First Thing Today | January 2, 2024
Good morning!
No overnight grain trade... There was no overnight trade in the grain markets due to the New Year’s holiday. Grain and livestock markets will resume trading at 8:30 a.m. CT. Front-month crude oil futures are more than $1.50 higher and the U.S. dollar index is nearly 700 points higher this morning.
Cordonnier lowers Brazilian soybean crop forecast... South American crop consultant Dr. Michael Cordonnier cut his Brazilian soybean production forecast by 2 MMT to 151 MMT, citing low yields on early harvested soybeans. Recent rains across central and northeastern areas of the country came too last for early maturing soybeans but will benefit later maturing fields. Cordonnier left his Brazilian corn crop forecast at 117 MMT. He also left his Argentine crop estimates at 50 MMT for soybeans and 53 MMT for corn.
Brazil sees improved though variable rainfall... Holiday weekend rainfall was highly variable with some of the greatest amounts in eastern Mato Grosso and western Goias. World Weather Inc. says rainfall is expected to favor northern areas of the country over the next 10 days, while south-central and southern locations will see more sporadic rains. Argentina will be drier this week, which will benefit areas in eastern parts of the country that have been too wet recently.
Slight decline in soy crush expected... Analysts expect USDA to report soybean crush totaled 200 million bu. in November, which would be down 0.7% from the all-time record in October but up 5.5% from last year. Corn-for-ethanol use is expected to total 451.0 million bu., which would be down 2.3% from October but up 0.1% from last year.
Heightened tensions in Red Sea... Iran dispatched a warship to the Red Sea over the holiday weekend after the U.S. Navy destroyed three Houthi boats. White House National Security Spokesperson John Kirby said the U.S. was not seeking a wider conflict in the Middle East or with the Houthis. “We’re going to do what we have to do to protect shipping” he told ABC’s Good Morning America on Sunday, adding the U.S. had “significant national security interests in the region.” Meanwhile, Denmark’s Maersk shipping company will decide today whether to resume sending vessels through the Suez Canal via the Red Sea or redirect them around Africa following a weekend attack on one of its ships.
India’s food-security challenges have global implications... India’s reliance on government price controls and trade policies has made its food production highly susceptible to the effects of climate change. This issue is significant not only because India has a massive population to feed but also because it is a major player in the international food export market. The Wall Street Journal examines (link) the intricacies of India’s tightly regulated agricultural market and the complex political dynamics surrounding its food-pricing system.
The week ahead in Washington... This is usually one of the quietest weeks in Washington, as lawmakers remain on recess, with the Senate returning Jan. 8 and the House on Jan. 9. The economic highlights this week will be Wednesday’s release of minutes from the Fed’s December monetary policy meeting and Friday’s employment data for December.
Mixed signals for China’s manufacturing sector... China’s official manufacturing purchasing managers index (PMI) fell to 49.0 in December, the third straight month of contraction in factory activity and the steepest decline in six months. The Caixin/S&P Global manufacturing PMI rose to 50.8, the second straight month of expansion within China’s smaller and privately owned factories and the highest reading since August.
Euro zone PMI expands slightly but factory sector still in contraction... The HCOB euro zone manufacturing PMI increased to 44.4 in December from the preliminary estimate of 44.2. However, the sector remained in contraction, with output and job losses continuing for the seventh consecutive month.
California’s Prop 12 officially becomes law... Proposition 12, which was passed by California voters in 2018, imposes strict regulations on the sale of food products derived from farm animals that are not raised according to specific standards. While the egg and veal requirements of Prop 12 had already gone into effect, the pork provisions were initially delayed to allow non-compliant pork to clear the supply chain. As of Jan. 1, 2024, only compliant animal products can be sold in California. The pork industry opposed Proposition 12 and took the legal battle to the Supreme Court, which ultimately ruled that states have the authority to restrict meat sales. Since the passage of Proposition 12 in California, 14 other states have enacted similar laws.
Cash cattle traded higher... Cash cattle prices firmed last week, though trading volume was relatively light. Packers have fresh contract supplies available to start the new month, which could limit their willingness to actively bid for cattle, though there’s a general belief they are short-bought on needs coming out of the holidays.
Cash hog prices still searching for a seasonal low... The CME lean hog index is down 22 cents to $65.35 (as of Dec. 28), extending the seasonal slide. February lean hog futures ended last Friday $2.625 above the cash index, suggesting traders anticipate a low to posted early in the new year.
Holiday weekend 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
- 10:00 a.m. Export Inspections — AMS
- 2:00 p.m. Cotton System Consumption and Stocks — NASS
- 2:00 p.m. Fats and Oils: Oilseed Crushings, Production and Consumption — NASS
- 2:00 p.m. Grain Crushings and Co-Products Production — NASS
