First Thing Today | April 18, 2023

Good morning!

Soybeans lead overnight gains... Soybean futures led a round of followthrough buying during overnight trade. As of 6:30 a.m. CT, corn futures are trading 2 to 3 cents higher, soybeans are 9 to 11 cents higher, SRW wheat futures are around 7 cents higher, HRW wheat is 1 to 2 cents higher and HRS wheat futures are 6 to 7 cents higher. Front-month crude oil futures are modestly weaker and the U.S. dollar index is around 400 points lower this morning.

Condition ratings continue to show two starkly different U.S. winter wheat crops... When USDA’s weekly crop condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the HRW crop dropped another 3.2 points to 248.0. The Kansas crop improved a little over the past week, but each of the other states declined. The SRW crop improved 12.5 points to 381.4, led by a 4.5-point increase in Illinois. The HRW crop is rated historically low, while the SRW crop is rated higher than average for mid-April. Click here for details.

Crop Progress Report highlights… Following are highlights from USDA’s crop progress and condition update as of April 16.

• Winter wheat: 27% good/excellent (27% last week); 10% headed (8% five-year average).
• Corn: 8% planted (5% average).
• Soybeans: 4% planted (1% average).
• Cotton: 8% planted (9% average).
• Spring wheat: 3% planted (7% average).

Attaché cuts Argentine soybean crop forecast... The U.S. ag attaché in Argentina cut the country’s soybean production estimate to 23.9 MMT, below USDA’s official forecast, which was reduced to 27 MMT last week. The post expects Argentina to import a record 11 MMT of soybeans in 2022-23 and export only 18.75 MMT of soymeal and 3.65 MMT of soyoil during the marketing year.

Consultant cuts Argentine crop estimates... Early soybean yields in Argentina have been disappointing and highly variable, which prompted crop consultant Dr. Michael Cordonnier to cut his crop estimate 2 MMT to 24 MMT. He notes corn has fared better than soybeans, but yields are still disappointing. He cut his Argentine corn crop estimate 1 MMT to 35 MMT. Cordonnier left his Brazilian crop estimates at 153 MMT for soybeans and 123 MMT for corn but noted the soybean crop figure could be increased barring “unforeseen problems in Rio Grande do Sul.”

Differing views on resumption of Ukraine grain export inspections... Inspections of ships moving grain from Ukraine have restarted, RIA news agency reported, citing Russia’s foreign ministry. A ministry official quoted by RIA blamed Monday’s interruption on Ukraine’s failure to observe agreed procedures but said the issue has been resolved. However, a senior Ukrainian official told Reuters, “Nothing has been resolved. There are no inspections.”

Poland, Ukraine continue grain transit talks... Ukraine will try to unblock exports of grain through Poland in a second day of talks in Warsaw on Tuesday. Poland, Hungary and Slovakia have recently banned imports of Ukrainian grains to protect their markets from an influx of cheaper supplies. Polish Agriculture Minister Robert Telus told public radio station PR1 on Tuesday talks were set to continue. “We are talking with the EU as well as with Ukraine to find solutions. We want these products to go to Europe, but go deep into Europe,” Telus said.

China’s economy grows more than expected in Q1... China’s economy grew 4.5% annually in the first quarter, accelerating from 2.9% GDP in the fourth quarter of 2022 and topping expectations for 4.0% growth. That was the strongest GDP reading in a year. Separate data showed China’s retail sales jumped 10.6% in March, near a two-year high. China’s industrial production increased by 3.9% from year-ago in March, faster than a 2.4% rise in January-February combined and the fastest growth since last October. However, industrial production was a little lower than the 4.0% expansion economists expected.

Chinese demand for wheat reserves waning... China sold 18,552 MT of state-owned wheat reserves, 46.8% of the total put up for auction last week. The average sales price was 2,578 yuan ($374.79) per metric ton, down from 2,689 yuan the previous week.

USDA data users’ meeting today... USDA will hold its spring data users’ meeting this afternoon. One of the key topics discussed will be the format for the weekly export sales data after the botched release of a new reporting system last August – the Export Sales Reporting and Maintenance System 2.0 (ESRMS 2.0). Based on pre-meeting materials, USDA will continue to use its legacy reporting system for export sales “until FAS addresses concerns and corrects issues identified during the launch of ESRMS 2.0.”

China pork imports increased in March... China imported 150,000 MT of pork in March, up 11.2% from last year. During the first three months of this year, China imported 530,000 MT of pork, up 27.7% from the same period last year.

China’s Q1 pork output hits five-year high... China’s pork output in the first quarter rose 1.9% from year-ago to 15.9 MMT, the highest quarterly production since the fourth quarter of 2017. A spike in infections of African swine fever earlier this year forced many farms in the world's top pork producer to cull pigs, pushing up slaughter numbers. China slaughtered 198.99 million hogs in the quarter, up 1.7% from the same period last year. China’s pig herd, though 2% higher than the same period a year earlier, contracted from the prior quarter’s 452.56 million head to 430.94 million.

Cash cattle prices surge... Cash cattle averaged a record high $180.44 last week, a $7.34 surge from the previous week. Packers bought 87,000 head last week, including 22,000 head “with time.” Typically, that would suggest packers would back off cash cattle bids the following week. But with feedlots current and carcass weights declining, there aren’t enough supplies to fill needs. As a result, the cash market is expected to post another record high this week.

Waiting on cash hog index to bottom... Hog futures posted corrective gains on Monday, while the cash hog market continues to fall. The CME lean hog index is down another 11 cents today. May hogs assumed lead-month status at a $9.48 premium to today’s cash index quote (as of April 14). June hogs finished Monday $16.655 above the cash index. Given those premiums, buyer interest will be limited until the cash index signals it has bottomed.

Overnight demand news... Japan is seeking 66,377 MT of milling wheat in its weekly tender.

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

• No reports scheduled.