First Thing Today

Posted on Thu, 12/19/2019 - 06:40

Good morning!

Some pressure on corn and soybeans overnight… Corn futures saw two-sided action overnight and are steady to fractionally lower as of 6:35 a.m. CT. Soybean futures are down 4 to 5 cents. Winter wheat futures are posting gains of 2 to 4 cents, with spring wheat up 1 to 2 cents. The U.S. dollar index is marginally lower, with crude oil posting similar gains.

Expectations for today’s Weekly Export Sales Report…


2019-20 (in MT)

2020-21 (MT)

















Phase 1 agreement more detailed than thought, ag purchases may not be evenly distributed between years… U.S. government trade advisory panel members inform that the pending Phase 1 accord is far more detailed than what they thought, with specific and varying dates on China’s fulfillment of the terms of what some said were 27 pages of ag-specific language in the 86-page document. The sources also said that while China committed to purchase additional U.S. farm products over a two-year timeframe ($16 billion annually above a base of $24 billion for a total of $40 billion annually and $80 billion over two years), those purchases may not be equally spread out, with more products likely being bought the second year versus the initial year of the accord. Phase 1 also lays out specific reasons that will provide China the ability to temper its committed purchases, including for drought and other factors, sources advise.

China is signaling the details of Phase 1 will not be made public until the deal is signed… Ministry of Commerce spokesman Gao Feng says the two sides are in close communication, but said there was no specific information he could provide on the deal. "After the official signing of the deal, the content of the agreement will be made public," Gao said. In a regular news briefing Wednesday, Chinese Foreign Ministry spokesperson Geng Shuang repeatedly dodged questions on the terms of the Phase 1 trade deal, according to a transcript on its website.

China’s shopping list includes beef, pork, poultry, corn, wheat rice, tobacco, ethanol and DDGs… A look at China’s recent history of ag-related purchases worldwide may temper the bevy of private analysts who are skeptical that China will purchase the additional amount of U.S. farm products specified in the agreement. Last year, data shows China purchased a total of $124 billion of farm products from around the world. Included in that total is $5 billion of world beef purchases, with year-to-date beef purchases totaling $6 billion.  China is also expected to hike pork and poultry imports. Industry sources say China will become a $2 billion market for U.S. poultry, with nearly $850 million of that being chicken paws. China is also expected to buy corn, wheat and rice—crops embodied in a U.S. challenge of China at the World Trade Organization (WTO). Beijing is also expected to increase purchases of ethanol and its byproducts, as well as tobacco.

Chinese importers buy U.S. soybeans after receiving another round of tariff-free quotas… Chinese importers purchased at least two cargos of U.S. soybeans on Tuesday after receiving another round of tariff-free quotas for U.S. shipments, traders in both countries told Reuters. Some of those sources indicate China may have purchased at least six boatloads of U.S. soybeans, or around 400,000 MT. China’s latest duty-free quota is for 10 to 15 vessels, or between 600,000 MT and 1.05 MMT of the oilseed, according to two U.S. traders. Reuters’ trade sources say Chinese crushers will need about 1 MMT of U.S. soybeans before Brazilian supplies come available. U.S. soybeans are competitively priced through January, but after that Brazilian soybeans are the more attractive option. While the Phase 1 trade agreement between the U.S. and China will roll back existing tariffs, that measure has not yet been finalized.

Initial test of Chinese intentions: upcoming Chinese quotas… For 2019, China released tariff rate quotas (TRQs) for grains, including 7.2 MMT of corn, 9.64 MMT of wheat, 2.66 MMT of long grain rice and 2.66 MMT of medium-short grain rice. Those levels were unchanged from 2018. They have announced a TRQ for cotton in 2020 of 894,400 MT, opening application for the quota in late October.

German producers cut winter wheat acres… Germany sowed just 2.83 million hectares to winter wheat for harvest in 2020, the country’s statistics office said today. That represents a 7.1% decline from year-ago. Germany dodged the soggy sowing conditions that plagued much of western Europe, but producers nevertheless turned to other crops amid unattractive wheat prices. They hiked winter rapeseed sowings 11.8% from last year to 952,000 hectares. Germany is one of the EU’s biggest producers of rapeseed and its second largest wheat producer.

Egypt resumes cargo checks at port of origin… Egypt will once again allow traveling delegations of ag inspectors to check wheat shipments purchased during state tenders at the port of origin. Government inspectors had previously taken lavish trips at the expense of supply companies that helped smooth the way for passage of wheat. The cancellation of these trips in 2016 and shift to private companies handling inspections was thought to play into Egyptian rejections of shipments on shaky grounds. Traders say they are concerned that increased involvement of government officials in the wheat import process could again lead to cargo rejections. But the head of Egypt’s agricultural quarantine says that such trips would be optional and up to the supplier. Egypt’s next wheat tender will be closely monitored.

Corn-based ethanol production to double in 2019-20… Brazil’s production of corn-based ethanol will likely surge 114% in 2019-20 to 1.69 billion liters, the country’s statistics agency Conab reports. But this is still just a small portion of the country’s overall center-south ethanol production, which Conab now puts at 31.57 billion liters, up 3.46 MMT from its August forecast.

USMCA expected to easily clear the House today… The U.S.-Mexico-Canada Agreement (USMCA) will be ratified today by the U.S. House of Representatives, likely by a wide bipartisan margin. The AFL-CIO labor union sent out a legislative alert urging House members to vote for the trade accord. The U.S. Senate will vote early in 2020 on USMCA ratification, with wide expectations the chamber will follow the House in approving the trade pact. Mexico has already ratified USMCA; Canada is expected to do so in January 2020.

House of Representatives on Wednesday impeached Trump for abuse of power and obstruction of Congress… The article on abuse of power, which accused President Donald Trump of corruptly using the levers of government to solicit election assistance from Ukraine in the form of investigations to discredit his Democratic political rivals, passed 230 to 197. Republicans were united in opposition. On the second charge, obstruction of Congress, a third Democrat joined Republicans in opposition. The vote was 229 to 198. Republicans were united in opposition. The only Democratic dissenters from the abuse of power charge were Representatives Collin Peterson of Minnesota and Jeff Van Drew of New Jersey, a freshman who has announced that he will switch parties and become a Republican. Representative Jared Golden of Maine, another centrist freshman, joined them in opposition to the obstruction of Congress charge. The next step is a trial that is expected to begin early next year in the Senate, which will have the final say.

Representative Mark Meadows (R-N.C.) says he won’t run for re-election… Meadows, a top ally of Trump, made the announcement in a statement Thursday morning, adding that his work with Trump “and his administration is only beginning.” Meadows, a four-term lawmaker who represents part of western North Carolina, said in a statement that he “struggled” with leaving what he has long considered a “temporary job.”

Lawyer whose client won a $289 million Roundup lawsuit against Bayer has been arrested on extortion charges... The Justice Department said Timothy Litzenburg threatened an unnamed company with legal action over their weedkiller products unless the company paid a $200 million consulting fee to his legal firm.

China to accelerate pork imports in 2020… U.S. pork purchases by China should pick up after China’s cold storage pork runs a lot lower, industry sources advise. China in part confronted the devasting African swine fever (ASF) by killing off entire hog operations, resulting in a reduction of 40% to 50% of its hog population. The country has added cold storage facilities, but when those stocks are significantly reduced sometime during 2020, China is expected to accelerate pork imports.

China to sell another additional pork from state reserves... China will sell 40,000 MT of frozen pork from state reserves Dec. 23, the China Merchandise Reserve Management Center said in a notice. China has previously auctioned supplies from state reserves as it seeks to assure domestic pork supplies with the most-recent sales aimed at making sure pork supplies are enough for the January Lunar New Year holiday.

Choice beef continues to slide, falling under year-ago levels… Choice boxed beef values tumbled $3.24 on Wednesday, extending the market’s dramatic slide that has taken Choice beef under year-ago for the first time since June. Select values also dipped $1.90. But the lower prices did encourage decent movement of 155 loads. Falling wholesale prices and coming holiday downtime have reined in cash expectations. So far, there have just been a few sales in the Nebraska market at $120, steady with week-ago.

Pork prices also retreating… Pork prices have also fallen over the past week, with the pork cutout value sliding $1.52 yesterday to extend its weekly drop to $4.37. Ham and belly prices have led the decline, with other cuts holding pretty stable. Cash hog bids edged another dime lower on Wednesday. Today’s weekly export sales report for the week ending Dec. 12 will be in focus today, particularly whether it includes any big pork sales to China. The reporting period precedes the Phase 1 trade deal announcement.

Overnight demand news… Taiwan purchased 104,600 MT of milling wheat from the United States. Ethiopia has received offers in its tender to buy 75,000 MT of wheat.

Today's reports: