First Thing Today | December 12, 2023

Good morning!

Grains mildly firmer overnight... Soybean futures built on Monday’s gains during the overnight session, while corn and wheat firmed amid corrective buying. As of 6:30 a.m. CT, corn futures are trading mostly 1 to 2 cents higher, soybeans are 1 to 3 cents higher, SRW wheat is 1 to 2 cents higher, HRW wheat is around 4 cents higher and HRS wheat is fractionally to a penny higher. Front-month crude oil futures are modestly weaker, while the U.S. dollar index is down around 375 points.

Cordonnier leaves Brazilian crop estimates unchanged amid lower bias... Crop consultant Dr. Michael Cordonnier left his Brazilian soybean crop estimate at 157 MMT, though he believes “there is a definite downside risk,” especially if rains remain erratic. Cordonnier left his Brazilian corn crop estimate at 118 MMT as he awaits more information about safrinha corn acreage, which will “largely determine” the country’s production. He says safrinha corn acreage will likely decline more than the 4.5% Conab forecast last week, with some reporting purchases of seed and fertilizer for the second corn crop are down 18% to 20%. Cordonnier left his Argentine crop estimates at 50 MMT for soybeans and 52 MMT for corn, though he has a differing bias – neutral/higher for soybeans and neutral/lower for corn.

Vilsack: Mexico corn GMO corn issue could be resolved with new president... For months our sources have signaled the lingering U.S./Mexico GMO corn issue was largely a Mexican presidential initiative as he comes from southern Mexico, which is the leader in making tortillas. Our contacts said this largely domestic initiative could ease once Mexico’s Andrés Manuel López Obrador leaves in June next year. USDA Secretary Tom Vilsack expressed hope the current frontrunner to replace the term-limited Obrador, Claudia Sheinbaum, could prove more flexible on the issue. “There’s going to be a new administration… the leading candidate is a scientist,” he said referring to Sheinbaum. “My hope and belief is that as a result of the new administration, they will take a look at the science take a look at the fact that they are reliant on the U.S. for yellow corn and that the relationship with the U.S. is important.”

Argentina temporarily suspends grains export registry... Argentina on Monday suspended its registry where companies exporting grains officially report trades “until further notice,” the CIARA-CEC grains chamber said. The suspension came ahead of new President Javier Milei’s announcement of economic measures, which he is scheduled to release today. Milei is expected to unveil fiscal adjustments, reductions in social spending and a potential devaluation of the Argentine peso.

French winter wheat area drops 5%... France is expected to see a sharp drop in the sowing of winter grains after heavy rain disrupted field work in the European Union’s largest grain producer, the country’s ag ministry said. In its first sowing estimates for the 2024-25 harvest, the ministry projected the country’s area sown with soft wheat at 4.49 million hectares, down 5.1% from 2023-24 and a four-year low. Winter barley area was pegged at 1.31 million hectares, down 4.0% from 2023-24, though that would be 3.1% above the five-year average. Durum wheat acreage was projected at 205,000 hectares, down 10.5% from 2023-24 and 15.7% below the five-year average.

House committee considers revoking China’s PNTR status... The House Select Committee on China is considering recommending the revocation of China's Permanent Normal Trade Relations (PNTR) status, which was granted to China by the U.S. in 2000 as part of its accession to the World Trade Organization (WTO). This potential move could have significant implications for the U.S./China relationship and the global economy. It could also have a significant negative impact on U.S. farm exports, and farm groups oppose such action. We’ll have further details in “Evening Report.”

Focus will shift to disaster aid after FY ’24 spending is completed... Congress is expected to shift its focus to domestic disaster relief once it addresses fiscal 2024 funding, according to Senator Martin Heinrich (D-N.M.), a member of the Appropriations Committee. Currently, lawmakers have been preoccupied with various pressing matters, including aid to Ukraine and Israel and upcoming spending deadlines in January and February. President Joe Biden in October requested an additional $23.5 billion for disaster relief related to extreme weather events, besides the $16 billion allocated in a previous continuing resolution to support FEMA in dealing with the rising costs of disaster aid. However, this domestic supplemental request has largely taken a backseat in Congress, despite its importance for both red and blue states with significant agricultural interests. An Appropriations subcommittee is holding a hearing today to address the implications of delayed disaster recovery funds.

China’s Country Garden may avoid yuan bond default after deal... China’s Country Garden Holdings is likely to avoid its first default on yuan bonds after most holders of a local note agreed not to demand repayment this week, Bloomberg News reported, citing people familiar with the matter. The builder, which defaulted on a dollar bond for the first time in October, has also prepared cash to repay at least a couple holders of the local note who bucked the trend and still planned to exercise their options, the people said. In return for holders forgoing the put option, the two state-owned firms which sold the CDS contracts would issue additional swaps effective until the maturity of the security next December, the people said.

ERP payments slightly increase... Payments under the Emergency Relief Program (ERP) increased to a total of $8.27 billion as of Dec. 10. In the latest week, Phase 2 payments rose to $824.9 million, benefiting 10,145 recipients, up slightly from the prior week’s $823 million. Phase 1 payments remained unchanged at $7.45 billion. Meanwhile, USDA has set Dec. 13 as a deadline for FSA State Committee (STC) to act on relief requests under Phase 1 and Phase 2 of ERP with the deadline for relief requests to be submitted to Washington as Dec. 15.

USDA confirms HPAI in Ohio ‘mega-flock’... USDA’s Animal and Plant Health Inspection Service (APHIS) confirmed the presence of highly pathogenic avian influenza (HPAI) in a large commercial table egg layer operation in Hardin County, Ohio, consisting of 2,613,600 birds. This adds to the total number of commercial egg layers depopulated due to HPAI outbreaks since October, which now stands at 8 million birds. Additionally, APHIS reported HPAI cases in various locations, including Stanislaus County, California (258,600 commercial broilers), Darke County, Ohio (15,200 commercial turkey meat birds), Barron County, Wisconsin (70,000 commercial turkey meat birds) and Charles Mix County, South Dakota (32,400 turkey meat birds). Since early October, a total of 13.4 million birds have been depopulated because of HPAI outbreaks.

Chinese hog futures rebound... China’s most active January hog futures jumped for the third consecutive session on Tuesday, as plunging temperatures and shrinking herd size fueled buying. The January contract rose 2.8% to 14,640 yuan, the highest level in nearly two weeks. The futures market tracked gains in cash prices, which rose to 14.14 yuan per kilogram.

Steady/lower cash cattle expectations... Last week’s cash cattle price averaged $169.94, down $4.51 from the previous week and the lowest level since the end of March. Traders will anticipate the cash market will continue to weaken until futures clearly signal a low has been posted. Live cattle futures have posted consecutive days of strong corrective gains, but haven’t yet signaled a low.

Cash hogs drop, pork cutout firms... The CME lean hog index is down another 83 cents to $67.93 (as of Dec. 8). December hogs finished Monday at a 32-cent premium to the cash index, while February futures fell to a 60.5-cent discount. The pork cutout value only held onto about half of Monday morning’s price strength but still firmed 95 cents, as a $10.86 jump in primal bellies more than offset weakness in all other cuts.

Overnight demand news... Algeria purchased unknown quantities of corn expected to be sourced from Argentina and optional origin soymeal. Indonesia purchased 110,000 MT of rice from Pakistan and 80,000 MT of rice from Myanmar, with more purchases expected from the tender to buy up to 534,000 MT. Japan is seeking 102,493 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

• 11:00 a.m. Cotton and Wool Outlook: December 2023 — ERS
• 11:00 a.m. Meat Price Spreads — ERS
• 11:00 a.m. Oil Crops Outlook: December 2023 — ERS
• 2:00 p.m. Dairy Monthly Tables — ERS
• 2:00 p.m. Feed Outlook: December 2023 — ERS
• 2:00 p.m. Rice Outlook: December 2023 — ERS
• 2:00 p.m. Wheat Outlook: December 2023 — ERS
• 2:00 p.m. Fresh Apples, Grapes, and Pears: World Markets and Trade — FAS