First Thing Today | February 20, 2024

Good morning!

Corn and beans higher, wheat mostly firmer overnight... Soybeans built on last Friday’s gains during overnight trade, while corn and wheat followed to the upside amid corrective buying. As of 6:30 a.m. CT, corn futures are trading 2 to 3 cents higher, soybeans are 8 to 9 cents higher, winter wheat markets are 2 to 4 cents higher and spring wheat is narrowly mixed with an upside bias. Front-month crude oil futures are modestly weaker, while the U.S. dollar index is down around 200 points this morning.

Cordonnier further cuts Brazil soybean estimate... South American crop consultant Dr. Michael Cordonnier cut his Brazilian soybean crop estimate another 2 MMT to 145 MMT, noting later-maturing soybeans will not be able to fully compensate for low yields on early harvested areas. He said soybean yields are generally 10% to 20% below expectations thus far. Cordonnier left his Brazilian corn crop forecast at 112 MMT. While the safrinha corn crop has gotten off to a mostly favorable start, acreage will be down from year-ago and 25% to 30% of the crop will be planted after the ideal window (around Feb. 20), while some forecasts call for a rapid end to the rainy season. Given generally favorable near-term weather forecasts, Cordonnier left his Argentine crop estimates at 50 MMT for soybeans and 54 MMT for corn.

Brazil soybean harvest remains rapid, safrinha corn planting record fast... Brazil’s soybean harvest advanced to 32% complete as of last Thursday, according to AgRural. That was eight percentage points ahead of last year at that point. Safrinha corn planting jumped to 59% done, the fastest on record for AgRural’s historical data that began in 2013.

Rains forecast for Brazil, Argentina mostly dry this week... Brazil is expected to see generally favorable weather over the next two weeks, though conditions could be too wet in some northeastern areas of the country, according to World Weather Inc. Argentina will experience net drying over most areas of the country this week, with some rains expected in southern and western areas late in the week. Better rainfall chances are in the forecast for Argentina next week.

Reuters: Administration choosing SAF middle ground... The Biden administration is poised to announce an adjustment to its scientific modeling for ethanol that will show the corn-based fuel to be less effective at reducing greenhouse gas emissions than previously estimated, three sources briefed on the plans told Reuters. The adjustment will make it more difficult for ethanol producers to qualify for tax credits for sustainable aviation fuel (SAF), the sources said, though it will still leave them a pathway to the subsidies if they can partner with corn growers that use sustainable farming practices. Reuters said this change reflects a more precise consideration of the environmental consequences associated with converting land into corn farms. It also aims to incentivize climate-smart farming practices such as no-till farming and covered crops. Reuters noted politically, the plan would be a “middle ground” for the administration between environmentalists and the ethanol industry. A White House spokesman told Reuters no final decision has been made on the climate model, and that “speculation about determinations are premature.”

NCC: Cotton acreage to decline 3.7%... U.S. cotton producers intend to plant 9.8 million acres to cotton this year, down 3.7% from 2023, according to the National Cotton Council’s annual survey. Upland cotton intentions at 9.6 million acres, are down 4.3% from 2023, while extra-long staple (ELS) intentions of 202,000 acres would be a 37.7% increase. Using 10-year average abandonment rates along with a few state-level adjustments to account for current moisture conditions, NCC projects harvested area at 8.1 million acres – a 17.9% abandonment rate. NCC projects total cotton production at roughly 14.6 million bales, with the upland crop at 14.0 million bales and an ELS crop of 538,000 bales.

India offers protesting farmers price support... The Indian government offered guaranteed support prices for pulses, corn and cotton in a bid to break a deadlock with protesting farmers, Trade Minister Piyush Goyal said. Goyal said the government proposed five-year contracts for a minimum support prices to farmers who diversify their crops to grow cotton, pigeon peas, black matpe, red lentils and corn, paid by co-operative groups it promotes.

Indonesia to import corn, wheat to curb inflation... Indonesia’s state food procurement agency plans to import 500,000 MT or corn, without giving specifics. The planned import comes on top of a 500,000 MT import quota allotted in the last quarter of 2023, some of which is expected to arrive this year. Indonesian grain buyers are also boosting imports of lower quality wheat, with the country’s wheat imports expected to climb at least 10% from around 10.87 MMT last year.

The week Ahead in Washington... Congress is on an extended Presidents Day holiday recess, even though it has not yet delivered fiscal year (FY) 2024 funding bills. The Senate is out until Feb. 26, while the House will return on Feb. 28. The current continuing resolutions (CR) for FY 2024 March 1 for 20% of the government, including USDA, and on March 8 for the remaining 80%. While some top GOP House leaders say there will not be another CR, others are not so sure. Other lingering issues include border protection and aid to Ukraine, Israel and Taiwan, among other topics. The new farm bill still looks like it is going backward, not forward, with the same issues: 1) funding (need for more money for reference price hikes) and 2) policy issues (conservation, food stamps, tapping the CCC Charter Act and trying to do something to temper the impact of California Proposition 12 and other similar restrictive policies). The economic focus will be Wednesday’s release of the minutes from the Jan. 30-31 Federal Open Market Committee (FOMC) meeting, which market participants will comb through to see if there are any additional clues as to when the Fed might start cutting interest rates. USDA’s updated food price outlook will be the focal point for agriculture, along with the Cattle on Feed and Cold Storage Reports – all of which will be released Friday.

China slashes mortgage reference rates, slows liquidity infusion... The People’s Bank of China (PBOC) slashed the five-year loan prime rate (LPR), the reference rate for mortgages, by 25 basis points to 3.95% -- the first cut since June 2023 and the largest since it was introduced in 2019. The one-year LPR was maintained at 3.45%. PBOC kept the rate of 500 billion yuan worth of one-year policy loans to some financial institutions, known as the medium-term lending facility (MLF), at 2.5% amid efforts to prevent more pressure on the yuan and assess the impact of recent support measures for the economy. With 499 billion yuan worth of MLF loans set to expire this month, the operation resulted in a net 1 billion yuan injection into the system, the smallest infusion since last August.

China’s state banks act to slow yuan declines after mortgage rate cut... China’s major state-owned banks sold dollars on Tuesday, three people with knowledge of the matter said, in an attempt to slow weakness in the yuan in the wake of the deep cut to the benchmark mortgage rate. Chinese state banks actively swapped yuan for dollars in the onshore swap market before immediately selling those greenbacks in the spot market to support the local currency, the sources said.

Cash cattle drop could be short-lived... Cash cattle trade averaged $180.35 last week, down 80 cents from the previous week, snapping a four-week string of gains. While packers will try to get cattle bought at lower prices again this week as they manage poor margins and tight supplies, it’s unlikely feedlots will be willing to move many cattle at lower prices.

Pork cutout surges... The pork cutout value jumped $3.21 on Monday, led by an $11.16 surge in primal bellies, though all cuts except hams posted gains. That came on the heels of a 78-cent rise last Friday. At $93.78, the pork cutout is the highest since Oct. 9.

Holiday weekend demand news... South Korea purchased 66,000 MT of corn expected to be sourced from South America or South Africa. Japan is seeking 115,921 MT of milling wheat in its weekly tender. Iran tendered to buy 120,000 MT each of corn (sourced from Brazil, Europe, Russia, Ukraine or elsewhere in the Black Sea region), soymeal (sourced from Brazil or Argentina) and feed barley (sourced from EU, Russia, Ukraine, elsewhere in the Black Sea region or Kazakhstan).

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

• 10:00 a.m. Export Inspections — AMS
• 8:00 a.m. Food Expenditure Series — ERS
• 2:00 p.m. Chickens and Eggs - Annual — NASS