Soybean Group Analysis of White House Plan to Boost Plantings Shows Little Impacts

April jobs report showed robust growth

Both Russia and Ukraine are literally dug in via their strategies in Russia’s war on Ukraine. Ukraine’s military counterattacked Russian forces in the east. As Europe takes steps to wean itself off Russian energy, Moscow is redrawing its commodity exports map to ship more cargoes to Asia, build new pipelines and expand railroad links to the East.

A U.N. official said there are some 25 million tonnes of grain in Ukraine that cannot be exported due to infrastructure issues and blocked Black Sea ports.

The April jobs showed robust growth despite rising interest rates, jittery stock markets and growing fears of a slowdown. The U.S. economy added 428,000 jobs in April and the unemployment rate remained at 3.6%, marking the 12th straight month of job growth above 400,000.

The Fed will likely need to raise its benchmark interest rate over the next year to 3.5% or even higher, former senior Fed official Richard Clarida said.

The average mortgage rate for a 30-year fixed-rate home loan rose to 5.27%.

Western ports are bracing for increased congestion when China eventually lifts stringent Covid-19 restrictions in major cities, which could come just as many importers start to load up for the back-to-school and holiday shopping seasons. Import gateways such as California’s Los Angeles and Long Beach ports are still inundated with uncollected cargo. $12,600

Is the cost to move one container from China to the West Coast of the U.S. — about twice the price a year ago.

American Soybean Assn. analysis of the Biden administration plan to boost some crop plantings will have very little impact. Details in Policy section.

USTR Tai talks China tariff review after meeting with Canada trade official. And there is still no resolution with Canada regarding its dairy policy. Details in Trade Policy section.

World food prices declined slightly in April but remain elevated. Declines in vegoils and cereal grains contributed to the decline.

U.S. Election Day 2022 is 186 days away. Election Day 2024 is 914 days away.

Equities today: Global stock markets were mostly lower overnight. U.S. Dow opened around 240 points lower. Asian equities finished broadly lower except for the Nikkei which resumed trade after being closed much of the week for a holiday. The Hang Seng Index fell 791.44 points, 3.81%, at 20,001.96. The Shanghai Composite was down 66.20 points, 2.16%, at 3,001.56. The Nikkei rose 185.03 points, 0.69%, at 27,003.56. European equities are posting broad losses in most markets in early action, with the Stoxx 600 down 1.6% and regional markets 0.5% to 1.5% lower.

U.S. equities yesterday: The Dow collapsed, losing 1,063.97 points, 3.12%, at 32,997.97. The Nasdaq dropped 647.16 points, 4.99%, at 12,317.69. The S&P 500 fell 153.30 points, 3.56%, at 4,146.87. All three segments cratered on concerns the Federal Reserve’s interest rate hike would not be enough to tame surging inflation.

Agriculture markets yesterday:

• Corn: July corn futures rose 3 1/4 cents to $7.97 1/2, while December futures rose 2 1/4 cents to $7.38 1/2.
• Soy complex: July soybeans rose 6 1/2 cents to $16.47. July soymeal rose $1.70 to $419.90. July soyoil fell 58 points to 81.85 cents.
• Wheat: July SRW wheat rose 30 cents to $11.06 1/2, the highest closing price since April 19. July HRW wheat soared 53 3/4 cents to $11.77. July spring wheat rose 32 1/2 cents to $12.09 3/4, a lifetime-high close for the contract.
• Cotton: July cotton fell 600 points to 148.76 cents per pound.
• Cattle: June live cattle fell $1.05 to $133.775, the contract’s lowest settlement since a seven-week closing low April 29. August feeder cattle fell $1.825 to $174.375.
• Hogs: June lean hog futures rose $1.975 to $107.075, the contract’s highest closing price since April 28.
  

Ag markets today: Wheat futures took back a small portion of Thursday’s strong gains amid corrective selling overnight. Soybeans and corn more than erased yesterday’s gains, with corn scoring new lows for the week. As of 7:30 a.m. WT, corn futures were trading mostly 10 to 12 cents lower, soybeans were mostly 16 to 19 cents lower, winter wheat was 10 to 11 cents lower and spring wheat was 3 to 5 cents lower. Front-month U.S. crude oil futures were nearly $2.50 higher and the U.S. dollar index was around 450 points lower this morning.

Technical viewpoints from Jim Wyckoff:

On tap today:

• U.S. nonfarm payrolls for April are expected to increase by 400,000 from the prior month and the unemployment rate is forecast to fall to 3.5% from 3.6%. (8:30 a.m. ET) See UPDATE below.
• Baker Hughes rig count is out at 1 p.m. ET.
• Federal Reserve consumer credit data for March at 3 p.m. ET.
• Commitments of Traders report, 3:30 p.m. ET.
• Fed speakers: New York’s John Williams to the Columbia University Center for Environmental Economics and Policy at 9:15 a.m. ET, Minneapolis’s Neel Kashkari to the University of Minnesota Carlson School of Management at 11 a.m. ET, Atlanta’s Raphael Bostic at Georgia Tech at 3:20 p.m. ET, St. Louis’s James Bullard, and governor Christopher Waller at Stanford University’s Hoover Institution at 7:15 p.m. ET [webcast], and San Francisco’s Mary Daly at Utah Valley University at 8 p.m. ET.

UPDATE: U.S. added 428,000 jobs in April — beating expectations. The U.S. added back another 428,000 jobs in April, performing better than economists expected. Job gains in April surpassed the roughly 400,000 new jobs economists had forecast, and matched revised estimates for employment growth in March, according to data released this morning by the Labor Department. Growth was widespread, and led by gains in leisure, manufacturing, transportation and warehousing, the government said. Despite the better-than-expected gains, the unemployment rate remained flat at 3.6% — close to a pre-pandemic rate of 3.5% in February 2020, when unemployment was hovering at its lowest level since 1969.

U.S. labor productivity fell at the sharpest pace in 74 years in the opening months of 2022. Nonfarm productivity dropped at a 7.5% annual rate from the prior quarter, the Labor Department said, as economic output declined while hours worked climbed. Unit labor costs, meanwhile, jumped at a 11.6% pace. The data are choppy from quarter to quarter but both figures are worrisome. Rising productivity allows companies to pay workers more without goosing inflation, a key to improving living standards. And the big rise for labor costs suggests inflationary pressures are still bubbling up through the economy.

Steady climb in mortgage rates shows no sign of slowing down. The average rate for a 30-year fixed-rate home loan rose to 5.27% from 5.1% a week earlier, housing-finance giant Freddie Mac said Thursday. That marked the weekly figure’s highest reading in nearly 13 years. The average rate on America’s most popular home loan was 3.22% in early January and 2.96% a year ago.

Former Federal Reserve Vice Chairman Richard Clarida said it was likely that the central bank would need to raise its benchmark interest rate over the next year to at least 3.5% or to even higher levels that deliberately slow economic growth to bring down inflation.

Market perspectives:

• Outside markets: The U.S. dollar index was weaker ahead of the key U.S. jobs update, with the euro and yen both firmer against the greenback. The yield on the 10-year U.S. Treasury note was trading further above 3% at around 3.09% ahead of U.S. jobs figures. Gold and silver futures were higher ahead of the Employment report, with gold around $1,883 per troy ounce and silver around $22.43 per troy ounce.

• Crude oil futures were higher ahead of U.S. market action, with U.S. crude around $110.35 per barrel and Brent around $113.10 per barrel. Futures firmed in Asian action, with U.S. crude around $109 per barrel and Brent around $111.65 per barrel.

• Oil headed for its first back-to-back weekly gain since early March on signs the market is tightening as the EU moved toward banning Russian crude and the U.S. said it would refill its strategic reserves.

• Western ports are bracing for increased congestion when China eventually lifts stringent Covid-19 restrictions in major cities, which could come just as many importers start to load up for the back-to-school and holiday shopping seasons. Some officials say importers could face more delays in the arrival and handling of their cargoes, as well as higher delivery costs.

• USDA’s WASDE comes on May 12. USDA data have a larger corn and bean yield than the private trade is using. Also, as USDA is slower to adjust, the lowering world crops likely will not match the private trade.

• Ag trade: Taiwan tendered to buy 40,000 MT of U.S. milling wheat. South Korea tendered to buy 140,000 MT of optional origin corn, including the Black Sea region.

• NWS weather: A low pressure system will bring a threat of severe thunderstorms into the Southeast and Mid-Atlantic today while heavy rain and flash flood threat overspreads the central Appalachians and northern Mid-Atlantic into tonight... ...Colder and unsettled weather across the Northwest and northern Great Basin... ...A heat wave is forecast to develop and intensify over the southern Plains into the weekend.

Items in Pro Farmer’s First Thing Today include:

• Price pressure overnight
• FAO cuts global wheat production forecast
• Firm raises Russian wheat export forecast
• Russian wheat export tax declines
• China to sell more state-owned soybeans
• Packers buying cattle ‘with time’
• Cash hog index continues to slide

— Summary: Efforts to evacuate civilians from the Azovstal steelworks in Mariupol resumed today, after fighting between Russian and Ukrainian troops at the plant on Thursday. Azovstal is the only remaining Ukrainian-held territory in the besieged city, with some 200 civilians trapped there. Authorities say supplies of food and water are running low. Ukraine will not launch a full counter-offensive against Russian troops until at least mid-June, according to Oleksiy Arestovych, the military adviser to Ukraine’s presidency. Arestovych says his country is waiting for more Western weapons, and that Russia is unlikely to make headway before then.

• European Union proposed a revision to its planned Russia oil sanctions ban to give Hungary and Slovakia until the end of 2024 to comply, with the Czech Republic granted an exemption until June of that year. All other EU states would phase out imports by the end of this year.
• Israel said Russian President Vladimir Putin apologized to Prime Minister Naftali Bennett after a heated public disagreement over comments by Russia’s foreign minister suggesting Adolf Hitler was Jewish. “The Prime Minister accepted President Putin’s apology for Lavrov’s remarks and thanked him for clarifying the President’s attitude towards the Jewish people and the memory of the Holocaust,” Bennett’s office said in a statement.
  

— Market impacts:

• A U.N. official said there are some 25 million tonnes of grain in Ukraine that cannot be exported due to infrastructure issues and blocked Black Sea ports. “It’s almost a grotesque situation we see at the moment in Ukraine with nearly 25 million tonnes of grain that could be exported but that cannot leave the country simply because of lack of infrastructure, the blockade of the ports,” Josef Schmidhuber, FAO Deputy Director, Markets and Trade Division said during a Geneva press briefing via Zoom. He also warned of storage shortages for the coming harvest due to facilities being full.

— ASA analysis: meager impact from loan rate increases, crop insurance double-crop incentive. The Biden administration recently proposed to lengthen commodity loan terms for 2022 crops to 12 months, boost marketing assistance loan (MAL) loan rates for 2022 and 2023 crops, and provide a $10-per-acre payment under crop insurance to encourage double-cropping of soybeans after winter wheat in 2023. But the proposals would not have any major impacts, according to analysis by the American Soybean Association (ASA).

Regarding the crop insurance subsidy, ASA said winter wheat and double crop soybean area would increase by 47,000 acres with the additional premium subsidy. Single-crop acres of soybeans and wheat would fall slightly. Net increase would be 35,000 acres of total soybean acres and 37,000 of total wheat acres.

— USDA announces PIMA cotton and wool aid. USDA unveiled $50 million to aid eligible apparel manufacturers of worsted wool suits, sport coats, pants, or Pima cotton dress shirts; Pima cotton spinners; and wool fabric manufacturers and wool spinners under the Cotton and Wool Apparel (CAWA) program. Eligible participants must have suppered at least a 15% decrease in 2020 gross sales or consumption of eligible products versus gross sales in 2017, 2018 or 2019. Payments are based on pre-pandemic market share.

— Karine Jean-Pierre will replace Jen Psaki as White House Press Secretary, becoming both the first Black person and openly LGBTQ person to hold the position.

— China’s government ordered its agencies and state-backed companies to get rid of all personal computers from foreign brands within the next two years. They must be replaced with domestically produced alternatives, running their own operating systems. It is the latest move to wean the country off American technology, in response to both sanctions and paranoia over information security.

— USTR Tai discusses China tariff review and meets with Canada trade official. U.S. Trade Representative Katherine Tai said the review of Section 301 tariffs against China by the Trump administration will be a “robust” process that will focus on “how important this process is and how important it is for us to hear from all of our stakeholders across the country.”

Tai huddled Thursday with Canadian Minister of International Trade, Export Promotion, Small Business and Economic Development, Mary Ng. Of note, there was no resolution on dairy as Canada has still not come into compliance with a USMCA ruling on the operation of its tariff-rate quotas (TRQs) for dairy products.

The China tariffs are a topic that have different opinions within the Biden administration.

— Biden administration unveils plan for restocking the SPR. The Biden administration Thursday announced its plan to start buying oil to restock the Strategic Petroleum Reserve (SPR) that has been tapped to help boost oil supplies and bring down fuel prices. The Department of Energy will call for bids on 60 million barrels this fall, but deliveries will not be made until some point in the future.

— World food prices declined slightly in April but remain elevated. World food commodity prices measured by the U.N. Food and Agriculture Organization (FAO) Food Price Index (FFPI) declined to 158.5 points in April, down 0.8% from the record March level, but prices still remain 29.8% above year-ago levels.

Declines in vegoils and cereal grains contributed to the decline. “The small decrease in the index is a welcome relief, particularly for low-income food-deficit countries, but still food prices remain close to their recent highs, reflecting persistent market tightness and posing a challenge to global food security for the most vulnerable,” said FAO Chief Economist Máximo Torero Cullen. The vegoil price index declined 5.7% in April, losing nearly one-third of the increase seen in March. Prices for palm, sunflower and soyoil fell on demand rationing, FAO said. But uncertainty on exportable supplies out of Indonesia kept prices from falling further.

The Cereal Price Index was down 0.7% on a 3% decline in corn prices, while wheat prices rose 0.2% and rice prices were up 2.3%.

Price indices for several other commodities increased from March, including sugar (up 3.3%), meats (up 2.2% to a new record high), and dairy (up 0.9% and marking an eighth straight monthly increase).

The slight downturn removes a little pressure from food importing countries but prices remain elevated across the board compared to year ago with the overall index hovering near the record level seen in March.

— Additional commercial operations confirmed with HPAI. USDA data indicates that now 171 commercial flocks have been confirmed with highly pathogenic avian influenza (HPAI), with cases confirmed May 3 in Wisconsin (47,200 and 19,300 turkey meat birds in Barron County), South Dakota (56,200 turkey meat birds in Beadle County), Pennsylvania (12,500 duck meat birds and 29,500 duck breeder birds in Berks County), and Minnesota (118,900 turkey meat birds in Lyon County). The number of commercial flocks are showing as released by the Animal and Plant Health Inspection Service (APHIS) continue to increase, meaning the process of recovering continues to expand. Total HPAI confirmations are at 283 flocks in 32 states totaling 37.36 million birds in both commercial (171) and backyard (112) flocks.

— Two vegan meat companies are battling in court over the molecule that makes products taste like beef. Link for details via the Financial Times.

— Summary: Global cases of Covid-19 are at 516,186,916 with 6,247,592 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 81,694,169 with 996,964 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 577,843,905 doses administered, 219,974,190 have been fully vaccinated, or 66.76% of the U.S. population.

— FDA further limited the use of Johnson & Johnson’s vaccine, citing concerns over a rare clotting disorder.

— New York City’s top health official is warned a rise in Covid-19 cases may force it to restore a city-wide mask mandate. On Tuesday, New York City Health Commissioner Ashwin Vasan spoke about the recent rise in cases, particularly those effected by the BA.2 subvariant of the Omicron strain. If this trend is left unaddressed, Vasan warned that the city may have no choice but to bring back the mask mandate.

— Dems’ dilemma: a failed progressive agenda, including inflation, falling real wages, gasoline prices, crime, the border, critical race theory. Their agenda now: campaign against the Supreme Court relative to abortion and a renewed push to cancel a lot of student debt.

— Senate committee approves improved cost share in 2022 WRDA bill. The Senate Environment and Public Works (EPW) Committee on May 4 unanimously approved the 2022 Water Resources Development Act (WRDA), which permanently amends the cost share for inland waterways construction projects. The legislation, passed by a vote of 20-0, improves the cost share to 75% general Treasury funds and 25% from the Inland Waterways Trust Fund (from 65%/35%). The Senate bill keeps Congress on a biannual WRDA schedule, which resumed in 2014. It also authorizes 21 Chief of Engineer’s reports, or projects with completed feasibility studies.

Next step: The House Transportation and Infrastructure Committee is developing its version of the WRDA bill with plans to release text and hold a markup in mid-May.

— Cotton AWP hits 11-year high. The Adjusted World Price (AWP) rose to 147.10 cents per pound, effective today (May 6), up from 133.38 cents the prior week and the highest since it was at 153.18 cents per pound the week of May 6, 2011. Meanwhile, Special Import Quota #3 will be established May 12 for the import of 45,462 bales of Upland Cotton, applying to supplies purchased not later than Aug. 9 and entered into the U.S. not later than Nov. 7.