First Thing Today | December 1, 2023
Good morning!
Price pressure overnight... Selling pressure built through the overnight session, with corn, soybeans and wheat trading near session lows earlier this morning. As of 6:30 a.m. CT, corn futures are trading mostly 2 cents lower, soybeans are 15 to 16 cents lower and wheat futures are mostly 7 to 10 cents lower. Front-month crude oil futures are near unchanged, while the U.S. dollar index is more than 100 points lower.
Record soy crush, big rise in corn-for-ethanol use expected... USDA is expected to report October soybean crush jumped to an all-time high of 199.2 million bu. for October based on a Bloomberg survey. That would be up 24.5 million bu. (14.0%) from September and 2.5 million bu. (1.3%) above last year. Corn-for-ethanol use is expected to rise to 452.7 million bu., up 22.6 million bu. (5.3%) from September and 4.1 million bu. (0.9%) higher than October 2022.
USDA expects even bigger ag trade deficit in FY 2024... USDA’s updated ag trade forecast for fiscal year (FY) 2024 calls for exports of $169.5 billion (down $2.5 billion from August) against imports of $200.0 billion (up $500 million). That would result in an ag trade deficit of $30.5 billion for FY 2024, up from the August projection of $27.5 billion and red ink of $16.7 billion in FY 2023. Bottom line: The trade outlook for U.S. agriculture in FY 2024 reflects a complex interplay of economic factors, global demand and trade dynamics, with potential growth opportunities in diverse markets. But U.S. ag sector and farm-state lawmaker concerns are accelerating regarding President Joe Biden’s trade policy. They note that unless trade barriers are reduced or eliminated in targeted countries, promotion funding won’t help.
Congress leaves down with limited work on key issues... Another week has gone by with no action on government funding or the supplemental request for aid to Ukraine, Israel and Taiwan. Regarding the farm bill, the same issues (funding and policy differences) remain. Other things on the must-do list include:
• Federal Aviation Administraiong reauthorization.
• Section 702 reauthorization and reform.
• National Defense Authorization Act.
What will likely occur short term: Congress will punt on all these priorities until next year, passing temporary extensions and further crowding the legislative calendar early in 2024.
Argentina not joining BRICS... Argentina, under the leadership of incoming President Javier Milei, has decided not to join the China-led BRICS bloc. This decision reflects a notable shift in the country’s foreign policy that is anticipated to take place during his presidency.
Russia again cuts wheat export tax... Russia’s wheat export tax for Dec. 6-12 will be 3,808.1 rubles ($42.35) per metric ton based on an indicative price of $253.20. That’s down from a rate of 3,820.2 rubles per metric ton the previous week and the third straight weekly decline.
Capital Economics: Canada’s economy shifts from recession to ‘bumpy landing’... Canada’s economic situation has shifted from a recession to what forecasting firm Capital Economics describes as a “bumpy landing,” at least for the time being. In the third quarter, the Canadian economy contracted significantly by 1.1% on an annualized basis. However, this decline was offset by a surprising and substantial upward revision for the second quarter, which shifted from a 0.2% decline to a 1.4% increase. This revision suggests that consumer spending did not decrease as much as previously thought. In the third quarter, household spending remained relatively stable. Capital Economics believes the sharp drop in the third quarter will likely be a one-time occurrence, with early indicators pointing toward a return to growth in the fourth quarter.
China’s smaller factories fairing much better than larger manufacturers... China’s Caixin/S&P Global manufacturing purchasing managers index (PMI) unexpectedly rose to 50.7 in November from a 49.5 reading in October. The Caixin/S&P Global manufacturing PMI, which focuses on smaller and privately owned firms have been above the 50.0 expansion level for five of the past eight months, in contrast to the official manufacturing PMI that has shown contraction for seven of the past eight months.
China's Evergrande creditors seek controlling stakes in new proposal... A group of offshore creditors to China Evergrande Group 3333.HK is asking for a controlling equity stake of the developer and two of its Hong Kong subsidiaries as part of company’s revised debt restructuring proposal, Bloomberg reported, citing people familiar with the situation. The group, which works as an ad hoc group of Evergrande's offshore creditors, made the request after the developer earlier this week made a new offer to repay their offshore debts, the source said. Reuters reported on Thursday that Evergrande had offered to swap some offshore debt into equity in the company and two Hong Kong-listed units and repay the rest with non-tradeable “certificates” backed by offshore assets. Evergrande has until a Hong Kong court hearing on Monday to present a "concrete" revised debt restructuring proposal for offshore creditors.
Euro zone factory downturn eased a touch in November... HCOB’s final euro zone manufacturing PMI, compiled by S&P Global, rose to 44.2 in November from October’s 43.1 and was above a preliminary estimate of 43.8. Still, the reading was far below the 50.0 level, signaling ongoing contraction within Europe’s manufacturing sector.
COP28 okays climate damage fund; U.S. contribution criticized... Delegates at the COP28 climate summit in Dubai officially approved a damage fund aimed at assisting countries most severely affected by the climate crisis. Several nations made substantial financial commitments to the fund, but the U.S. has faced criticism for its comparatively modest contribution, which is less than a fifth of what the United Arab Emirates pledged. The UAE and Germany pledged $100 million each, the U.K. committed £60 million, while the U.S. offered $17.5 million, and Japan contributed $10 million.
Futures drop triggers additional lower cash cattle trade... More cash cattle traded at lower prices on Thursday given the sharp drop in futures. So far this week, cash trade has been mostly $1.00 to $3.00 lower on a live basis and as much as $4.00 lower for the dressed market. With funds remaining in liquidation mode, both futures and the cash market are struggling to find a bottom.
Two more HPAI cases in Iowa... State and federal authorities confirmed two cases of highly pathogenic avian influenza (HPAI) in backyard mixed species flocks in Woodbury County, Iowa. Since October, the state has reported 15 cases of HPAI in commercial and backyard flocks.
Cash hog prices continue to weaken... The CME lean hog index is down another 18 cents to $71.35 (as of Nov. 29). December lean hog futures finished Thursday at a $2.575 discount to today’s cash quote. After strong gains yesterday, February futures are back to a small premium to the cash index.
Overnight demand news... Exporters reported no tenders or sales.
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. Cotton System Consumption and Stocks — NASS
- 2:00 p.m. Fats & Oils: Oilseed Crushings, Production, Consumption and Stocks — NASS
- 2:00 p.m. Grain Crushings and Co-Products Production — NASS
- 2:00 p.m. Peanut Prices — NASS
- 2:30 p.m. Commitments of Traders — CFTC
