ERP Payments on Brisk Clip Based on Pro Farmer Member Emails ALL

2-year and 10-year Treasury yield curve briefly inverted this morning

German, French, and Italian leaders are set to visit Kyiv to meet with Ukrainian President Volodymyr Zelenskyy. Meanwhile, Russia reportedly is close to controlling the city of Severodonetsk. The West faces tough questions about Ukraine, as the momentum of the war shifts more decisively in Russia’s favor, the New York Times reports (link).

Russia’s war on Ukraine has cost global companies $59 billion in losses amid sanctions and hasty exits. Nearly 1,000 Western businesses have committed to exiting completely from Russia or slashing some business there, the Wall Street Journal reports.

Treasuries flashed a recession warning. The U.S. yield curve inverted with two-year note yields exceeding those on benchmark 10-year debt for the first time since early April. The dollar strengthened. Futures and global stocks sank with oil and gold. Meanwhile, the Japanese yen hit a 24-year low and Japan’s bonds also tumbled, prompting its central bank to say it’ll buy an extra $3.7 billion of debt tomorrow.

Major crypto lending platform Celsius on Monday announced it was suspending all withdrawals due to “extreme market conditions,” triggering a major selloff in the cryptocurrency market with bitcoin dropping more than 9%. The startup had promised yields of up to 17% to investors staking crypto assets.

Commodities can still get a lot more expensive, Bloomberg’s latest MLIV Pulse survey shows. The findings: About 64% of 805 respondents expect Bloomberg’s key gauge of raw materials to end the year stronger as supply shortages persist. Around 34% saw wheat leading the gains, while close to 27% expected copper and oil to rally most. Meanwhile. Citi estimates that global buyers of commodities are on track to pay producers $5.2 trillion more in 2022 than they did in 2019 thanks to the surge in prices. That’s equal to 5% of world GDP.

Emails to Pro Farmer signal ERP (WHIP+) payouts for 2020 and 2021 disasters have surged following announcement of program details. USDA still has not released its first official report on the newly named program — Emergency Relief Program.

Financial focus is on Wednesday’s FOMC statement, updated Fed projections and Chairman Jerome Powell’s presser. Goldman Sachs now sees half-point increases in June, July, September and November before slowing to quarter-points again in December. “The chairman of the Fed doesn’t want to let the ‘r’ word slip out of his mouth in a positive way, that we need a recession,” former U.S. central bank policy maker Alan Blinder said. “But there are a lot of euphemisms and he’ll use them.”

The average price of gasoline in the U.S. climbed above $5 a gallon for the first time ever as demand jumped to the highest level so far this year just over a week into the peak driving season.

$9,574 was the average price to ship a 40-foot container from Asia to the U.S. West Coast last week, down 11% from the week before and off 41.6% from the first week of March but 9% higher than the same time last year, according to Freightos. President Biden had some choice words about shippers during his visit to Los Angeles last week… details below.

A bipartisan group of U.S. senators agreed to a modest deal on gun control. The proposal will provide resources to states to help keep guns away from people deemed to be dangerous. It will also increase funding of mental-health services and make it harder for people under 21 to buy guns. With the support of ten Republicans, it should pass the Senate. President Joe Biden said that while the deal could have gone further, it reflects “important steps in the right direction.”

Age is becoming a factor among Democrats looking at possible Biden re-election run. Axios notes that Washington is run by Biden, 79 … House Speaker Nancy Pelosi, 82 … Senate Majority Leader Chuck Schumer, a comparatively youthful 71 … and Senate Republican leader Mitch McConnell, age 80. Dr. Anthony Fauci, running the U.S. pandemic response, is 81. It’s a global phenomenon: Pope Francis is 85. Prince Charles, Britain’s next king, is 73. Adds Axios: “And it’s not just the top of the ticket. The average age of the Senate at the beginning of this Congress (last year) was 64.3 years — the oldest in history. Seven senators are in their 80s. But Democrats now are privately debating whether Biden, already the oldest president, will be fit to run for reelection. At the end of a second term, he’d be 86.”

Equities today: Global stock markets were mostly lower overnight. U.S. stock indexes are pointed toward sharply lower openings and new for-the-move lows. Dow futures are down 600 points premarket, while contracts linked to the S&P 500 and Nasdaq tumbled 2.6% and 3.3%, respectively. The market is already coming off its worst week since January as consumer prices stay elevated at 40-year highs and gasoline remains firmly over $5 per gallon. Asian equities cratered after major declines in. U.S. equities Friday as inflation worries persist. The Nikkei dropped 836.85 points, 3.01%, at 26,987.44. The Hang Seng Index fell 738.60 points, 3.39%, at 21,067.58. European equities are posting major losses in early trade.

U.S. equities Friday: The Dow fell 880 points, 2.7%, to 31,392.79. The S&P 500 declined 116.96 points, 2.9%, to 3,900.86, and the Nasdaq tumbled 414.20 points, 3.5%, to 11,340.02. All three indexes declined for a second-consecutive week.

Ag markets today: Soybean futures extended last Friday’s price pressure overnight, while corn and wheat favored the upside amid two-sided trade. As of 7:30 a.m. ET, corn futures were trading 4 to 5 cents higher, soybeans were 15 to 18 cents lower and wheat futures were mostly 9 to 12 cents higher. Front-month U.S. crude oil futures were around $2 lower and the U.S. dollar index was about 650 points higher.

Technical viewpoints from Jim Wyckoff:

On tap today:

• USDA Grain Export Inspections report, 11 a.m. ET.
• Fed Vice Chairwoman Lael Brainard speaks about the Community Reinvestment Act at a conference at 2 p.m. E.T. (pre-recorded)
• USDA Crop Progress report, 4:00 p.m. ET.

Economist says most U.S. inflation ‘could have been avoided.’ Most of the current record high inflation could have been avoided had the Federal Reserve acted earlier and shown humility after it wrongly described inflation as “transitory,” economist Mohamed El-Erian said Sunday. El-Erian, chief economic advisor at Allianz, appeared on CBS’s Face the Nation to discuss what caused the current inflation and where it was likely to be heading. “We got here because we got a combination of things happening,” El-Erian said, citing the war in Ukraine, the energy transition, and how the Fed incorrectly judged inflation and fell behind. “All these things came together and are feeding now this everything inflation. The price of nearly everything is going up and making us feel really insecure,” he said.

El-Erian said that most of the inflation “could have been avoided if early action had been taken” by the Fed, which must now regain credibility to ease long-term inflation expectations. “I was very puzzled when a year ago so many people were so confident that inflation was transitory,” he said. “There was so much we didn’t understand about the post-Covid inflation that humility would have been a good idea.”

Focus on Fed’s FOMC statement, projections and Powell’s presser on Wednesday. In economic projections to be released this week, the Fed could pencil in plans to raise interest rates higher than anticipated. They might also project higher unemployment rates over the next two years.

Former Fed Chair Ben Bernanke sounded more optimistic on inflation and the Fed’s prospects, giving a bit of a boost to Powell & co. in a CNN interview. He said he sees the Fed with “a decent chance, a reasonable chance” of a soft landing in the form of a mild recession or perhaps no recession at all. That’s also a nod to healthy employment. Bernanke’s assessment also hinges on prospects for supply-side issues to moderate and oil and food prices to stabilize, he said.

Food prices to keep rising. Price increases show few signs of slowing down. Some of the biggest U.S. food suppliers and restaurants, such as Kraft Heinz Co. and some McDonald’s Corp. franchises say they plan to keep on raising prices to offset starkly higher costs, the Wall Street Journal reports (link). The food industry has been hit by cost increases for labor, packaging, ingredients, energy and transportation. Besides raising consumer prices, the companies have tried selling smaller packages, raising the per-unit price and improving their operations’ productivity.

Inflation is cranking up Americans’ air-conditioning bills this summer. Electricity prices rose 12% in the past year, a jump that will translate to $540 in electric bills for the average American household between June and August, a $90 increase from a year earlier, according to an analysis of federal data (link to WSJ article). In addition to higher natural-gas prices and rising temperatures, a major factor in the cost of your air-conditioning bill is location, analysts said. Some utility companies, such as those along the Eastern Seaboard and Gulf of Mexico, are more dependent on natural gas for electricity generation. They are also often less restrained by state governments in terms of how freely they can pass along costs to customers in the form of higher bills.

Britain’s economy shrank by 0.3% in April compared with March, a sharper contraction than most forecasts. Production across sectors fell as firms struggled with high energy prices and supply-chain shortages. There was a reduction in services output as well. GDP is now only 0.9% higher than it was before the pandemic.

Market perspectives:

• Outside markets: The U.S. dollar index is solidly higher in early trading and hit a 20-year high overnight. The yield on the 10-year U.S. Treasury note is fetching 3.23% — the highest level in 14 years. U.S. crude was trading around $118.75 per barrel and Brent around $120.20 per barrel. Gold was trading around $1,860 per troy ounce and silver around $21.55 per troy ounce, both metals under pressure.

• The surge of U.S. inflation is hammering the Japanese yen, a currency that usually strengthens on bad economic news. Normally, a weak yen is good news for Japan’s exporters. But higher global commodity prices and supply shortages are raising costs for producers in Japan. The yen fell to a 24-year low, prompting a warning from the Bank of Japan as its easy monetary policy increasingly feels the strain of rising interest rates globally.

• Bitcoin fell below $24,000 Monday, after fresh inflation concerns had investors fearing that the Federal Reserve could act more aggressively to control soaring prices. Bitcoin’s fall was part of a wider crypto market selloff. In the last 24 hours, Ethereum has also cratered almost 18% to $1,205, according to CoinDesk data. Meanwhile, one of the largest crypto lenders, Celsius Network, announced Sunday it was pausing all customer withdrawals. “Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, Swap, and transfers between accounts,” Celsius said in a statement. The news exacerbated the decline of cryptocurrencies, and prompted the price of the Celsius token to fall as much as 60%.

• The threat to South Korea’s economy and global supply chains is growing as a nationwide trucker strike widens, curbing output at top steelmaker Posco and damaging the petrochemicals sector.

• Gas prices breach $5 threshold. The average price of a gallon of regular unleaded gas in the U.S. hit a record $5 Friday night and could rise further as we head into the busy summer driving season. Gas prices skyrocketed after Russia’s invasion of Ukraine, which led traders, shippers and financiers to shun Russian oil supplies. Oil inventories, which were already tight due to high demand, have depleted even more.

The AP reports (link) the average U.S. price of regular-grade gasoline has “spiked 39 cents over the past three weeks to $5.10 per gallon,” which is $1.97 higher than it was this time last year. The AP adds an industry analyst with the Lundberg Survey “said Sunday that the price jump comes amid higher crude oil costs and tight gasoline supplies.”

President Joe Biden accused Exxon Mobil and other oil companies of exploiting high gasoline prices after a report showed inflation soaring to a new 40-year record. “We’re going to make sure everyone knows Exxon’s profits. Exxon made more money than God last year,” Biden said during an event last Friday at the port of Los Angeles.

• Biden very upset about nine ocean carriers. During a visit to the Western Hemisphere’s busiest port in Los Angeles last week, President Joe Biden made no bones about taking on the nine ocean carriers in the three main global shipping alliances for their role in stoking U.S. inflation that’s running at the hottest pace in 40 years. “Every once in a while, something you learn makes you viscerally angry. Like, if you had the person in front of you, you’d want to pop them. No, I really mean it,” Biden said of the Asia- and Europe-based firms that share vessel capacity on key trade lanes and currently enjoy immunity from US antitrust laws. “These companies have raised their prices by as much as 1,000%,” he said Friday, urging the House to pass the bipartisan Ocean Shipping Reform Act that the Senate passed unanimously in March and would allow the Federal Maritime Commission to crack down on shipping fees charged by international carriers. “But there’s no better place to starting it than right here in the port and letting those nine foreign shippers understand the rip-off is over,” the president said. What Biden didn’t say was that the Federal Maritime Commission just two weeks ago issued a report essentially absolving the container shipping industry of any wrongdoing, concluding that “our markets are competitive” and blaming high ocean freight rates on “unprecedented consumer demand, primarily in the United States.” A European Competition report concluded the same.

• The Port of Los Angeles handled just under 970,000 units of cargo in May, making it the operation’s third-busiest month on record. Neighboring Long Beach processed 890,989 units in May, its second-busiest to date. The chiefs of both San Pedro Bay ports are preparing for the early arrival of the 2022 peak season, which they expect in June.

• Port congestion should ease next year as new container vessels are delivered and demand from shippers softens from pandemic highs, but not enough to restore global supply-chain flows to where they were before Covid, according to the head of DHL’s freight-forwarding unit.

• Orange is the new red (hot). In the map below, orange are the areas having heat advisories.

• NWS weather: Dangerous heat expected to extend from the Midwest to the Southeast through midweek... ...Flooding threat continues for portions of the Northwest while heavy snow falls over parts of the northern Rockies... ...Critical fire weather conditions expected for a large portion of the Southwest and the southern and central Rockies today.

NWS

Items in Pro Farmer’s First Thing Today include:

• Soybeans weaker, corn and wheat firmer overnight
• Heat builds across U.S. crop areas
• Ukraine grain harvest starts in Odesa region (details below)
• Iraq plans to buy U.S., Aussie wheat
• India has no plans to curb rice exports
• Seasonal cash weakness built into cattle futures
• Cash hog index weakens for third straight day

— Summary: Russian artillery is pounding Ukrainian positions in the eastern Donbas region, inflicting heavy casualties. Ukraine’s deputy head of military intelligence has warned that his army is nearly out of artillery ammunition, with guns chewing through as many as 6,000 rounds a day. Russia had ten times as much artillery, he said, and Western arms are slow to arrive. Russia now holds all residential areas in Severodonetsk. But Ukraine’s army is holding out in the Azot industrial zone.

• Amnesty International accused Russia of committing war crimes in Ukraine. The NGO said it had proof that Russian forces killed hundreds of civilians in Kharkiv through indiscriminate shelling and the use of cluster munitions, which violates international conventions. Meanwhile Russia destroyed a bridge linking besieged Severodonetsk to another city in eastern Ukraine, severing a vital evacuation path for civilians. The last remaining bridge out of the city is also under heavy shelling, a Ukrainian official said.
• Ukraine grain harvest starts in Odesa region. Farmers have started harvesting winter grains in the southwestern Odesa region of Ukraine, according to regional officials. Farmers in the region are expected to harvest 1.06 million hectares of winter grains, including 551,000 hectares of winter wheat and 244,0000 hectares of barley. Ukraine’s ag ministry says spring planting across the country is completed. The ministry previously said farmers planned to sow 14.2 million hectares of spring grains, down from 16.9 million hectares in 2021, due to the war. The ag ministry provided no crop outlook.
  

— Market impacts:

• Over a dozen former McDonald’s restaurants in Russia reopened Sunday under a new name — Vkusno & Tochka, which translates to “tasty and that’s it” — and branding after the American fast food chain pulled out of the country over the war in Ukraine.

— Based on emails from ERP-eligible producers, payments are being made quickly after program details were announced. USDA still has not released payment information regarding the Emergency Relief Program (EPA/WHIP+) but based on emails to Pro Farmer, a significant number of eligible producers have already received their payouts under Phase 1 of the renamed program.

— Shuler wins AFL-CIO presidency, first woman elected to role. AFL-CIO President Liz Shuler won election to a four-year term at the federation’s national convention Sunday, solidifying her spot at the helm of the U.S. labor movement.

— Nominations votes. The Senate Energy and Natural Resources Committee will hold votes Tuesday on the nominations of David Applegate to be the director of the United States Geological Survey, Ambassador Carmen G. Cantor to be the assistant secretary of Insular and International Affairs at the Interior Department, and Evelyn Wang to be the director of the Advanced Research Projects Agency-Energy.

— Shanghai locked down almost everyone in the city over the weekend to conduct mass testing. The effort was triggered by a rebound of infections found in the community less than two weeks after the financial hub exited a bruising two-month shutdown. There were six such cases on both Thursday and Friday, up from none the day before. Many Beijing schools scrapped plans to reopen on Monday. Shanghai, which ended a two-month lockdown on June 1, ordered most of its 25 million residents into mass-testing after an outbreak at a hair salon.

— Trade ministers from World Trade Organization countries gather in Geneva this week for the first time since 2017 to try to address pressing issues, including increasing food security amid war-induced shortages and responding to the continuing pandemic.

— GOP senators seek to overturn EPA on refiner biofuel waiver denials. Republican senators are looking at options for blocking the Biden administration from requiring small oil refiners to comply with U.S. biofuel-blending rules. As a first step, they are asking the Government Accountability Office (GAO) to weigh in on whether an Environmental Protection Agency decision denying more than 60 waivers falls under the scope of the Congressional Review Act, which allows lawmakers to overturn executive actions by a simple majority if moved within 60 days from the rule’s public action. Sens. Roger Wicker of Mississippi, Shelley Moore Capito of West Virginia and Bill Hagerty of Tennessee made the request in a letter to GAO chief Gene Dodaro. The U.S. Supreme Court ruled last year that the EPA has wide latitude to exempt refineries. While the Biden administration has rejected dozens of waivers, it also is proposing to give small refineries more time to comply with past targets.

— Not so fast on electric-vehicle-charging stations. Western states with miles of remote highway say the government’s plan to put fast electric-vehicle-charging stations along major highways doesn’t make sense everywhere.

— Largest pork processor in the U.S. is culling its production operations. Smithfield Foods is closing a large plant in Southern California and shrinking the size of its hog herd in the region, the Wall Street Journal reports (link), citing high costs that include the outsize regulatory demands for operating in the state. The plant is one of 46 that Smithfield operates in the U.S. and the closure reflects in part the volatile economics across the food business over the past two years. Food suppliers are dealing with rising costs across their supply chains, including higher prices for transportation, packaging and livestock feed. Smithfield also points to taxes, utility costs and labor costs that are far higher in California than at its plants in other states. Experts say the supply of hogs in the U.S. remains constrained and that high costs for farmers are likely to keep head counts down.

— Summary:

• Global cases of Covid-19 are at 535,314,553 with 6,309,606 deaths.
• U.S. case count is at 85,515,795 with 1,011,275 deaths.
• Johns Hopkins University Coronavirus Resource Center says there have been 590,999,136 doses administered, 221,714,657 have been fully vaccinated, or 67.29% of the US population.

— Biden administration’s lifting of Covid testing rules for tourists who enter the United States is welcome and long overdue, travel organizations said on Friday. The Centers for Disease Control announced Friday that it would no longer require visitors to the country to present a negative Covid test at ports of entry, starting Sunday. European countries have long ditched the rule. The administration’s decision is also likely to have a positive impact on Americans’ ability to travel abroad.

— Three doses of Pfizer’s vaccine and a two-doses of Moderna’s shot are safe and effective in preventing illness from Covid-19 in young children, according to assessments provided by the Food and Drug Administration, in a possible signal that the agency is gearing up to approve Covid vaccinations for the youngest Americans later this week.

— Biden’s age for re-election a topic among Democratic supporters. David Axelrod, chief strategist for President Obama, told the N.Y. Times for a story over the weekend (link) about rising worries among top Democrats about Biden’s age and tenacity: “The presidency is a monstrously taxing job and the stark reality is the president would be closer to 90 than 80 at the end of a second term, and that would be a major issue.”

— Palin leads special election for Alaska’s sole congressional seat. The New York Times reports (link) Alaska’s former Governor Sarah Palin “leads the 48-candidate field in a special primary election for the state’s sole congressional seat, according to a preliminary count of ballots on Sunday.” The “top four candidates in the race will advance to the special election in August.” Palin “has nearly 30% of the vote tallied so far,” and the second-highest ranking candidate, Nick Begich, “has 19.3%.” The special election, which was prompted by the death in March of Representative Don Young, will be held on Aug. 16, which is also the day of Alaska’s primary contest for the House seat’s 2023-2025 term. So, voters will see some candidates’ names twice on one ballot.

— Emmanuel Macron, the French president, is fighting to keep his parliamentary majority after the first round of voting in legislative elections on June 12. His centrist alliance, Ensemble, came in neck-and-neck nationally with Jean-Luc Mélenchon’s radical-left grouping, NUPES. A final run-off vote will be held on June 19.

— House Appropriations Committee releases the text of its bills 24 hours before each subcommittee markup. That means observers can expect the bills to be publicly released at the following times:

• Defense: 9:30 a.m. Tuesday
• Legislative Branch: 11 a.m. Tuesday
• Military Construction-VA: 1 p.m. Tuesday
• Agriculture-FDA: 2:30 p.m. Tuesday
• Homeland Security: 9 a.m. Wednesday
• Financial Services: 11 a.m. Wednesday

Members rarely offer any amendments during subcommittee markups, instead waiting for the full committee markup.

Rep. Sanford Bishop (D-Ga.), chair of the Agriculture-FDA Subcommittee, said his bill hews fairly closely to the Biden administration budget proposal. (Source of calendar: Bloomberg)

— A bipartisan group of senators announced an agreement on gun safety legislation Sunday following several deadly mass shootings. The proposal includes “needed mental health resources, improves school safety and support for students, and helps ensure dangerous criminals and those who are adjudicated as mentally ill can’t purchase weapons,” the group said in a statement. Notably, the plan has the support of 10 Republican senators, which would help overcome a Senate filibuster. But as usual in the Senate, many of the details of the plan are still to be sorted out and maintaining support for it throughout the legislative process will be challenging. This would be the most significant gun-control initiative that has a chance of being passed by Congress since then-President Bill Clinton signed the assault weapons ban in 1994. The bipartisan group led by Sens. Chris Murphy (D-Conn.) and John Cornyn (R-Texas) wants to pass this bill before the July 4 recess.

— Food and fuel costs. New loan and waiver authorities and emergency funding would be provided to address food and fuel prices under an expanded version of HR 7606. The legislative package would provide $700 million for, among other things, competitive grants to expand biofuel infrastructure. It also would also allow for higher percentage ethanol-based fuels (E15) to be sold year-round.

— EPA seeks to maintain waters protections. The U.S. Supreme Court should uphold Clean Water Act protections for wetlands that aren’t directly connected to large bodies of water, the Environmental Protection Agency argued in a brief filed Friday in a case that will determine the extent of the federal government’s power over wetlands nationwide. At least three Biden administration rulemakings hinge on the outcome of the case.