First Thing Today | December 7, 2023

Good morning!

Grains firmer overnight... Early seller interest faded overnight, with corn, soybeans and wheat all trading solidly higher early this morning. As of 6:30 a.m. CT, corn futures are trading 2 to 3 cents higher, soybeans are 6 to 9 cents higher, SRW wheat futures are 2 to 4 cents higher, HRW is near unchanged and HRS wheat is mostly 3 to 4 cents higher. Front-month crude oil futures are modestly firmer and the U.S. dollar index is around 200 points lower this morning.

Weekly Export Sales Report out this morning... For the week ended Nov. 30, traders expect:

Brazil cuts soybean, corn crop forecasts... Conab now forecasts Brazil’s soybean crop at 160.18 MMT, down 2.24 MMT from last month. Corn production is estimated at 118.53 MMT, down 538,000 MT from November, including a safrinha crop of 91.24 MMT. Conab typically uses trendline projections for safrinha corn until February. The government’s crop forecasting agency noted “adverse conditions,” including hot and dry weather in center-west states and excessive rainfall in southern areas, for the cuts. Conab forecasts soybean production will fall 3.8% from year-ago in the center-west region, led by an expected 4.6% decline in top producer Mato Grosso. The southern region is expected to see soybean production increase 21.4% from last year, with a 68.1% surge forecast for Rio Grande do Sul, which was hurt by drought in 2022-23. Conab noted delays in soybean planting “open up uncertainties for second-crop (safrinha) corn.”

China’s soybean imports surge in November but less than expected... China imported 7.92 MMT of soybeans in November, up 53.5% from October and 7.8% above year-ago but lower than traders’ expectations due to slower clearing of cargoes at customs. Traders expect soybean imports to jump sharply in December, unless unloading delays at ports worsen. During the first 11 months of this year, China imported 89.63 MMT of soybeans, up 13.3% from the same period last year.

Chinese exports unexpectedly increase in November... China’s exports grew 0.5% from a year earlier to $291.93 billion in November, compared with a 6.4% fall in October and beating an expected 1.1% drop. This was the first increase in exports since April. Imports unexpectedly fell 0.6% to $223.54 billion, missing market forecasts for a 3.3% rise and reversing from a 3.0% rise the prior month. That left China with a trade surplus of $68.39 billion, up from $56.63 billion in October. The trade surplus with the U.S. narrowed to $29.8 billion from $30.82 billion in October.

China’s FX, gold reserves increase in November... China’s foreign exchange reserves rose to $3.172 trillion in November, up from the previous month’s 12-month low of $3.101 trillion and above market expectations of $3.12 trillion, as the dollar weakened against other major currencies. Throughout November, the yuan saw a 2.6% rise against the dollar, while the dollar depreciated by 3.1% against a basket of other major currencies. China’s gold reserves rose to $145.7 billion by the month’s end, up from $142.17 billion at the close of October.

India permits exports of non-basmati white rice for Nepal earthquake victims... India’s government granted a one-time exemption from “prohibition” to the Indian Rice Exporters Federation for the export of 20 MT of non-basmati white rice as a donation to earthquake victims in Nepal.

China says U.S. plan to limit access to EV credits violates WTO rules... China said Biden administration plans to limit Chinese content in batteries eligible for electric vehicle (EV) tax credits from next year violate international trade rules and will disrupt global supply chains. The plans will make investors in the U.S. EV supply chain ineligible for tax credits should they use more than a trace amount of critical materials from China, or other countries deemed a “Foreign Entity of Concern” (FEOC). “Targeting Chinese enterprises by excluding their products from a subsidy’s scope is typical non-market orientated policy,” said a commerce ministry spokesperson. “Many World Trade Organization members, including China, have expressed concern about the discriminatory policy of the U.S., which violates the WTO’s basic principles,” he said.

Euro zone economy stalls in Q3... The euro zone economy contracted 0.1% on a quarterly basis in the third quarter, marking a reversal from downwardly revised 0.1% growth in the preceding three-month period. It was the first quarterly decline in GDP since the final quarter of 2022. On an annualized basis, euro zone GDP was 0%, worse than the initial estimate of a 0.1% rise. This was the weakest economic performance since contractions in 2020, with GDP falling 0.4% in the bloc’s largest economy Germany.

China’s meat imports inch up from October but down sharply from year-ago... China imported 557,000 MT of meat during November, up 0.9% from October but down 16.4% from last year. Through November, China imported 6.82 MMT of meat, up 1.8% from the same period last year.

New cases of HPAI confirmed... USDA’s Animal and Plant Health Inspection Service (APHIS) confirmed new cases of highly pathogenic avian influenza (HPAI) in commercial poultry operations. These cases include two commercial broiler production operations in Stanislaus County, California, with a combined total of 494,300 birds affected. Additionally, a commercial turkey meat bird operation in Barron County, Wisconsin, with 113,800 birds, has also been impacted by HPAI.

Choice beef drops again but movement surges... Wholesale Choice beef prices dropped $3.19 on Wednesday and are down $6.47 over the past week, while Select firmed 77 cents. Packers moved a huge 235 loads of product in the spot market, building on the recent surge in retailer buying.

Cash hog index continues to drop but pace slows... The CME lean hog index is down another 17 cents to $69.43 (as of Dec. 5). That’s the smallest daily loss since Nov. 28, though the cash market is giving no signs the seasonal decline is imminent. December lean hog futures ended Wednesday $1.88 below today’s cash quote, while February hogs held a 13-cent discount.

Overnight demand news... South Korea purchased 138,000 MT of corn to be sourced from the U.S., South America or South Africa and 65,000 MT of optional origin feed wheat. Japan purchased 132,504 MT of milling wheat from its weekly tender, including 59,446 MT U.S., 33,788 MT Canadian and 39,270 MT Australian. Algeria tendered to buy up to 120,000 MT of Argentine corn. Egypt tendered to buy an unspecified amount of wheat from multiple origins. Indonesia tendered to buy 534,000 MT of optional origin long grain white rice.

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

• 7:30 a.m. Weekly Export Sales — FAS
• 10:00 a.m. Livestock and Meat International Trade Data — ERS