First Thing Today | January 22, 2024
Good morning!
Grains favor the downside overnight... Corn, soybeans and wheat traded on both sides of unchanged during the overnight session but are mostly weaker this morning. As of 6:30 a.m. CT, corn futures are trading fractionally to a penny lower, soybeans are 1 to 2 cents lower, winter wheat markets are 4 to 6 cents lower and spring wheat is narrowly mixed. Front-month crude oil futures are modestly firmer and the U.S. dollar index is more than 125 points lower this morning.
Brazil trends wetter, Argentina drier this week... Brazil’s weekend rainfall was greatest from Mato Grosso to southern Minas Gerais, Sao Paulo and Parana where sufficient amounts of rain fell in many areas to maintain favorable crop development. Rainfall during the next two weeks will be most concentrated on center-west, northern center-south and northeastern parts of the country. Portions of Rio Grande do Sul, along with a portion of Sao Paulo and southwestern Minas Gerais, will continue drier than usual through the coming week. Argentina was mostly dry during the weekend and that trend will continue for at least one more week, though rainfall may increase next week.
Brazil soybean harvest reaches 6% done... Brazil’s soybean harvest advanced to 6% done as of last Thursday, according to AgRural, paced by Mato Grosso and Paraná. It noted, “The low yields coming from harvest reports are not surprising in Mato Grosso, as the state was the most affected by the drought this harvest. In Paraná, yields slightly lower than initially expected cause disappointment in the state, where the heat and irregular rainfall have affected crops in the final stretch of the grain filling phase.” AgRural estimated safrinha corn planting reached 4.9% done, ahead of last year’s 1%.
Brazil’s share of China’s soybean imports rises, U.S. declines... China’s soybean imports from Brazil in 2023 jumped 29% from the prior year to 69.95 MMT. Imports from the U.S. fell 13% to 24.17 MMT. Brazil’s market share grew to 70%, while the U.S. share shrank to 24%. China’s soybean imports in the first quarter are forecast to slow by about 20% from a year earlier to 18.5 MMT, according to a Reuters survey, after a record slaughter shrank pig herds. Exports from Argentina are expected to jump in 2024 amid forecasts for a rebound in its soybean crop from drought, which could bring further competition to U.S. soybeans.
OMB concludes meeting on E15 waiver request; final rule publication date TBD... The Office of Management and Budget (OMB) concluded its solitary meeting regarding the request for a 1-PSI volatility waiver for ethanol-blended fuels like E15, submitted by eight states, including Illinois, Iowa, Minnesota, Missouri, Nebraska, Ohio, South Dakota and Wisconsin. This meeting involved representatives from the Renewable Fuels Association (RFA) and other stakeholders. Currently, there are no additional meetings scheduled on this matter by OMB. EPA has not yet determined the publication date for the final rule regarding this issue, as it was listed as “to be determined” in the agency’s regulatory plans for the upcoming year.
Limited demand for Chinese wheat auction... China sold 11,142 MT (55.2%) of state-owned wheat sales put up for auction last week. The average sales price was 2,588 yuan ($359.68) per metric ton.
China keeps benchmark lending rates steady amid pressure on yuan... China kept benchmark lending rates unchanged at their monthly fixing, matching expectations with Beijing seen as having limited scope for monetary easing amid downward pressure on the yuan. The People’s Bank of China kept the one-year loan prime rate (LPR) at 3.45%, which is the medium-term lending facility used for corporate and household loans, for the fifth consecutive month; and the five-year rate, a reference for mortgages, was held at 4.2% for the seventh straight month.
Chinese banks again move to support yuan... China’s major state-owned banks moved to support the yuan on Monday, tightening liquidity in the offshore foreign exchange market while actively selling U.S. dollars onshore, four sources with knowledge of the matter told Reuters. The goal was to prevent the yuan from falling too fast as China’s A shares plunged, said one of the sources, with the benchmark Shanghai Composite index posting its biggest one-day drop since April 2022 on Monday, down 2.7%.
The week ahead in Washington... The Senate is in session this week, but another House recess comes after Congress last week again kicked the fiscal year (FY) 2024 funding can further down the road until March 1 for some departments (including USDA), and March 8 for the other 80% of funding. Top leaders still have not settled on spending levels for the committees, so little additional work is expected. It has been two weeks since lawmakers agreed to stick with the original $1.66 trillion spending outline. The only way for further progress is to slice that pie into 12 bills covering all the agencies. Between now and late February, the House and the Senate will be in session at the same time just seven days, several of those coming on shortened fly-in/fly-out travel days. As for the farm bill, no action (if any) will take place until Congress completes its work on funding measures, and likely a supplemental spending bill that may include controversial border protection language. Also, the Congressional Budget Office usually takes about five days to review these bills. Key economic data this week will be the first estimate of fourth quarter 2023 GDP on Thursday and Friday’s personal consumption expenditures price index. Key agricultural data this week will be Wednesday’s Cold Storage Report and an update on the food price outlook on Thursday.
Davos focuses on Trump and European conflicts, overlooking Asia... Last week’s annual meeting of the World Economic Forum in Davos shifted its focus away from Asia, with the Eurocentric crowd primarily discussing Donald Trump’s potential return to the U.S. presidency and the ongoing conflicts in Gaza and Ukraine. The gathering coincided with Trump’s landslide victory in the Republican Party Iowa caucuses, sparking discussions about his chances of regaining the presidency. Some referred to this as the “Davos Consensus,” even though the U.S. election outcome remains uncertain. The panel titled “4.2 billion people at the ballot box” briefly touched on other elections, including India’s, where 900 million people vote. However, the primary concern for many was the U.S. election and its potential impact on Europe, with some expressing concerns about Trump’s lack of support for NATO and the European Union.
Neutral Cattle on Feed Report... Friday’s Cattle on Feed Report showed there were 11.930 million head of cattle in large feedlots (1,000-plus head) as of Jan. 1, up 248,000 head (2.1%) from year-ago. December placements dropped 4.5%, while marketings slipped 0.9% from year-ago levels. All three categories virtually matched the average pre-report estimates. As a result, the market should have little to no price response.
Cash hog index continues to firm, pork cutout pauses... The CME lean hog index is up another 19 cents to $68.06 (as of Jan. 18). While gains haven’t been strong, that’s the eighth gain in the last nine days, as the cash index continues the rebound from the seasonal low. After a recent string of steady gains, the pork cutout value slipped 17 cents on Friday and movement slowed to 245.2 loads.
Weekend demand news... Exporters reported no tenders or sales.
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
- 10:00 a.m. Export Inspections — AMS
- 11:00 a.m. Cotton Ginnings — NASS
- 2:00 p.m. Chickens and Eggs — NASS
