First Thing Today | February 1, 2024

Good morning!

Grains lower overnight... Corn, soybeans and wheat kicked off the new month with a round of fresh selling during the overnight session. As of 6:30 a.m. CT, corn futures are trading 3 to 4 cents lower, soybeans are 10 to 12 cents lower, winter wheat markets are 6 to 8 cents lower and spring wheat is 1 to 2 cents lower. Front-month crude oil futures are modestly firmer and the U.S. dollar index is around 350 points higher.

Weekly Export Sales Report out this morning... For the week ended Jan. 25, traders expect:

Record soy crush, big jump in corn-for-ethanol use expected... Analysts expect USDA to report December soybean crush totaled 206.5 million bu. in December, according to a Bloomberg survey, which would be the most ever for any month and 19.4 million bu. (10.2%) above last year. Corn-for-ethanol production is expected to total 474.4 million bu., which would be up 19.0 million bu. (4.3%) from November and 48.6 million bu. (11.4%) above last year.

Soyoil use in biofuels unchanged in November... Soybean oil used to produce biofuels in the U.S. held at 1.062 billion lbs. in November, according to the Energy Information Administration. That marked the seventh straight month in which soyoil use for biofuels topped 1 billion lbs., something that hadn’t happened prior to May 2023.

India rice prices extend record rally... Parboiled rice export prices from India extended their record rally this week, driven by tight supplies and firm demand due to higher prices from other exporters. India’s 5% broken parboiled variety was quoted at a record $537 to $546 per MT this week, up $4 per MT on both ends of the range. Vietnam’s 5% broken rice was offered at $635 to $640 per MT on Thursday, up from $630 a week ago. Thailand’s 5% broken rice prices was quoted at $640 to $658 per ton, slipping from $665 per ton last week.

House passes nearly $79 billion bipartisan tax bill... The measure includes provisions to expand the child tax credit for American families and reinstate some tax cuts for businesses. The bill, which was negotiated between Rep. Jason Smith (R-Mo.) and Sen. Ron Wyden (D-Ore.), received strong support in the House with a vote of 357-70. It needed significant bipartisan backing due to being fast-tracked under a tactic known as “suspension,” which requires two-thirds support in the Republican-controlled House. Republicans voted for the bill by a margin of 169-47. The bill would devote about $33 billion to reviving a trio of business tax breaks and roughly the same amount to expand the child tax credit. The bill’s future now depends on its reception in the Senate, where it faces additional challenges, with some Republicans demanding further changes before approving it.

EU leaders agree on a support package for Ukraine... EU leaders agreed sooner than expected on a €50 billion ($54. billion) support package for Ukraine after months of obstruction by Hungary. Earlier this week, European officials and leaders reportedly threatened to harm Hungary’s economy to put pressure on its pro-Russian prime minister, Viktor Orban. Charles Michel, who heads the European Council, said the deal locked up “steadfast, long-term” support for Ukraine. Support from the U.S. remains held up in partisan gridlock.

China’s smaller factories again expand in January... The Caixin/S&P Global manufacturing purchasing managers index (PMI) held at 50.8 in January amid stable growth in output, quicker logistics and the first rise in new export orders since June. That marked the third straight month of growth in factory activity based on the private survey focused on smaller and privately owned plants, contrasting with official PMI data that showed extended contraction amid larger and state-owned factories ahead of a Lunar New Year celebration.

China pledges fiscal expansion to spur economy... China will maintain fiscal expansion this year to spur an economic recovery, Vice Finance Minister Wang Dongwei said, reinforcing market views that public spending will be the government’s main tool to lift growth. Beijing will “increase the intensity of fiscal macroeconomic adjustments, implement a proactive fiscal policy to consolidate and enhance the positive trend of economic recovery,” Wang said. Authorities will “maintain a necessary intensity in fiscal spending” and keep a certain amount of transfer payments to local governments, he noted. Fiscal policy will focus on expanding domestic demand and the government will use fiscal subsidies, loan interest subsidies and tax incentives to support tech innovation and advanced manufacturing, he said.

BOE holds rates steady but signals rate cuts ahead... The Banks of England (BOE) left its key interest rate at 5.25% and removed a mention in its statement that higher rates were still possible. BOE said how long rates stay at the current level would be “under review.”

Euro zone inflation eases in January, though less than expected... Consumer inflation in the euro zone dipped to 2.8% in January from 2.9% in December, according to preliminary data. Core inflation, excluding food and energy prices, eased to 3.3% -- the lowest level since March 2022 though above forecasts of 3.2%.

Cattle Inventory Report neutral compared to expectations but underlying data bullish... USDA estimated there were 87.157 million head of cattle in the U.S. as of Jan. 1, down 1.684 million head (1.9%) from last year. The beef cow herd dropped 716,000 head (2.0%) to 28.233 million head. The 2023 calf crop was estimated at 33.593 million head, down 847,000 head (2.5%) from the previous year. The total cattle herd was the smallest since 1951 and last year’s calf crop was the smallest in 82 years. While the data was neutral compared to pre-report expectations, the underlying data was bullish as the U.S. cattle herd contracted further — and will continue to do so. Click here for more details.

Cash hog rally accelerating... The CME lean hog index is up another 90 cents to $72.38 as of Jan. 30. The cash index has firmed $7.33 this month, with $2.48 of that gain coming the last three days. February lean hog futures finished Wednesday $3.97 above today’s cash quote, suggesting traders anticipate the seasonal strength will continue for at least another two weeks. But the nearly $12.50 premium April hogs hold to the cash index may be getting too extended.

Overnight demand news... Turkey provisionally sold 150,000 MT of durum to an unknown buyer, subject to approval by the Turkish government.

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

• 7:30 a.m. Weekly Export Sales — FAS
• 2:00 p.m. Cotton System Consumption and Stocks — NASS
• 2:00 p.m. Fats and Oils: Oilseed Crushings — NASS
• 2:00 p.m. Flour Milling Products — NASS
• 2:00 p.m. Grain Crushings and Co-Products Production — NASS