First Thing Today | January 24, 2024
Good morning!
Grains mildly firmer overnight... Corn, soybeans and wheat modestly extended recent corrective gains during the overnight session. As of 6:30 a.m. CT, corn futures are trading mostly a penny higher, soybeans are steady to fractionally higher, winter wheat markets are 4 to 6 cents higher and spring wheat is 1 to 3 cents higher. Front-month crude oil futures are modestly weaker, while the U.S. dollar index is around 450 points lower.
U.S. military strikes two Houthi anti-ship missiles in Yemen... The U.S. military carried out more strikes in Yemen early on Wednesday, destroying two Houthi anti-ship missiles that were aimed at the Red Sea and were preparing to launch, the U.S. military said in a statement. The strikes are the latest against the Iran-backed group over its targeting of Red Sea shipping, and followed a larger round of strikes a day earlier. The Houthis, who control the most populous parts of Yemen, have said their attacks are in solidarity with Palestinians as Israel strikes Gaza. The attacks have disrupted global shipping and escalated geopolitical concerns in the Middle East.
U.S. asks China to urge Iran to curb Red Sea attacks by Houthis... The U.S. repeatedly has asked China to urge Tehran to rein in the Iranian-aligned Houthi rebels attacking commercial ships in the Red Sea but has seen little sign of help from Beijing, the Financial Times (FT) reported, citing U.S. officials. White House national security adviser Jake Sullivan and his deputy, Jon Finer, discussed the issue in meetings this month in Washington with Liu Jianchao, head of the International Liaison Department of China's Communist Party, FT said. U.S. Secretary of State Antony Blinken also raised the issue with his Chinese counterpart, the report said, adding U.S. officials believe there was little evidence that China had put any pressure on Iran to restrain the Houthis beyond a mild statement Beijing issued last week.
SovEcon raises 2024 Russian wheat crop forecast... Black Sea consulting firm SovEcon raised its 2024 Russian wheat production forecast 900,000 MT to 92.2 MMT, citing favorable weather conditions. At that level, production would be down 600,000 MT (0.6%) from last year’s crop. SovEcon says due to the abundant snow cover, the first significant cold snap of the season this month had minimal impact on the winter crops. SovEcon noted: ““Abundant Russian supplies were a big bearish story for the global wheat market in 2023. With an early good crop outlook and almost record-high stocks, there is a chance that it will remain the case in 2024 as well. Typically, the market starts to trade new-crop prospects in the northern hemisphere starting from the end of the first quarter.”
Refiners petition EPA for rework of RINs... CVR Energy has petitioned EPA to rework the regulations covering Renewable Identification Numbers (RINs) under the Renewable Fuel Standard (RFS), calling for limits on who can trade the credits. The petition argues independent refiners are forced to buy RINs as they do not have the blending capacity to generate the credits to show compliance with RFS requirements. “The companies are captive buyers in an illegal RIN market where RINs trade at hundreds of times their production cost for the benefit of market speculators, criminals, large retail chain owners and RIN-long large vertically integrated refiners,” CVR Energy said. The company argues that restricting those that can participate in the market would lower RIN prices and lower fuel costs to consumers. CVR Energy is seen using a federal appeals court ruling which rejected a part of EPA’s justification for the current RIN structure. The arguments have been rejected by prior administrations.
Argentina leads global food inflation in 2023... Argentina led global food inflation last year, topping Lebanon and Venezuela. Argentina’s food inflation surged 211%, followed by 193% for Venezuela and 192% for Lebanon. U.S. food prices rose about 5.8% annually last year.
India plans to raise sugar can floor price... India is planning an 8% increase for the floor price that mills must pay for sugar cane in 2024-25 season starting Oct. 1, a government source told Reuters. New Delhi is considering fixing the Fair and Remunerative Price (FRP) of sugar cane at 340 rupees per 100 kg for next season, up from this year's 315 rupees for a basic recovery rate of 10.25%, the source said.
China announces biggest RRR cut in more than two years... China’s central bank will cut the amount of cash banks must hold as reserves from Feb. 5 in an effort to shore up its economy. The People’s Bank of China cut the reserve requirement ratio (RRR) for all banks by 50 basis points (bps), a move that would free up 1 trillion yuan ($139.45 billion) to the market. It is the biggest such cut since December 2021 and follows earlier 25-basis-point RRR cuts in March and September last year. The RRR cut was bigger than expected but analysts say more stimulus is needed to shore up the economy.
Euro zone business activity contracts again in January... HCOB’s preliminary euro zone Composite purchasing managers index, compiled by S&P Global, rose to 47.9 this month from December’s 47.6 reading but that marked its eighth month below the 50.0 level separating growth from contraction. Demand continued to fall while price pressures rose due to tensions in the Red Sea. The manufacturing outlook did improve somewhat but remained in contractionary territory and was partly offset by a steeper decline in the bloc’s dominant services industry.
Cold Storage Report out this afternoon... USDA will detail frozen meat stocks at the end of December. The five-year average is an 8.9-million-lb. increase in beef stocks and less than a million-lb. rise in pork stocks during the month.
Beef packer margins back in the black... Wholesale beef prices firmed another $2.99 for Choice cutout and $1.80 for Select on Tuesday. That pushed cutting margins into the black, which should give packers incentive to more actively bid for market-ready supplies.
Cash hog index continues to climb... The methodical climb in the cash hog index from the seasonal low continues. The CME lean hog index is up another 35 cents to $68.75 (as of Jan. 22) and has now $3.70 off the low at the beginning of this month. February lean hog futures extended their premium to the cash index to $4.55 as of Tuesday’s close.
Overnight demand news... South Korea purchased 136,000 MT of corn expected to be sourced optionally from the U.S., South America or South Africa. Taiwan tendered to buy 89,650 MT of U.S. milling wheat. Jordan made no purchases in its tender to buy up to 120,000 MT of optional origin milling 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
- 9:30 a.m. Weekly Ethanol Production — EIA
- 2:00 p.m. Broiler Hatchery — NASS
- 2:00 p.m. Coffee — NASS
- 2:00 p.m. Cold Storage — NASS
- 2:00 p.m. Milk Production — NASS
- 2:00 p.m. Pecan Production Survey — NASS
