First Thing Today | December 18, 2023
Good morning!
Grains weaker to start the week... Corn modestly favored the downside overnight, while soybeans and wheat failed to sustain early price strength and have weakened this morning. As of 6:30 a.m. CT, corn futures are trading 1 to 2 cents lower, soybeans are 2 to 3 cents lower, SRW wheat is 6 to 7 cents lower, HRW wheat is 10 to 11 cents lower and HRS wheat is mostly 8 cents lower. Front-month crude oil futures are around 50 cents higher and the U.S. dollar index is trading just below unchanged.
Crop stress to continue in Brazil early this week before expected relief... The hot and dry conditions that stressed crops in central and northeastern Brazil during the weekend will continue early this week. Rains and cooler temps are expected to move into these areas of the country by midweek and continue periodically over the next 10 days. Mostly favorable conditions are expected across southern Brazil, Argentina, Paraguay and Uruguay during the next 10 days.
Drought slows Brazilian fertilizer demand... Drought in central Brazil is causing farmers to delay fertilizer purchases for the safrinha corn-planting season, executives told Reuters. Also, Brazil’s soybean harvest will be delayed and that will push a portion of safrinha corn planting past the ideal window. As of early December, farmers had purchased only 60% of their estimated fertilizer needs in the safrinha corn-producing states of Parana and Mato Grosso, compared with the normal 80% at this time of year, said a market development director at Oslo-based Yara’s Brazil unit.
Shipping companies suspend cargoes through Red Sea... Many shipping companies have suspended cargoes through the Red Sea after missile attacks by the Houthis, an Iran-backed Yemeni militant group. The attacks are a mark of the group’s intensifying assaults on the shipping lane. The Houthis claim to target ships heading toward Israel. One-tenth of globally traded seaborne oil transits through the Bab al-Mandeb strait, a narrow waterway between Yemen and the Horn of Africa.
China’s Nov. corn imports record-large... China imported a record 3.59 MMT of corn during November, customs data showed, despite this year’s record domestic crop. The November import volumes were higher than expected, mainly because of quick loading from Brazil and some from Ukraine, according to Shanghai JC Intelligence Co. In the first 11 months of this year, China’s corn imports totaled 22.18 MMT, up 12.3% from the same period last year.
Russia not interested in restarting Black Sea grain deal... Russia has no interest in restarting the Black Sea grain deal, RIA news agency reported, citing the country’s ag minister Dmitry Patrushev. He added this is to a large extent a political decision, but Russia will continue to export its grain, as it has its buyers. Russia says it quit the deal in July because the arrangement was not delivering grain to the poorest countries, and because it still faces barriers to its own exports of grain and fertilizer.
Odds shrinking for new farm bill in early 2024... Disputes over fund and food/nutrition issues have been lingering hurdles for getting a new farm bill. But another major development has added a potential delay – New York redistricting. A court decision out of New York boosted Democrats in drawing new election lines. But an aggressive Democratic gerrymander would spur litigation, which in turn would delay final action. Also, an abortion-rights initiative could add to turnout. Several vulnerable GOP lawmakers are now at more risk of losing their seats. If so, that puts Democrats closer to retaking control of the House in 2025... and could make farm-state Democrats want to wait until then to finish a new farm bill.
The week ahead in Washington... The House is out until Jan. 9, while the Senate remains in session for a possible framework agreement on a border security/Ukraine aid package, but as of Sunday evening, no agreement was reached. The economic focus this week will be Friday’s personal consumption expenditures (PCE) price index for November. The core PCE price index, the Fed’s preferred inflation gauge, is expected to rise 3.4% from year-ago. USDA will release its Hogs & Pigs, Cattle on Feed and Cold Storage Reports on Friday afternoon.
China’s economic conditions to improve in 2024... China’s economy is expected to see more favorable conditions and more opportunities than challenges in 2024, state media said citing officials of the Chinese Communist Party’s finance and economy office. Macroeconomic policies will continue to provide support for economic recovery, Xinhua news reported in a detailed readout of the annual Central Economic Work Conference held Dec. 11-12, during which top leaders set economic targets for the following year. Still, headwinds persist in the domestic economic cycle as demand, consumption and enterprise investment remain weak. Next year, party officials said China will look to shift from a post-pandemic recovery to sustained consumption growth. The effects of this year’s treasury bond issuance, cuts in interest rates, tax and fee cuts and other policies will continue into next year, the report said. China would also continue to monitor its battered real estate market and meet the reasonable financing needs of real estate companies.
China’s Nov. pork imports down sharply from year-ago... China imported 90,000 MT of pork during November, unchanged from the previous month but 48.1% less than last year. During the first 11 months of this year, China imported 1.46 MMT of pork, down 6.3% from the same period last year.
Hong Kong suspends some U.S., Canadian poultry meat imports due to HPAI... Hong Kong suspended imports of poultry meat and products from areas in the U.S. and Canada affected by highly pathogenic avian influenza (HPAI).
Cattle market still searching for a low... Cattle futures posted modest corrective gains last week but remain in the steep downtrend from the September highs. Cash cattle prices fell for a sixth consecutive week. With packers facing upcoming holiday-shortened kill schedules, they aren’t expected to be active with bids, though they have increased slaughter rates the past couple weeks.
Cash hog index continues seasonal slide... The CME lean hog index is down another 60 cents to $67.15 (as of Dec. 14) and now $14.73 below last year at this time. February lean hog futures posted strong gains late last week and finished Friday $4.75 above today’s cash quote. While that suggests traders anticipate a seasonal bottom soon, it also likely limits near-term upside potential until the cash market signals a low is in place.
Weekend demand news... Saudi Arabia purchased 1.353 MMT of optional origin milling wheat. Algeria tendered to buy 200,000 MT of Argentine corn and 70,000 MT of optional origin soymeal.
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
- 2:00 p.m. Milk Production — NASS
