First Thing Today | January 4, 2023
Good morning!
Soybeans rebound overnight, corn and wheat extend price drops... Soybeans were supported by corrective buying overnight, while corn and wheat faced followthrough selling. As of 6:30 a.m. CT, corn futures are trading around 3 cents lower, soybeans are mostly 9 to 12 cents higher, winter wheat futures are around a dime lower and spring wheat is mostly 6 cents lower. Front-month crude oil futures are around $2.50 lower and the U.S. dollar index is nearly 400 points lower.
HRW conditions decline further in December... Individual state crop conditions ratings showed further deterioration of the HRW wheat crop during December except for Oklahoma and Colorado. The “good” to “excellent” ratings for HRW wheat dropped two points in Kansas (to 19%), 22 points in Montana (22%), two points in Nebraska (18%) and 11 points in South Dakota (16%) during December. The “good” to “excellent” ratings for HRW wheat improved seven points in Oklahoma (38%) and 20 points in Colorado (50%) over the past month. Texas did not release updated crop condition ratings. When the updated crop condition ratings (and using Texas ratings from late November) were plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500 point scale, with 500 being perfect), the HRW crop dropped two points to a rating of 278.3. The HRW crop went into dormancy with the lowest CCI rating on record ahead of spring.
Russian grain exports slowed in December... SovEcon estimates Russia exported 4.5 MMT of grain including 4.1 MMT of wheat during December. That would be down from 4.85 MMT of grain including 4.3 MMT of wheat during November. But exports were up from last year when Russia exported 3.912 MMT of grain including 3.063 MMT of wheat during December.
Concerns build over rapid spread of Covid in China... Japan became the latest in a long list of countries to require a pre-boarding negative Covid test for travelers coming from China. Japan also will ask airlines to limit additional flights from China. European Union government health officials will hold talks today on a coordinated response to the surge in Covid-19 infections in China. World Health Organization (WHO) officials met Chinese scientists on Tuesday amid concern over the accuracy of China's data on the spread and evolution of its outbreak. WHO officials are expected to release information from that meeting at a press conference today.
New variant of Covid in America... A new Covid-19 variant known as XBB.1.5 has become the dominant variant in the U.S., causing most new coronavirus cases, data from the Centers for Disease Control and Prevention shows. XBB.1.5 cases have shown the greatest spike, rising from about 4% to 41% of new infections during December. Scientists say the variant has features that give it the potential to drive a new surge of Covid-19 cases in the U.S., although it's still unclear how large that wave will be and whether it could send more people to the hospital. Many experts in the medical community are also saying XBB.1.5 has shifted far away from earlier Covid-19 strains, and therefore has the potential to escape the protections of vaccinations and antibodies developed from past infections.
EPA RFS proposals published in Federal Register... The proposed Renewable Fuel Standard (RFS) levels for 2023-2025 were published in the Federal Register Dec. 30 (link), with a 10-day comment period on the proposed marks. While EPA has announced it will hold a virtual public hearing on the proposed RFS levels, the agency noted it would announce “information regarding the public hearing for this proposal in a supplemental Federal Register document.”
EPA wants comments on third report to Congress on RFS impacts... EPA Jan. 3 published a notice in the Federal Register (link) seeking comments on a report to Congress required under the Energy Independence and Security Act of 2007 (EISA). EPA is seeking comments on the “Biofuels and the Environment: Third Triennial Report to Congress (External Review Draft).” EPA prepared the report in consultation with USDA and the Department of Energy. The report examines environmental and resource conservation impacts of the RFS and EPA is seeking review of the report by a contractor-led peer review panel. The first two reports that were prepared in 2011 and 2018 concluded that the environmental impacts of increased biofuel production and use “were likely negative but limited in impact” and that there was potential for “both positive and negative impacts in the future.” The initial report also concluded the EISA goals on biofuel production could be met “with minimal environmental impacts” if best practices were used and second-generation biofuel feed stocks were advanced. The second report indicated the things had not materially changed from the first report relative to impacts and that production cellulosic biofuel had “not materialized.” The second report concluded increased corn and soybean production resulted from the RFS and that did cause land use changes. But that report concluded more research was needed. EPA is currently seeking comments on an update on environmental impacts from the RFS, including “assessments of air, water and soil quality; ecosystem health and biodiversity.” The report also “includes new analyses not previously included in the first and second reports.” The comment period on the 994-page report concludes March 6.
House votes to adjourn amid Republican stalemate over choosing a speaker... Rep. Kevin McCarthy (R-Calif.), his party’s nominee for House Speaker, failed to secure the necessary votes through three ballots as hard-right conservatives opposed his selection. After the third ballot results, the House voted by voice vote to adjourn until noon ET today. The House can’t start regular business until a speaker is elected. Members of the 118th Congress can’t be sworn in, the House can't set rules to govern itself and it can’t consider legislation or create committee assignments. The last time the House needed more than one ballot to confirm a speaker was 1923 (9 ballots). It took two months — and 133 ballots — for the House to elect its speaker in 1856. McCarthy’s failure to lock down the votes so far has heightened uncertainty over whether he can win, or who would be a viable alternative. Possible alternatives: Reps. Steve Scalise of Louisiana, Patrick McHenry of North Carolina, Jim Jordan of Ohio or Elise Stefanik of New York.
Signs inflation has peaked in Europe... Inflation in France declined in December from a record high reached in November, according to preliminary figures published on Wednesday. On Tuesday German data showed December inflation eased for a second month in a row and was also broadly in line with lower Spanish inflation figures released last week. Meanwhile, the British public’s expectations for future inflation fell last month, according to a survey from Citi and YouGov. Inflation expectations for 12 months’ time dropped to 5.7% in December from 6.1% in November and a peak of 10.3% in August.
Slight rise in ERP payments... Total payments under the Emergency Relief Program (ERP) increased to $7.28 billion as of Jan. 2, up from $7.27 billion the prior week. The total includes $6.21 billion in payments for non-specialty crops ($6.20 billion prior) and $1.08 billion for specialty crops ($1.07 billion prior). There were no major changes in payouts under either Coronavirus Food Assistance Program (CFAP) efforts.
Still expecting firmer cash cattle prices... Tuesday’s sharp losses in nearby live cattle futures were more reflective of broad market risk aversion than cash cattle expectations. With the sharp decline, February live cattle settled nearly $1 below last week’s average cash cattle price of $157.81. Cash sources still expect firmer cash trade this week, but active followthrough selling in futures could rein in those expectations and give packers a little more bargaining power.
Traders cautious toward hog futures... The CME lean hog index is down 74 cents to $79.45 (as of Jan. 2). While that’s still 85 cents above the seasonal low of $78.60 to date, traders remain relatively cautious. February lean hog futures finished Tuesday $5.625 above today’s cash index quote, which is around $2 below the 10-year average rally in the cash market from now until mid-February.
Overnight demand news... South Korea purchased 6,000 MT of optional origin food-grade non-GMO soybeans. Tunisia tendered to buy 100,000 MT of optional origin soft milling wheat. Thailand tendered to buy 75,200 MT of feed wheat from unspecified origins. The Philippines tendered to buy 110,000 MT of feed wheat from unspecified origins.
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
- 2:00 p.m. Broiler Hatchery — NASS
