First Thing Today | December 19, 2023
Good morning!
Grains weaker overnight... Soybeans erased Monday’s gains during overnight trade, while corn and the winter wheat markets faced mild followthrough selling. As of 6:30 a.m. CT, corn futures are trading around a penny lower, soybeans are 8 to 10 cents lower, winter wheat markets are fractionally to a penny lower and spring wheat futures are narrowly mixed. Front-month crude oil futures and the U.S. dollar index are both modestly weaker.
Cordonnier cuts Brazilian crop forecasts... Central and northeastern production areas of Brazil faced extreme heat over the past week in combination with the extended dryness, adding to crop stress. As a result, South American crop consultant Dr. Michael Cordonnier cut his Brazilian crop forecasts 2 MMT for soybeans and 1 MMT for corn. He now forecasts Brazilian soybean production at 155 MMT and the corn crop at 117 MMT.
Maritime task force to protect Red Sea shipping... The U.S. is creating a multinational naval force called Operation Prosperity Guardian to protect merchant ships in the Red Sea, responding to Houthi rebel attacks that have jeopardized the Suez Canal’s crucial role in global trade. This security operation will involve countries such as the UK, Bahrain, France, Norway and others. The Suez Canal has recently become a new focal point in the Israel-Hamas conflict, with global shipping companies being the primary targets. Many major shipping lines, oil producers and cargo owners are rerouting their vessels away from this critical trade corridor, opting for longer voyages around Africa’s Cape of Good Hope.
Ergodan wants Russia to rejoin Black Sea grain deal... Turkish President Tayyip Erdogan said he will speak with his Russian counterpart Vladimir Putin soon to urge Moscow to revive the Black Sea grain initiative. Russia on Sunday reiterated it has no desire to restart the deal.
USDA opens enrollment for 2024 crop year in ARC and PLC programs... USDA announced that producers can now enroll in the Farm Service Agency’s (FSA) Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs for the 2024 crop year. Producers can make election changes and enroll for the 2024 crop year from Dec. 18 through March 15, 2024. Producers have the option to elect coverage and enroll in ARC-County (ARC-CO) or PLC, which provide crop-specific protection, or ARC-Individual (ARC-IC), which protects the entire farm. While election changes for 2024 are voluntary, producers must complete enrollment through a signed contract each year. Multi-year contracts will continue for 2024 unless an election change is made. Producers are encouraged to use web-based decision tools offered by universities to make informed decisions based on their specific farming operations. More information on ARC and PLC can be found on the USDA’s website (link), and producers can also complete elections and enroll online through level 2 eAuth (link).
PBOC adviser: China can achieve 5% economic growth again in 2024... China should be able to maintain the same level of economic growth in 2024, said Wang Yiming, a policy adviser to the People’s Bank of China (PBOC). China’s economy is likely to grow 5% next year, if investment rises 4% to 5%, consumption rises 6% to 7% and exports return to growth, Wang said. He also noted China has room to increase support for the economy given the central government’s debt burden and consumer prices are both relatively low. Wang said China may be able to cut interest rates as the Federal Reserve has likely stopped raising U.S. rates, although a wide interest rate gap between the two countries and worries about the impact on banks could act as constraints.
India directs rice industry to cut domestic prices... India’s government directed rice industry associations “to ensure that the prices in the domestic market need to be brought down to optimal levels and efforts at profiteering dealt with strictly.” New Delhi says domestic rice prices are rising despite a good crop, ample stocks and regulations on rice exports.
Indonesia seeking 2 MMT of Thai rice next year... Indonesia is seeking to buy 2 MMT of Thai rice next year, Thailand’s government said, a volume that would fulfil Jakarta’s planned import quota. Indonesia is seeking 1 MMT from the private sector and 1 MMT in a government-to-government deal.
Euro zone inflation falls to 28-month low... Consumer inflation in the euro zone dropped to an annualized 2.4% in November, the lowest since July 2021. Core inflation, excluding energy and unprocessed food products, rose 4.2% from year-ago. Both the headline and core inflation figures were inline with the “flash” estimates released earlier.
BOJ keeps ultra-loose policy, offers few hints on exit timing... The Bank of Japan (BOJ) maintained ultra-loose policy settings as widely expected, as the central bank opted to await more evidence on whether wages and prices would rise enough to justify a shift away from its broad monetary stimulus. The central bank also made no change to its dovish policy guidance. BOJ kept its short-term rate target at -0.1% and that for the 10-year government bond yield around 0%. It also left unchanged a pledge to ramp up stimulus “without hesitation” if needed. BOJ Governor Kazuo Ueda gave no clear signal on how soon the central could exit negative rates but said there “won’t be much data coming in” between now and the next policy meeting on Jan. 22-23. He also said BOJ won’t rush into raising rates just because the U.S. Federal Reserve could start cutting them soon.
HPAI infections continue to increase... Since Dec. 11, USDA's Animal and Plant Health Inspection Service (APHIS) has confirmed highly pathogenic avian influenza (HPAI) in Olmsted County, Minnesota (15,100 commercial turkey breeder hens); Lake County, South Dakota (76,000 commercial turkey meat birds); Rice County, Kansas (700,000 commercial table egg layers); San Joaquin County (6,000 commercial duck breeder birds) and Merced County (183,100 commercial broiler production birds and 1,358,000 commercial table egg layers), California; and Darke County, Ohio (560,000 commercial table egg layers). In the past 30 days, a total of 62 commercial flocks and 36 backyard flocks have been confirmed with HPAI, impacting a total of 11.08 million birds.
ERP payments continue to edge higher... Total payments under the Emergency Relief Program (ERP) moved up to $8.29 billion as of Dec. 17. ERP Phase 2 payments reached $837.5 million to 10,152 recipients, up from $824.9 million the prior week. Phase 1 payments remained at $7.45 billion.
Bullish cash cattle expectations... Cash cattle averaged $168.71 last week, down $1.23 from the previous week and the sixth straight weekly decline. That was the lowest cash price since the week ended March 24. But packers only purchased 40,000 head and slaughter runs have increased recently, causing some cash sources to believe packers are short-bought on slaughter needs – even with holiday-shortened kill schedules on the near-term horizon. With futures extending last week’s corrective gains, the general expectation is cash prices will be steady/firmer this week.
February hogs mildly extend premium to cash index... February lean hog futures dropped 32.5 cents on Monday but given a 56-cent decline in the CME lean hog index to $66.59 (as of Dec. 15), the contract finished at nearly a $5.00 premium to today’s quote. That premium will limit near-term buyer interest but also signals traders anticipate a solid rebound in the cash index from now until mid-February.
Overnight demand news... Egypt tendered to buy an unspecified amount of wheat from multiple sources. Jordan made no purchases in its tender to buy 120,000 MT of 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
- 8:00 a.m. Food Expenditure Series — ERS
- 10:00 a.m. Fruit and Tree Nuts Data — ERS
- 10:00 a.m. Vegetables and Pulses Data — ERS
- 2:00 p.m. Dairy: World Markets and Trade — FAS
