First Thing Today | November 20, 2023
Beans firmer, wheat lower and corn caught in the middle overnight… Soybean futures firmed despite a gap lower on the overnight open, corn futures have pivoted near unchanged while wheat continued recent weakness. As of 6:30 a.m. CT, corn futures are steady to a penny lower, soybeans are 2 to 5 cents higher and wheat futures are 2 to 5 cents lower. Front-month crude oil futures are modestly firmer following reports of OPEC considering production cuts, and the U.S. dollar index is lower and trading on 11-week lows.
Brazil to likely receive helpful rains… Portions of central Brazil received light precipitation over the weekend, while southern areas received heavy rains. Not much change occurred for center west, center south or interior northeastern Brazil over the coming ten days, as isolated showers and thunderstorms are likely to pop up across key summer crop areas, World Weather Inc says. The forecaster notes they do not see crop areas nearly as hot and dry as it has been for quite a while.
Brazil planting pace remains slow… Soybean planting reached 68% completed as of Nov. 16, according to AgRural. This compares to 61% a week prior and 80% last year. That marks the slowest pace since 2019/20. Crop concerns remain in Mato Grosso with irregular rains and high temperatures, leaving producers torn between replanting, leaving the crop as is or abandoning parts of it and going straight to planting the second crop in early 2024.
The week ahead in Washington... Congress is on Holiday Break; the senate will return to Washington Nov. 27 and the House the following day. Congressmen will focus on inking appropriations measures, which has been difficult as GOP conservatives have made it difficult to get some individual fiscal year 2024, which started Oct. 1, approved. The Senate will attempt to answer the bipartisan push to provide aid to Israel, Ukraine and Taiwan, and to link this with border policy reform and additional funding for border protection. The Federal Reserve Open Market Committee (FOMC) will release their meeting minutes on Tuesday from the interest rate decision earlier this month. Chinese president Xi Jinping recently changed his tone following the Asia-Pacific Economic Cooperation (APEC) summit and his interactions with President Biden, departing from his previous critical and nationalistic rhetoric. Jinping adopted a more conciliary tone, emphasizing the advantages of economic cooperation, even hinting at sending more pandas to the United States.
Federal fund futures pricing in rate cuts… Following last week’s lower than expected CPI print, futures are pricing in four 25 basis point cuts over the course of 2024, bringing the Fed funds rate down a full percentage point from the current range of 5.25%-5.50%. This marks the seventh time since mid-2022 that markets have anticipated a “pivot” by the Fed toward lower short-term interest rates, according to a client note by Deutsche Bank macro strategist Henry Allen. Despite this, Powell said the FOMC is not confident that monetary policy is sufficiently restrictive to bring inflation down to 2% in the recent FOMC meeting remarks.
Javier Milei wins Argentine president bout… Milei, a far-right libertarian often likened to Donald Trump, won the election in a significant rightward shift for the country. Milei, a 53-year-old economist and former TV personality with limited political experience, won with 56% of the vote, defeating center-left economy minister Sergio Massa, who conceded defeat before official results were released. The coming president promises to reduce spending and taxes, eliminate the country’s central bank and replace the rapidly inflating Argentine peso with the U.S. dollar. Milei will be sworn in on Dec. 10.
Israel and Hamas nearing deal to halt fighting… The nations are nearing an internationally brokered deal to pause fighting and free some of the hostages taken by the militant group, officials close to the talks said. Israel is also shifting the focus of its military campaign to southern Gaza, where its battle plans will be complicated by large numbers of civilians there.
Houthi rebels capture cargo ship in the Red Sea… The rebels, backed by Iran and located in Yemen, captured a cargo ship and are holding 25 crew members as hostages. They claim they seized the ship due to its alleged connections to Israel, warning previously that they consider all Israeli ships as potential targets.
Sustainable funds losing capital… Investors withdrew $14 billion from sustainable funds, leaving at least five funds announcing they will drop their ESG mandates this year and another 32 sustainable funds have closed, according to data compiled by Morningstar and WSJ. Conventional funds also lost money, but the pain was more acute for climate funds.
China shifting from further rate cuts… The country left interest rates unchanged recently and is shifting to other means of supporting its economy and stabilizing credit growth as it approaches the new year. The country's commercial banks on Monday maintained their benchmark lending rates, including the five-year loan prime rate used as a reference for mortgages. This aligns with expectations following the People's Bank of China's decision to hold the medium-term lending facility rate steady. China has previously implemented rate cuts to aid economic recovery, but constraints on the yuan, capital outflows, and narrowing bank profit margins have limited their effectiveness.
USDA launches 2023 irrigation and water management survey… USDA’s National Agricultural Statistics Service (NASS) has initiated the 2023 Irrigation and Water Management Survey, sending survey codes to selected irrigators across all 50 states. These irrigators are invited to respond online to the survey, which is a special study linked to the 2022 Census of Agriculture. The survey aims to compile a comprehensive dataset on irrigation practices and water usage in American farms, ranches, and horticultural operations. The data collected from producers will support the USDA's efforts to promote efficient irrigation methods and the long-term sustainability of water resources in the United States.
Neutral Cattle on Feed Report... Last Friday’s Cattle on Feed Report showed the Nov. 1 feedlot inventory up 1.7% from year-ago, as placements rose 3.8% and marketings declined 2.5%. All three categories were close to the pre-report estimates, so there should be limited price impact.
Cash hog index continues to decline... The CME lean hog index is down 59 cents to $75.09 (as of Nov. 16), marking a new low in the seasonal decline. While the cash market has shown glimpses of an early seasonal low, pressure is still being felt as market-ready supplies build.
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
· 10:00 a.m. Fruit and Tree Nuts Data — ERS
· 10:00 a.m. Vegetables and Pulses Data — ERS
· 11:00 a.m. Cotton and Wool Yearbook — ERS
· 2:00 p.m. Chickens and Eggs — NASS
· 2:00 p.m. Milk Production — NASS
· 2:00 p.m. Poultry Slaughter — NASS
· 3:00 p.m. Crop Progress — NASS
