First Thing Today | January 31, 2024
Good morning!
Grains weaker overnight... Corn, soybeans and wheat pulled back from Tuesday’s strong corrective gains during overnight trade. As of 6:30 a.m. CT, corn futures are trading around a penny lower, while soybeans and wheat are 6 to 8 cents lower. Front-month crude oil futures are nearly $1.00 lower and the U.S. dollar index is more than 100 points higher.
Market focus will be on clues for when Fed rate cuts will begin... The Federal Open Market Committee (FOMC) is widely expected to hold interest rates unchanged at the conclusion of the two-day monetary policy meeting this afternoon, though traders will be looking for indications of when rate cuts will begin. Special attention will be paid to wording in the post-meeting statement and Fed Chair Jerome Powell’s press conference.
Ag attaché raises Ukraine’s corn, wheat export forecasts... The USDA attaché in Ukraine reported, “By the end of 2023, Ukraine independently resumed operations of its major marine ports on the Black Sea, Chornomorsk, Odesa, and Pivdennyi. It increased the throughput of the Danube River export routes. The total volume of grain exports (wheat, corn, and barley) soared from around 2 MMT in September 2023 to 5.2 MMT in December 2023. Based upon the high December 2023 export rate, if Ukraine maintains average monthly exports of around 4 MMT for all grains combined for the remainder of the marketing year, they will export the vast majority of the harvest and reach the export estimates” of 29.2 MMT for corn (up 8% from 2022-23) and 17.7 MMT for wheat (up 3% from 2022-23). In the January WASDE Report, USDA forecast Ukraine’s 2023-24 exports at 21 MMT for corn and 14 MMT for wheat.
EU plans extension of Ukrainian import duty suspension, ‘emergency brake’ on sensitive products... The European Commission is planning to extend the suspension of import duties for Ukrainian exports until June 2025, a one-year extension. However, the commission is also proposing an “emergency brake” mechanism for sensitive products like poultry, eggs and sugar. This brake would allow the imposition of tariffs if imports exceeded their average levels from 2022 and 2023. Member countries would have the flexibility to implement temporary measures if their markets faced disruptions due to a surge in imports, especially for grains and other products. Additionally, the commission is suggesting an exemption for farmers in the EU from the requirement to maintain a minimum level of fallow land to continue receiving farm supports. Instead, farmers could cultivate nitrogen-fixing crops like lentils or peas or other crops between plantings of their main crops, without applying plant protection products.
China’s factory activity contracts again... China’s official purchasing managers index (PMI) rose to 49.2 in January from 49.0 in December, though that was the fourth straight month of contraction in factory activity, as Beijing struggled to spur economic recovery amid deflationary pressure, feeble demand and persistent weakness in the property sector. January’s new orders sub-index contracted for the fourth consecutive month, while the new export orders index shrank for the 10th straight month.
China unveils new property support measures amid mounting concerns... Two of China’s major cities, Suzhou and Shanghai, followed Guangzhou in easing home-buying restrictions, official media reported on Tuesday, in an effort to boost demand from homebuyers. In another support measure, a loan worth 330 million yuan ($46 million) to a state-backed development was approved just a few working days after the government announced the “project whitelist” mechanism, the official Securities Times reported. Under the mechanism, city governments should provide a list of local property projects suitable for financing support, and coordinate with local financial institutions to meet the financing needs of these projects. The measures come amid mounting concerns about the liquidation of development giant Evergrande.
China's major state banks defend yuan as stock market slides... China’s major state-owned banks were heavy sellers of dollars on Wednesday, three people with direct knowledge of their activity told Reuters, steadying the yuan as it came under pressure. One of the sources said the selling was “very forceful” to defend the yuan at around 7.1820 per dollar in the onshore spot market. The state bank actions come as the yuan faces renewed downside pressure from foreigners’ rush out of China’s sinking equities market and a globally resurgent U.S. dollar. With a 1% fall, the yuan is headed for its largest monthly drop versus the dollar in five months and the blue-chip equity index notched a record sixth consecutive monthly loss on Wednesday.
House set to vote today on $78 billion bipartisan tax package... House Speaker Mike Johnson (R-La.) leading the effort on the measure despite facing opposition from some centrist Republicans, largely from New York. The package was negotiated with Senate Democrats and will be considered under the suspension of the rules, necessitating a two-thirds majority for passage. The package gained strong bipartisan support in the House Ways and Means Committee with a 40-3 vote, which is crucial for its progress in the House. However, there are concerns among Republicans about certain provisions in the package, particularly its failure to address the state and local tax deduction (SALT) cap. While the package includes the continuation of the child tax credit, some Democrats are disappointed it does not expand the credit further.
Slight increase ERP Phase 2 payments... Payments under Phase 2 of the Emergency Relief Program (ERP) rose from $879.14 million to $880.25 million as of Jan. 28. However, the number of payment recipients remained the same at 10,227. Despite this change, total ERP payments remained at $8.33 billion. There is no information available yet regarding ERP payments for 2022.
USDA concludes national milk marketing order pricing hearing... USDA has concluded its National Federal Milk Marketing Order pricing formula hearing, marking the first update to the system regulating minimum milk prices for farmers in nearly two decades. This hearing has highlighted the divisions within the dairy industry, leading some dairy cooperatives to exit a major dairy trade group. The next step involves putting the proposed changes to a vote among farmers, potentially bringing significant alterations to how dairy farmers are compensated. The hearing took place over several months in Carmel, Indiana, where various stakeholders, including dairy groups, farmers and dairy processors, testified on 21 different proposals. USDA spokesperson Allan Rodriguez mentioned the department is currently working through the necessary steps before the decision is voted on by dairy farmers.
China reports human death from bird flu... China on Wednesday reported the death of a 63-year-old woman due to an infection of mixed H3N2 and H10N5 avian influenza. The woman from Anhui province died on Dec. 16 due to the severity of the disease. “The outbreak is an episodic cross-species transmission from bird to humans,” the National Disease Control and Prevention Administration said. The risk of the virus infecting people is low, and no human-to-human transmission has occurred, it added.
Cattle Inventory Report out this afternoon... Analysts polled by Urner Barry expect USDA to show the U.S. cattle herd 1.8% below year-ago as of Jan. 1 at roughly 87.7 million head in this afternoon’s Cattle Inventory Report. If realized, that would be the smallest herd dating back to 1951. The annual calf crop is expected to be down 2.4% to just under 33.0 million head, which would mark the lowest calf crop on record since 1941. Beef replacement heifers will be a key category, as pre-report estimates range from a decline of 2.7% to a rise of 4.1% from the year-ago level.
Beef movement builds as wholesale prices drop... Wholesale beef prices dropped $3.35 for Choice and $1.77 for Select on Tuesday, but movement increased to 134 loads, nearly as much as the two previous days combined. That signals there’s solid underlying retailer demand not far below the recent ceiling levels of $300.00 for Choice and $290.00 for Select.
Cash hog rallies builds, pork continues to pause... The CME lean hog index firmed another 88 cents to $71.48 as of Jan. 29, marking the biggest daily gain during this month’s seasonal rally. While the cash index continues to strengthen, the pork cutout value dropped 52 cents on Tuesday as primal bellies fell $9.35, more than offsetting gains in all other cuts. The cutout remained stalled in the upper $80.00 area.
Overnight demand news... Indonesia purchased 500,000 MT of rice, with the bulk expected to be sourced from Vietnam and smaller amounts from Pakistan and Myanmar.
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
- 1:00 p.m. FOMC Meeting Concludes — Fed
- 2:00 p.m. Agricultural Prices — NASS
- 2:00 p.m. Broiler Hatchery — NASS
- 2:00 p.m. Capacity of Refrigerated Warehouses — NASS
- 2:00 p.m. Cattle — NASS
- 2:00 p.m. Sheep and Goats — NASS
