House, Senate Dems & Vilsack Gang Up to Defeat GOP House Farm Bill Proposals

Sluggish sales of U.S. ag goods to China persist | Xi, Putin scold U.S. | Deere | Walmart | Biden asserts executive privilege over Hur audio files

MARKET FOCUS

• S&P 500 up more than 11% this year
• Bureau of Labor Statistics accidentally published inflation data on ahead of schedule
• Williams: Fed to lower rates before inflation reaches 2% target to avoid acting too late
• Roger Aliaga-Diaz, economist at Vanguard: Inflation still too high
• Berkshire Hathaway reveals $6.7 billion stake in insurer Chubb
• Retail giant Walmart raises sales and profit forecasts for fiscal 2025
• Iger, Disney’s chief: We overspent in streaming wars
• Ag markets
• Deere & Co. cuts income forecast again
• Day 2 HRW tour results
• Strategie Grains raises EU wheat crop forecast
• Ag trade update
• NWS weather outlook
• Pro Farmer First Thing Today items

BALTIMORE BRIDGE COLLAPSE

• Next steps for ship that hit Key Bridge
  

ISRAEL/HAMAS CONFLICT

• Netanyahu dismisses calls from senior U.S. officials for postwar plan in Gaza
  

POLICY

• Dems issue joint farm bill statement opposing House farm bill
• Vilsack alleges House farm bill focused on ‘existing production system’
• Key questions surface regarding funding levels in Stabenow’s farm bill proposals
• General U.S ag media to receive House farm bill briefing today
  

CHINA

• Sluggish sales of U.S. ag goods to China persist
• U.S. adds Chinese firms to Uyghur forced labor prevention list Register (link/pdf).
• Microsoft reportedly asks China-based employees to relocate
• Peru, China to discuss beef exports
• China to discuss property aid with banks on Friday
  

ENERGY & CLIMATE CHANGE

• Groups urge Treasury to promptly complete 45Z guidance
  

LIVESTOCK, NUTRITION & FOOD INDUSTRY

• First meeting of Animal Agriculture and Water Quality Subcommittee May 30-31
  

POLITICS & ELECTIONS

• Wall Street donors coming around on Trump
• Mayer and venture capitalist Vinod Khosla.
• White House blocks release of Biden’s special counsel interview audio
  

— Equities today: Stocks in Asia and parts of Europe rose this morning as investors bet that new data showing inflation easing would finally persuade central bankers to lower interest rates from multidecade highs. In Asia, Japan +1.4%. Hong Kong +1.6%. China +0.1%. India +0.9%. In Europe, at midday, London -0.2%. Paris -0.4%. Frankfurt -0.3%. U.S. Dow opened slightly higher.

U.S. equities yesterday: The U.S. Consumer Price Index (CPI) data for April met market expectations, showing a decline in the rate of inflation compared to the first three months of 2024. This positive development was welcomed by the markets, with all three major indices reaching record highs on Wednesday. The Dow gained 349.89 points, 0.88%, at 39,908.00. The Nasdaq rose 231.21 points, 1.40%, at 16.742.39. The S&P 500 was up 62.47 points, 1.17%, at 5,308.15. The S&P 500 is up more than 11% this year, blowing past most analysts’ 2024 forecasts. Meanwhile, the likelihood of a Federal Reserve rate cut in September increased, although CME Fed funds futures still indicate that the highest probabilities are for two rate reductions this year.

Of note: The Bureau of Labor Statistics accidentally published (link) the inflation data on the web ahead of schedule. But there were no obvious signs that traders (or their bots) had tried to profit from that mistake, with markets fairly quiet until just after 8:30 a.m. Eastern, the official release time.

— Retail giant Walmart raised its sales and profit forecasts for fiscal 2025, anticipating improved results due to easing inflation and increased demand for discretionary purchases. The company now expects annual consolidated net sales to approach the higher end of its previous forecast range of 3% to 4%. Adjusted profit per share is projected to be at the upper end of the prior forecast of $2.23 to $2.37, or slightly above.

In the quarter ending April 30, Walmart reported a 3.9% increase in comparable sales, driven by higher average transactions. This positive outlook is significant given Walmart’s status as a major retailer and the largest grocer in the United States.

— Ag markets today: Wheat rebounded from yesterday’s losses overnight, pulling corn and soybean futures modestly higher. As of 7:30 a.m. ET, corn futures were trading mostly a penny higher, soybeans were fractionally to a penny higher and wheat futures were 10 to 14 cents higher. The U.S. dollar index was around 150 points higher, and front-month crude oil futures were near unchanged.

Wholesale beef continues to strengthen. Choice boxed beef prices firmed another $2.38 to $306.77 on Wednesday, while Select rose 49 cents. Wholesale beef prices have surged, led by a $10.10 jump in Choice values over the past week, significantly improving packer margins, though they remain slightly negative. Surging wholesale prices may encourage packers to raise cash cattle bids for a fourth straight week.

Cash hog index ready to run again? The CME lean hog index is up 47 cents to $91.76 as of May 14, marking a new high for the year. After a three-week pause, the cash index may be ready to continue its climb to a seasonal high in summer. After yesterday’s losses, the premium June lean hog futures hold to the cash index dropped to $5.74.

— Agriculture markets yesterday:

• Corn: July corn fell 5 cents to $4.62 1/2, nearer the session low and below the 10-day moving average.
• Soy complex: July soybeans fell 1 cent to $12.13 1/2. July soybean meal dipped $1.60 to $371.70. July bean oil closed up 15 points at 43.55 cents. Prices closed nearer their session lows in all three markets.
• Wheat: July SRW closed 6 3/4 cents lower at $6.65 3/4 after reaching a nine-month high early on. July HRW fell 8 1/4 cents to $6.75, near the session low, while HRS futures gave up 6 ¼ cents, closing at $7.27.
• Cotton: July cotton rose 78 points at 75.41 cents and nearer the session high after hitting a 1.5-year low early on.
• Cattle: Cattle and feeder futures seemed to mark time Wednesday as traders awaited cash market news. June live cattle inched up 7.5 cents to $178.25 while most-active August feeder futures gained 20 cents to $255.875.
• Hogs: June lean hog futures sank 82.5 cents to $97.50 and settled nearer session lows.
  

— Quotes of note:

• New York Fed President John Williams, a permanent voter on the Federal Open Market Committee (FOMC), expressed cautious optimism about the CPI data in an interview with Reuters. While acknowledging the data as a positive development after several disappointing months, he emphasized that it does not yet meet the Fed’s threshold of sustainably moving towards a 2% inflation target. Williams pointed out that despite favorable data in 2023, the Fed did not implement a rate cut, and earlier 2024 data suggested that inflation was not yet under control.

  Williams stated that there is no immediate need for tightening monetary policy and indicated that the Fed would likely lower rates before inflation reaches the 2% target to avoid acting too late. He suggested that other Fed officials might share his cautious stance, reflecting Fed Chair Jerome Powell’s comments prior to the CPI update that the current data allows the Fed to be patient with interest rate adjustments. Essentially, the April inflation data needs to show consistent improvement before the Fed will take decisive action.
  

• Roger Aliaga-Diaz, an economist at Vanguard, says inflation is still too high, he wrote in an investor note yesterday, adding that he believes the Fed is unlikely to cut rates this year. Inflation remains well above the Fed’s 2% target.
  
• Berkshire Hathaway revealed a $6.7 billion stake in the insurer Chubb, ending months of speculation on Wall Street. Warren Buffett’s conglomerate had requested confidential treatment from the SEC regarding this investment, keeping it under wraps until now. Following the disclosure, Chubb’s shares surged nearly 8% in premarket trading.
  
• Bob Iger, Disney’s chief, said that his media company had overspent in the streaming wars. “Basically, we invested too much, way ahead of possible returns,” he said.
  

Market perspectives:

— Outside markets: The U.S. dollar index was slightly higher, with the euro, yen and British pound all weaker against the greenback. The yield on the 10-year U.S. Treasury note was weaker, trading around 4.34%, with a mixed tone in global government bond yields. Crude oil futures were weaker, with U.S. crude around $78.50 per barrel and Brent around $82.60 per barrel. Gold and silver futures were mixed ahead of economic data, with gold weaker around $2,389 per troy ounce and silver firmer around $29.94 per troy ounce.

— Day 2 HRW tour results. On Day 2 of the Wheat Quality Council’s HRW wheat tour, scouts found an average yield of 42.4 bu. per acre on samples taken from western and south-central Kansas. That was up sharply from an average yield of 27.6 bu. per acre in the same areas last year and the five-year average (2018-23; no tour in 2020) average of 40.8 bu. per acre. While conditions are much better than last year’s drought, scouts found varied wheat crops across areas sampled. Scouts will sample fields in southeastern 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.

— Strategie Grains raises EU wheat crop forecast. Strategie Grain raised its 2023-24 EU wheat production forecast by 1.7 MMT to 123.5 MMT given favorable crop prospects in Spain. That would still be down 2.6 MMT from last year. The firm increased its EU barley production forecast by 500,000 MT to 53 MMT, which would be up nearly 12% from last year.

— Ag trade update: Japan purchased 121,516 MT of milling wheat via its weekly tender, including 23,900 MT U.S., 67,806 MT Canadian and 29,810 MT Australian.

— NWS weather outlook: Severe thunderstorms along with significant flash flooding possible across portions of East Texas into the Gulf States through Saturday morning... ...Unsettled weather persists across the Northeast and Central U.S today... ...Hazardous heat possible across South Florida and South Texas this week.

Items in Pro Farmer’s First Thing Today include:

• Wheat leads overnight price gains
• France makes modest adjustments to wheat export forecasts
• Barge hits bridge in Galveston Bay

— Next steps for ship that hit Key Bridge. The ship that caused the Francis Scott Key Bridge collapse in March, resulting in the deaths of six construction workers, is expected to be refloated early next week. This is a crucial step for the Key Bridge Response Unified Command’s efforts to reopen the main 50-foot-deep, 700-foot-wide shipping channel in the Patapsco River, which has been closed since March 26. While smaller alternate paths have been opened for ships to access the Port of Baltimore, the main channel is projected to reopen by the end of the month.

Earlier this week, crews began the refloating process by using explosive precision charges to remove a section of the bridge weighing on the ship’s bow. Some bridge debris remains on the vessel’s deck, and additional wreckage must be cleared before refloating can proceed. Coast Guard Vice Admiral Peter Gautier indicated that the ship should be refloated and moved early next week after further surveying and clearance of debris.

According to the Baltimore Sun (link), the next steps involve:

1. Diving and clearing wreckage: Crews will conduct dive surveys and clear submerged debris from the controlled demolition, including unstable sections of the roadway still on the ship’s bow. This process is expected to be completed in the coming days.
2. Refloating the ship: Crews will evaluate the conditions needed to refloat the Dali, considering its position on the riverbed, remaining wreckage, and nearby infrastructure such as a Baltimore Gas and Electric Co. pipeline and an old water main. The ship will likely be escorted to Seagirt Marine Terminal by tugboats. Temporary channels for vessel transit will be closed during the refloating operations.
3. Removing wreckage and inspecting the ship: Once moored at Seagirt, further wreckage will be removed from the bow, and some of the 4,500 containers onboard will be unloaded. Engineers and investigators, including those from the National Transportation Safety Board, will inspect the vessel. The ship is expected to stay at Seagirt for four to six weeks before heading to Norfolk, Virginia, for more extensive repairs.

Bottom line: The refloating and subsequent steps are essential to restoring normal operations in Baltimore Harbor and completing the investigation into the bridge collapse.

— Israeli Prime Minister Benjamin Netanyahu dismissed calls from senior U.S. officials for a postwar plan in Gaza, asserting that any such plans would be meaningless while Hamas remains active. He emphasized, “There is no alternative to military victory,” according to a video released by his office. Despite ongoing internal discussions within the Israeli cabinet and national security council, no consensus has been reached on a postwar strategy for Gaza.

Meanwhile, the U.S. has anchored a temporary floating pier in Gaza to facilitate aid delivery. However, challenges remain, including the risks of operating in a war zone and a shortage of fuel for trucks needed to distribute supplies. Similar issues have hindered other aid efforts. The UN has yet to finalize its role in distributing aid from the pier. The U.S. Central Command stated that they expect trucks to start moving supplies ashore in the coming days. The U.S. announced this initiative in March, but progress has been delayed by unfavorable weather conditions.

— Dems issue joint farm bill statement opposing House farm bill. Senate Ag Committee Chairwoman Debbie Stabenow (D-Mich.) and Rep. David Scott (D-Ga.) issued a joint statement regarding the farm bill after meeting with House Ag Committee Democrats and Rep. Hakeem Jeffries (D-N.Y.), the Democratic leader in the House. They emphasized the commitment of House and Senate Democrats to passing a strong, bipartisan farm bill that supports farm and family safety nets and invests in rural communities.

Stabenow and Scott criticized House Republicans for proposing policies that they believe undermine the bipartisan coalition necessary for a successful farm bill. They stressed the need for a bill that unites this coalition and maintains the tradition of providing food assistance to vulnerable Americans while supporting farmers facing the climate crisis. They expressed readiness to work with Republicans on a bipartisan bill that supports farmers, feeds families, and strengthens rural communities.

The joint statement appears to address policies in the House Republican farm bill proposal that would halt the use of the Thrifty Food Plan, a USDA analysis used to increase benefits under the Supplemental Nutrition Assistance Program (SNAP).

— Vilsack alleges House farm bill focused on ‘existing production system.’ USDA Secretary Tom Vilsack commented on the farm bill proposed by House Ag Committee Chairman GT Thompson (R-Pa.), stating that it focuses on maintaining the current production system rather than looking toward future advancements. Speaking to the Organic Trade Association, Vilsack admitted he hadn’t fully studied Thompson’s proposal yet but praised the proposal from Senate Ag Committee Chairwoman Debbie Stabenow (D-Mich.). He emphasized the importance of the climate-smart measures Stabenow advocates for in the Inflation Reduction Act conservation programs.

— Key questions surface regarding funding levels in Stabenow’s farm bill proposals. Whenever the Congressional Budget Office (CBO) releases new farm bill scoring of both the House and Senate farm bill proposals, they will show total farm bill spending and levels for specific programs. Sources say unlike the House farm bill version, Stabenow’s bill is not spending neutral but goes considerably above the $1.51 trillion farm bill baseline over ten years. Stabenow previously said she garnered $5 billion additional farm bill funding from Senate Majority Leader Chuck Schumer (D-NY), but details on that has never been released. But sources say the additional funding level goes considerably above $5 billion. The ag sector wants to know how much, if any, funding goes to Title I farmer safety net programs.

— General U.S farm media to receive House farm bill briefing today. If the reporters do their job, some additional House farm bill details could surface today.

— Sluggish sales of U.S. ag goods to China persist. Weekly USDA export sales data for the week ending May 9 continued to show mostly subdued sales of U.S. ag commodities to China. Activity for 2023-24 for the week include net sales of 4,497 metric tons of wheat, 68,000 metric tons of corn, 11,863 metric tons of sorghum, net reductions of 637 metric tons of soybeans, and net sales of 63,609 running bales of upland cotton. The only sales activity reported for 2024-25 were net sales of 2,236 running bales of upland cotton. Net sales for 2024 of 1,942 metric tons of beef and 620 metric tons of pork were also reported.

— U.S. adds Chinese firms to Uyghur forced labor prevention list. The U.S. Dept. of Homeland Security issued updated Uyghur Forced Labor Prevention Act Entity List with 26 new entities, according to document published in the Federal Register (link/pdf).

— Microsoft has reportedly asked China-based employees to relocate. The tech giant has asked hundreds of staff members — most of whom are Chinese nationals — who work on cloud computing and artificial intelligence to consider transferring out of the country amid tensions between Washington and Beijing, according to the Wall Street Journal (link).

— Peru, China to discuss beef exports. Peru’s President Dina Boluarte will travel to China in June to meet with her counterpart Xi Jinping, with beef exports to China among the topics likely to be discussed. Peru’s ag minister says beef shipments to China could provide a $3 billion to $4 billion boost to its economy.

— China to discuss property aid with banks on Friday. China’s government plans to hold a meeting with key officials on Friday morning to discuss the property market, including a proposal to clear excess housing inventory, people with knowledge of the situation told Bloomberg. Senior officials from the housing ministry, financial regulators, local governments and state banks will attend the State Council meeting. Beijing is reportedly considering a proposal to have local governments buy millions of unsold homes to boost the slumping property sector.

— Groups urge Treasury to promptly complete 45Z Clean Fuels Production Credit guidance. Some 25 trade associations from diverse sectors of the economy — including aviation, agriculture, rail, manufacturing, and biofuels — sent a letter (link) to the Treasury Department on its highly anticipated guidance for the new clean fuel production credit, which applies to both SAF and vehicle fuels. The letter warns, “Any extended delays in publication of guidance for the Sec. 45Z credit may disrupt project timelines, impede capital flows, and threaten existing production and demand for low carbon renewable fuels.” Other signers include the Advanced Biofuels Business Council, Airlines for America, American Soybean Association, Growth Energy, National Corn Growers Association, National Oilseed Processors Association, and the Renewable Fuel Association.

Comments: The Treasury Dept. clearly does not understand the ag and biofuel sectors. It took them and EPA 21 months after the IRA (Climate Bill) was signed into law to issue modified GREET and other details regarding the 40B program.

— EPA scheduled the first meeting of the Animal Agriculture and Water Quality Subcommittee, part of the Farm, Ranch, and Rural Communities Advisory Committee (FRRCC), for May 30-31 at EPA headquarters in a hybrid setting. The subcommittee aims to provide recommendations to improve the implementation of the Clean Water Act (CWA) National Pollutant Discharge Elimination System (NPDES) Concentrated Animal Feeding Operation (CAFO) permitting program. The focus will be on reducing nutrients and other water pollutants from Animal Feeding Operations (AFOs), assessing the need for regulatory revisions, and exploring ways the EPA can support AFO operators in protecting water quality. Link to notice.

— Wall Street donors coming around on Trump. Former President Donald Trump is currently trailing President Biden in fundraising, with much of Trump’s funds being used to cover his mounting legal expenses. Despite this, there are indications that Trump may narrow the fundraising gap. Wall Street donors and others who had distanced themselves from Trump due to his leadership style and the January 6 Capitol riots are reconsidering their positions, according to the New York Times (link).

Unhappiness with Biden’s economic, regulatory, and immigration policies, as well as the administration’s stance on Israel’s war in Gaza, is prompting some donors to rethink their allegiances. For instance, hedge fund billionaire Ken Griffin, who had previously criticized Trump as a “three-time loser,” is now contemplating supporting him. Griffin and his associates have informed the Trump campaign that they are awaiting the selection of Trump’s running mate before deciding.

Trump is also gaining support in Silicon Valley. Venture capitalist David Sacks is hosting a fundraiser for Trump on June 6, with notable attendees like financier and podcast host Chamath Palihapitiya. Additionally, Palmer Luckey, founder of the virtual reality company Oculus and defense tech supplier Anduril, will host another fundraiser on June 8.

Despite these developments, President Biden continues to secure substantial funds. Last week, he raised millions during a West Coast fundraising trip, which included events hosted by former Yahoo chief Marissa Mayer and venture capitalist Vinod Khosla.

— White House blocks release of Biden’s special counsel interview audio. The Associated Press reports President Joe Biden has asserted executive privilege over audio of his interview with special counsel Robert Hur that’s at the center a Republican effort to hold Attorney General Merrick Garland in contempt of Congress, the Justice Department told lawmakers on Thursday. Link for details.

WASDE | Crop Production | USDA weekly reports | Crop Progress | Food prices | Farm income | Export Sales weekly | ERP dashboard | California phase-out of gas-powered vehicles | RFS | IRA: Biofuels | IRA: Ag | | Russia/Ukraine war, lessons learned | | SCOTUS on WOTUS | SCOTUS on Prop 12 pork | New farm bill primer | | Gov’t payments to farmers by program | Farmer working capital | USDA Ag Outlook Forum |