First Thing Today | January 11, 2024

Good morning!

Beans firmer, corn and wheat little changed overnight... Soybeans traded solidly higher overnight, while corn and wheat pivoted around unchanged in light trade. As of 6:30 a.m. CT, corn futures are trading fractionally higher, soybeans are 7 to 8 cents higher, winter wheat markets are mostly a penny lower and spring wheat is fractionally to a penny higher. Front-month crude oil futures are around $1.50 higher and the U.S. dollar is more than 100 points lower.

Weekly Export Sales Report out this morning... For the week ended Jan. 4, traders expect:

Exchange forecasts record Argentine corn crop... The Rosario Grain Exchange raised its Argentine 2023-24 corn production forecast by 3 MMT to a record 59 MMT. It raised the country’s soybean crop forecast by 2 MMT to 52 MMT.

China dethroned as top U.S. exporter by Mexico amid supply chain shifts... China, the top exporter to the U.S. since 2006, likely lost its position to Mexico in the past year. This shift in rankings is a consequence of changing dynamics and tensions between the two largest economies, reshaping global supply chains. We’ll have further details in “Evening Report.”

Global trade drops 1.3% on Red Sea attacks... Global trade declined 1.3% from November to December 2023 as militant attacks on merchant vessels in the Red Sea led to a plunge in the volumes of cargo transported in that key region, German economic institute IfW Kiel said. Currently around 200,000 containers are being transported via the Red Sea daily, down from some 500,000 per day in November. IfW Kiel’s trade indicator for December showed European Union exports and imports down 2% and 3.1%, respectively. The U.S. saw a 1.5% drop in exports and a 1% decline in imports.

U.S., allies mulling response to Houthi attacks in Red Sea... The New York Times reports Pentagon officials have drawn up plans for striking bases in Yemen and facilities where boats used to attack ships appear to be moored, and London is also considering military action. American and British officials reported intercepting one of the largest barrages of missiles and drones from the Houthis. These attacks, conducted in support of Hamas in its conflict with Israel, have compelled major shipping companies to divert their vessels away from the Red Sea, resulting in worldwide disruptions, including increased prices for oil and other imported goods. The Biden administration indicated last week that it holds the Houthis accountable for these attacks. This has led some military officials to consider the possibility of launching retaliatory strikes on Houthi targets in Yemen. While Secretary of State Antony Blinken, currently touring the Middle East, stated there will be consequences for the Houthis’ actions, he did not provide further details.

Biden to send high-level delegation to Taiwan post-election... President Joe Biden plans to send a high-level delegation of former top officials to Taipei after the election in Taiwan on Saturday, which could complicate efforts by the U.S. and China to stabilize their strained relationship, the Financial Times (FT) reports. The delegation will be led by James Steinberg, a former Democratic deputy secretary of state, and Stephen Hadley, a former Republican national security adviser, sources told FT, which said sending such a delegation immediately after a presidential election is unusual and is likely to anger Beijing. The delegation also includes Laura Rosenberger, chair of the American Institute in Taiwan, to ensure clear communication with the winning and losing candidates about U.S. policy and the unofficial relationship between the U.S. and Taiwan.

Renewable energy surges, but global climate goals still far off... The International Energy Agency (IEA) reported a significant increase in the deployment of renewable energy in the past year, primarily driven by China, which contributed to a 50% rise in global renewable energy capacity. China more than doubled its solar capacity in 2023 and witnessed a 66% increase in wind power capacity from the previous year. The global growth, while promising, falls short of the UN-agreed target to limit global warming to 1.5°C compared to pre-industrial times. IEA Executive Director Fatih Birol emphasized the need for growth in emerging and developing countries, particularly in Africa, Latin America and other parts of Asia. IEA emphasized that fossil fuel demand needs to decline by 25% by the end of the decade to align with the goal of limiting global warming to 1.5°C, as outlined in the 2015 Paris Agreement. The current global temperature rise is already at least 1.1°C and 2023 was recorded as the hottest year on record.

IMF agrees to funds for Argentina... The International Monetary Fund (IMF) agreed to disburse $4.7 billion to Argentina despite the country’s failure to meet the terms of its $43 billion loan in recent months, offering a crucial lifeline to new libertarian President Javier Milei as he pursues major reforms. The money includes a $3.3 billion tranche of the loan that had been due to be disbursed in November, which was delayed by Milei’s inauguration in December, and $1.4 billion IMF agreed to disburse ahead of schedule. The decision by the fund’s technical staff on Wednesday must be reviewed by its board, which will take several weeks. IMF officials who visited Argentina this week said Milei’s team had “moved quickly and decisively to develop and begin to implement a strong policy package to restore macroeconomic stability and are fully determined to bring the current program back on track.”

Japan to end negative interest rate policy?... Former Bank of Japan board member Makoto Sakurai suggests the central bank is prepared to end the world’s last remaining negative interest rate policy. The most probable timing for this change is in April, and it may depend on specific economic data triggers. However, what might surprise market observers is the gradual and distinct approach Japan’s central bank intends to take during its normalization process after the initial interest rate hike. This approach will differ from what traders have seen in the U.S. and Europe, according to Sakurai.

Slow developing cash cattle market... Cash cattle are expected to trade higher for a fourth consecutive week, though the winter storm with another wave coming, along with arctic temps this time has created uncertainty. After temporarily shuttering or reducing slaughter runs, plants are trying to figure out how big of a Saturday kill they want to run, especially given highly negative margins, which will impact their buying decisions for cash cattle this week.

More signs of a seasonal low for cash hogs... The CME lean hog index is up 63 cents to $66.46 (as of Jan. 9) and is now $1.41 off the Jan. 1 low. Traders are seemingly gaining more confidence the cash market has posted a seasonal low as they have been regular buyers on intraday weakness in futures during the move off the recent lows.

Overnight demand news... Japan purchased 89,260 MT of milling wheat in its weekly tender, including 57,430 MT U.S. and 89,260 MT Canadian.

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
• 11:00 a.m. Meat Price Spreads — ERS
• 2:00 p.m. U.S. Agricultural Trade Data Update — ERS
• 2:00 p.m. Hogs and Pigs - Statistical Bulletin — NASS