First Thing Today | December 21, 2023

Good morning!

Quiet overnight grain trade... Corn, soybeans and wheat traded in narrow ranges during the overnight session. As of 6:30 a.m. CT, corn futures are trading mostly a penny higher, soybeans are 1 to 2 cents lower and wheat futures are 4 to 6 cents higher. Front-month crude oil futures are around 50 cents lower and the U.S. dollar index is down nearly 400 points.

Weekly Export Sales Report out this morning... For the week ended Dec. 14, traders expect:

Strategie Grains expects slightly smaller EU wheat crop... European Union soft wheat production is expected to decline next year, due mainly to wet weather in France. In its initial projections for the 2024-25 crop, Strategie Grains forecast soft wheat production at 124.8 MMT, down from 125.9 MMT this year. The firm lowered its estimate for the total soft wheat area to 21.2 million hectares, which would be down 2.4% from 2023-24. The area sown with soft wheat for 2024-25 in France is set to fall to its lowest level since at least 2000 at 4.24 million hectares two months of heavy rain took their toll on crops, consultancy Argus Media said on Wednesday.

Greece to send a frigate to Red Sea to protect shipping... Greece said on Thursday it would send a naval frigate to the Red Sea to protect shipping after attacks by Yemen's Iran-backed Houthi group. On Wednesday, the Greek Shipping Ministry advised commercial ships sailing in the Red Sea and the Gulf of Aden to avoid Yemeni waters. The U.S. on Tuesday launched a multinational operation to safeguard commerce in the Red Sea from attacks by Houthi militants. Yemen’s Houthi rebels vowed to continue targeting ships in the Red Sea, despite these efforts.

India’s exports could drop more than $4 billion due to shipment curbs... India’s exports could drop by about $4 billion to $5 billion this year due to trade restrictions on wheat, rice and sugar, a person familiar with the matter told Reuters. The source also said basmati rice exports from India may be impacted if attacks in the Red Sea by the Houthi group persists, noting longer shipping routes could lift prices 15% to 20%.

Indonesia makes rice purchases... Indonesia’s food procurement agency Bulog confirmed it had filed a tender earlier this month for more than 500,000 MT of rice as part of the import quota for 2023. The purchases will be from Thailand, Vietnam, Pakistan and Myanmar, with more than 300,000 MT sourced from Thailand. Indonesia is said to be seeking 1 MMT of rice from the private sector and 1 MMT in government-to-government deals. Bulog said last month the government would set next year’s rice import quota at 2 MMT, down from this year’s quota of 3.8 MMT.

EU to investigate Chinese biodiesel dumping allegation... The European Union said it would begin an anti-dumping investigation into biodiesel imports from China, which the bloc’s industry says has slashed domestic production. The probe will take up to 14 months, with the possibility of provisional duties being imposed within eight months. In addition to the possible transit of Indonesian biodiesel, there were structural imbalances in biodiesel trade with China, with prices not reflecting the advanced or waste-based biofuel categories that most cargoes have been classified as, producer group the European Biodiesel Board, which requested the investigation. This investigation is separate from another ongoing EU inquiry into whether Indonesia has been circumventing EU duties on biodiesel by routing shipments through China and the UK.

U.S. may raise tariffs on Chinese EVs, other goods... The potential increase in tariffs could come as the U.S. is trying to limit reliance on Asia’s biggest economy and shield its own green industry, the Wall Street Journal reports. Chinese electric vehicles (EVs) are already subject to a 25% tariff, which has helped prevent subsidized Chinese automakers from making inroads into the U.S. market.

China to help manage exchange rates to support exports... China’s commerce ministry said it will work with the central bank and government to manage exchange rate fluctuations in 2024, should the yuan start to rebound against the dollar and make already weak Chinese exports more expensive. “We will work with the People’s Bank of China, State Administration of Foreign Exchange and other departments... to effectively deal with the risk of exchange rate fluctuations,” said a commerce ministry spokesperson. “(We) will support enterprises through hedging and cross-border renminbi settlement,” she added.

China to cease exports of various rare-earth technologies... This move has the potential to create challenges for the U.S. and other Western countries in their efforts to secure essential raw materials for various strategic purposes. Rare-earth elements, consisting of 17 different elements, are crucial components in a wide range of applications, including wind turbines, military equipment and electric vehicles. By restricting the export of these materials, China could exert control over the global supply chain, making it more difficult for other nations to access these critical resources for their technological and industrial needs.

China’s major banks to cut time deposit rates on Friday... Some major Chinese commercial banks will cut time deposit rates on Friday, three sources with knowledge of the matter told Reuters, providing room to reduce lending costs amid the faltering economy. Rates for 1-year and 2-year time deposits will be cut by 10 basis points (bps) and 20 bps, respectively, and rates for 3- and 5-year time deposits will be cut by 25 bps, the sources said. In addition, lenders will cut rates for 1-year and 2-year large-scale certificates of deposit (CDs) by 10 bps and 25 bps, respectively, and cut rates for 3-year and 5-year large-scale CDs by 30 bps, the sources said. State-owned Industrial and Commercial Bank of China announced it would cut interest rates on some deposits from Friday.

China’s FDI down 10% through November... Foreign direct investment (FDI) into China declined 10% from year-ago to 1.04 trillion yuan ($145.51 billion) in the first eleven months of 2023, a sign foreign investors have not fully returned to the country after strict Covid restrictions and weak sentiment about the Chinese economic recovery. New actually utilized foreign capital decreased in manufacturing (-2.1%) and services (-15.9%).

More HPAI finds in Kansas, California, South Dakota... USDA’s Animal and Plant Health Inspection Service (APHIS) confirmed highly pathogenic avian influenza (HPAI) in additional commercial operations in several states that have already reported cases. Cases confirmed Dec. 18 included Sonoma County, California (497,700 commercial table egg layer birds) and Edmunds County, South Dakota (1,000 birds at a commercial upland game producer). Dec. 19 confirmations announced by APHIS included Muskegon County, Michigan (47,900 commercial turkey meat birds); Rice County, Kansas (800,000 commercial table egg layer birds); and Sonoma County, California (3,500 commercial duck meat birds).

Cash cattle hopes building... Cash sources noted feedlots passed on a smattering of steady cash cattle bids on Wednesday as they were encouraged by strong gains in futures. That suggests this week’s eventual trade will take place at higher prices. Packers are thought to be short-bought on slaughter needs, despite upcoming holiday-shortened production schedules and freshly available contract supplies when the calendar flips to January.

Cash hog index ticks up... The CME lean hog index firmed 17 cents to $66.54 (as of Dec. 19). While it’s  going to take stronger and sustained price gains in the cash index to convince traders the seasonal low is in place, the $3.685 premium February futures held to today’s cash quote on Wednesday’s close signals they anticipate a cash market bottom is close.

Overnight demand news... South Korea purchased 16,000 MT of non-GMO soybeans, with 12,000 expected to be sourced from the U.S. and 4,000 MT from Canada. Thailand passed on a tender to buy 197,300 MT of optional origin feed 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

• 7:30 a.m. Weekly Export Sales — FAS
• 8:00 a.m. Food Price Outlook — ERS
• 2:00 p.m. Chickens and Eggs — NASS
• 2:00 p.m. Livestock Slaughter — NASS
• 2:00 p.m. Poultry Slaughter — NASS