First Thing Today | January 30, 2024
Good morning!
Followthrough selling in grains overnight... Corn, soybeans and wheat extended Monday’s losses during the overnight session. As of 6:30 a.m. CT, corn futures are trading 2 to 3 cents lower, soybeans are fractionally to a penny lower, winter wheat markets are 5 to 8 cents lower and spring wheat is 2 to 3 cents lower. Front-month crude oil futures are around 40 cents lower and the U.S. dollar index is about 175 points lower.
Cordonnier keeps South American crop estimates unchanged... South American crop consultant Dr. Michael Cordonnier left his Brazilian crop estimates at 149 MMT for soybeans and 115 MMT for corn, but noted both could move lower if recent dryness in central and southern areas of the country persists. Cordonnier also left his Argentine crop forecasts at 52 MMT for soybeans and 56 MMT for corn. He has a neutral/lower bias toward soybeans given recent heat and dryness in key production areas. His bias is neutral toward the Argentine corn crop, down from neutral/higher due to the heat and moisture stress.
China’s soyoil, soymeal futures tumble to over six-month low on slowing demand... Soybean oil prices on China’s Dalian Commodities Exchange fell for a third consecutive session on Tuesday, with soymeal prices also declining as demand slowed. Soybean oil contract for May delivery fell 3.8% to a seven-month closing low of 7,204 yuan ($1,003.79) a metric ton. That was it biggest daily decline in more than a year. The most-active soymeal contract fell for a fourth straight session to 2,944 yuan ($410.21) per ton, its lowest close since mid-July 2023. Demand from China is weakening as stockpiling ahead of the Spring Festival (Lunar New Year) ends and animal feed demand declines.
HRW crop ratings improve further in January... State-level winter wheat crop condition ratings released on Monday signaled more general improvement in the HRW crop over the past month, led by top producer Kansas. When the state crop ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the HRW crop improved 11.6 points from the end of December to 345.3 and stood 22.0 points above USDA’s final national rating at the end of November.
Pakistani rice exports expected to be record-large... Pakistan’s rice exports are likely to jump to a record high in 2023-24 as rival India’s decision to curb its own shipments forces buyers to purchase more from the country. Pakistan’s rice exports could jump to 5 MMT in 2023-24, up from the last year’s 3.7 MMT, the chairman of Rice Exporters Association of Pakistan told Reuters. Some industry estimates are as high as 5.2 MMT as basmati rice exports could jump 60% this year to 950,000 MT, while non-basmati exports could surge 36% to 4.25 MMT.
China's 10-year treasury futures hit record high on heightened easing expectations... Chinese government bonds advanced on Tuesday with 10-year treasury futures hitting record highs amid market expectations that the central bank will soon ease monetary policy to support the faltering economy. China 10-year treasury futures for March rose to their highest level since the contract was launched in 2015. Yields on benchmark 10-year government bonds slid below 2.47% to their lowest levels since June 2002, while 30-year government bonds dropped below 2.70% to a record low. Traders said persistent deflationary pressure in China justifies interest rate reductions as falling prices have raised real borrowing costs.
Eurozone escapes recession... In the fourth quarter of 2023, the euro zone’s seasonally adjusted GDP was flat compared with the previous quarter and expanded 0.1% versus the prior year. Spain, Italy and Portugal exceeded growth expectations, whereas the French economy remained stagnant, and German GDP contracted by 0.3%.” The outlook for 2024 continues to be challenging amid faltering demand and increasing geopolitical tensions,” the head of Europe economics at S&P Global Market Intelligence told Reuters. “We think that eurozone activity will remain virtually stagnant during the first half of 2024.”
Saudi Arabia lowers Aramco oil max capacity target... Saudi Arabia made a significant policy reversal by dropping its plan to expand its daily oil production capacity. State-run Saudi Aramco had originally aimed to increase its maximum sustainable production capacity from 12 million barrels per day (bpd) to 13 million bpd by 2027. Analysts note this shift in policy may reflect a recognition within OPEC+ that excess production capacity is impacting oil prices. They believe it makes little sense for Saudi Arabia to invest heavily in expanding its production capacity under these circumstances. The decision could have far-reaching implications for Aramco’s capital spending, the Gulf supply chain and OPEC+ oil policy. Saudi Arabia also plans to free up an additional 1 million bpd of oil for export by replacing liquid fuels used for power generation within the kingdom with gas.
USDA making investments in specialty crops... The efforts include a $65 million initiative called the Assisting Specialty Crop Exports program to boost exports and reach new markets. Additionally, nearly $73 million in grant funding will be available for the Specialty Crop Block Grant Program, aimed at enhancing the competitiveness of specialty crops such as fruits, vegetables, tree nuts and more. These investments are part of efforts to address concerns over the growing agricultural trade deficit.
Vilsack to appear before House, Senate Agriculture panels in February... USDA Secretary Tom Vilsack will testify before the House Ag Committee on Feb. 14 and the Senate Ag Committee Feb. 28, according to Politico. This marks the first appearance by Vilsack in quite some time, suggesting lawmakers will likely have many questions, including the use of Inflation Reduction Act (IRA) funds and the Commodity Credit Corporation (CCC) authority. USDA nutrition programs are always a topic of interest, especially as this is one of the debate items in a lingering new farm bill.
Packers continue to manage cattle supplies... Packers purchased 83,000 head of cattle in the negotiated market last week as the average price rose $1.68 to $175.44, the highest since the week ended Nov. 24, 2023. But packers continued to limit their slaughter runs, including a small Saturday kill, suggesting they will keep closely managing their supplies. With fresh contract supplies available on Thursday, that could limit their willingness to actively bid for cash cattle this week.
Cash hog rally picks up... The CME lean hog index firmed another 70 cents to $70.60 as of Jan. 26, marking the second largest daily increase during this month’s seasonal rally. While futures are also climbing, relatively modest gains suggest traders are waiting on consistently bigger daily increases in the cash index before sharply building premiums.
Overnight demand news... South Korea purchased 198,000 MT of corn – 133,000 MT to be sourced from the U.S., South America or South Africa and 65,000 MT to be sourced from the U.S. or South America – and 86,200 MT of U.S. milling wheat. The Philippines purchased an unknown volume of Australian feed 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
- 11:00 a.m. Weekly Weather: State Stories — NASS
