First Thing Today | March 13, 2023
Good morning!
Weaker tone to start the week... Grain and soy futures mildly favored the downside overnight as anxiety with the U.S. banking situation triggered general risk aversion. As of 6:30 a.m. CT, corn futures are trading 2 to 5 cents lower, soybeans are steady to 2 cents lower, winter wheat futures are 4 to 6 cents lower and spring wheat futures are 1 to 2 cents lower. Front-month crude oil futures are around $1.30 lower and the U.S. dollar index is down around 350 points.
Black Sea grain deal talks start as deadline looms... Negotiations began today between UN officials and Russian Deputy Foreign Minister Sergei Vershinin on a possible extension of the Black Sea grain deal, which is up for renewal on March 18. Moscow has repeatedly signaled it will only agree to an extension if restrictions affecting its own exports are lifted. But Turkish Defense Minister Hulusi Akar said on Sunday he believes the deal will be extended. Markets also signal they expect an extension.
Will the Fed pull the rate increase plug sooner?... Fallout from Friday’s collapse of Silicon Valley Bank may cause the Fed to end its aggressive monetary tightening cycle sooner than expected. Goldman Sachs is now predicting the Federal Reserve will not raise interest rates at its March 21-22 meeting. Said one market analyst in a Wall Street Journal story: “When the Fed raises rates so quickly, nine times out of 10, it breaks things. We may see more corporate failures; we may see more regional banks go under.”
The week ahead in Washington... The Federal Deposit Insurance Corporate (FDIC) took control of the Silicon Valley Bank on Friday morning and worked over the weekend to ensure insured depositors. Treasury Secretary Janet Yellen said on Sunday that the U.S. gov’t was working closely with banking regulators to help depositors at Silicon Valley Bank but dismissed the idea of a bailout, saying the situation is different from the 2008 financial crisis. The House Agriculture Committee on Wednesday will hold a farm bill listening session in Waco, Texas. USDA Secretary Tom Vilsack will testify Thursday morning before the Senate Ag Committee hearing on USDA oversight. The economic focus will be Tuesday’s U.S. consumer price index report for February. The highlight for agriculture will be USDA’s Cattle on Feed Report Friday afternoon.
Argentina will receive some rains this week... Argentina is expected to receive rains in the drier areas later this week and again next week. But World Weather Inc. says any improvement in topsoil moisture will come slowly and mostly too late for a dramatic change to production potential. Areas of south-central Brazil will remain too wet, keeping soybean harvest and safrinha corn planting delayed.
China keeps familiar faces in power positions... China kept some familiar faces in power following its major confab over the weekend. As expected, China named Li Qiang as premier but surprisingly kept almost half of the 26 cabinet positions unchanged. People’s Bank of China Governor Yi Gang is staying. The new defense minister is Li Shangfu, who is under U.S. sanctions for dealings with Russia. China must redouble efforts to ensure stability and bolster self-reliance, President Xi Jinping told lawmakers. He also vowed during the closing of the annual National People’s Congress on Monday to oppose foreign interference in Taiwan, a veiled reference to increasing American support for the democratically elected government in Taipei.
China sells nearly all wheat put up for auction... China sold 137,797 MT of state-owned wheat reserves put up for auction last week – 96.7% of the total offered. The average sales price was 2,793 yuan ($405.18) per metric ton, virtually the same price as the previous week’s average.
Indonesia to raise palm oil reference price... Indonesia plans to set its crude palm oil reference price at $911.41 per metric ton for March 16-31, up from $889.77 per metric ton in the first half of the month, Musdhalifah Machmud, an official at the Economics Coordinating Ministry said. The price would put Indonesia's crude palm oil export tax at $74 per metric ton for the period, and levy at $95, unchanged from the current level.
Fake sugar use in processed foods has surged... Artificial sweeteners and other sugar substitutes sweeten foods without extra calories. But studies show the ingredients can affect gut and heart health, according to a story in the Washington Post.
Cattle traders remain overly cautious... Traders will have to wait until later this morning to get USDA’s average cash cattle price for last week, though most of the reported activity Friday afternoon was around steady prices compared to the previous week. April live cattle futures finished Friday at $164.275, which was down from the previous week’s average cash price, signaling traders maintained their overly cautious tone. Given tightening market-ready supplies, futures be trading premium to cash.
April futures build premium to cash index... The CME lean hog index is up 23 cents to $79.62 (as of March 9). After strong gains last Friday, April lean hog futures finished the week nearly $8 above today’s cash index quote. That’s likely to limit followthrough buyer interest. While the cash index continues its seasonal climb, the slow pace of gains is limiting traders’ willingness to build too much premium into nearby futures.
Weekend demand news... Saudi Arabia purchased 1.043 MMT of optional origin wheat. Tunisia tendered to buy 234,000 MT of optional origin soft milling wheat. Algeria tendered to buy 50,000 MT of optional origin soft milling wheat.
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
- 11:00 a.m. Feed Grains: Yearbook Tables — ERS
- 2:00 p.m. North American Grain and Oilseed Crushings — NASS
