Mich.) said the sequestration cuts from the 2011 situation “will continue for another eight years, regardless of the current debate, a 5.7% cut every year, right now.” The economic focus will be consumer inflation on Wednesday and producer prices on Thursday. The highlight for agriculture will be Friday’s May crop reports from USDA, which will update U.S. old-crop ending and global production, along with the first look at the 2023-24 balance sheets.

Beijing: Relations with U.S. on ‘cold ice,’ but stabilizing ties a ‘top priority’... China’s foreign minister said Monday a “series of erroneous words and deeds” by the United States had placed relations between the two superpowers on “cold ice,” but stabilizing ties is a “top priority.” Qin Gang made the comments during a meeting in Beijing with U.S. ambassador Nicholas Burns, their first since a dispute over a Chinese balloon shattered efforts to mend ties earlier this year. Qin said U.S. actions and words had undermined “hard-won positive momentum” following Chinese leader Xi Jinping’s meeting with President Joe Biden in Indonesia last year. “The agenda of dialogue and cooperation agreed by the two sides has been disrupted, and the relationship between the two countries has once again hit the cold ice,” he said according to a Chinese Foreign Ministry statement. In a brief post on Twitter, Burns said he and Qin discussed “challenges in the U.S./China relationship and the necessity of stabilizing ties and expanding high-level communication.”

China launches grain supply enforcement measures... China’s agriculture ministry launched a law enforcement campaign to stabilize grain supply in 2023. The ministry will investigate the illegal occupation of farmland, fake farm inputs, and illegal sales of GMO seeds, it said.

Ag balance sheets good today, but will endure heightened volatility… Rising interest rates and higher farm expenses will pressure farm finances ahead, according to the latest quarterly economic outlook published by ag credit lender Farmer Mac. When working capital declined from 2014 to 2018, farmers were able to utilize short-term financing at relatively low interest rates. “However, the average interest rate on agricultural production loans is 48% higher today than during that period,” the report says. Ag banks entered 2023 better positioned to confront the current economic period of rising interest rates than Silicon Valley Bank, which defaulted in March. “The rising and elevated interest rate environment may continue to stretch bank liquidity and cause financial stress, but ag lenders came into 2023 in an excellent position to endure heightened volatility,” the report concludes.

Rubio bill would exclude soda, prepared desserts from SNAP... The Supplemental Nutrition Assistance Program (SNAP) urgently needs reform, Sen. Marco Rubio (R-Fla.) wrote in a commentary item in the Wall Street Journal. Over 20% of SNAP spending “goes to unhealthy food and drinks, costing taxpayers billions and contributing to the nation’s obesity and diabetes crises,” he noted. “This issue has received bipartisan support for change, with progressive mayors and former agriculture secretaries expressing concern over the program’s contribution to poor nutrition.” Rubio said the next farm bill provides an opportunity to align SNAP with the nutrition standards of other major programs, such as the National School Lunch Program and the Special Supplemental Nutrition Program for Women, Infants, and Children. A proposed bill would exclude soda and prepared desserts from SNAP, focusing on healthier food and beverages. Although the proposal faces opposition, Rubio wrote the need for change has been acknowledged across party lines. “It is crucial to prioritize diet quality and make it a core SNAP objective, as suggested by USDA Secretary Tom Vilsack.”

USDA implements Congress-authored assistance for rice producers... USDA on Friday announced it would begin sending pre-filled applications to rice producers for its new Rice Production Program (RPP). The program will provide up to $250 million in assistance to rice farmers based on 2022 planted and prevented planted acres. The funding was allocated via the fiscal year 2023 Omnibus appropriations bill.

West Coast ports will struggle to stay No. 1... Los Angeles-Long Beach ports will struggle to stay the United States’ No. 1 ocean-freight gateway over the long run. Bloomberg reports a shift to other ports is getting supercharged by simmering West Coast port labor talks — which are set to hit the one-year mark this week — as well as the near-shoring of factory production amid rising tensions with China, and U.S. population growth shifting to the Sunbelt states. Meanwhile, some shipping officials are growing optimistic a deal could be reached by June, the Wall Street Journal reports, potentially clearing away uncertainty that has been hanging over U.S. importers heading into the crucial fall selling season.

Key week for cattle trade... Live cattle futures paused late last week after three days of sharp corrective declines. Bulls must defend support at last week’s lows or there will be an even deeper corrective pullback, despite futures trading well below the cash market. While cash cattle prices have posted seasonal tops, the discount in futures seems overly pessimistic.

Hog premiums continue to shrink... The CME lean hog index is up another 29 cents to $74.53 (as of May 4), extending its recent uptick in price. Meanwhile, the premium in May lean hog futures, which expire on Friday, was down to just under $1.00 at the end of last week. June hogs, which will assume lead-month status, finished last Friday $9.245 above today’s cash quote.

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