First Thing Today | March 22, 2023

Good morning!

Followthrough selling overnight... Bears controlled price action overnight, with corn, soybean and wheat futures trading solidly lower and near their session lows this morning. As of 6:30 a.m. CT, corn futures are trading 5 to 7 cents lower, soybeans are 7 to 12 cents lower, winter wheat futures are 13 to 16 cents lower and spring wheat is 10 to 11 cents lower. Front-month crude oil futures are modestly weaker and the U.S. dollar index is around 200 points lower.

Fed decision on interest rates today... The Fed will announce its decision on interest rates following its two-day monetary policy meeting this afternoon. Economists expect the Fed to raise rates 25 basis points, with around 80% odds of such, though some anticipate a pause amid the banking sector struggles. While the rate decision will be the primary focal point, markets will also closely monitor new projections from Fed officials on interest rates, inflation, GDP and other key economic figures. Chair Jerome Powell’s post-meeting press conference will also be closing scrutinized for clues to the Fed’s likely path forward.

Wild card: Quantitative tightening... Says the Sevens Report: “The Fed could alter QT to remove the headwinds on growth. This is especially notable because the Fed’s new program, the Bank Term Funding Program, would increase the Fed’s balance sheet as banks take advantage of the loan program at a time when the Fed is actively trying to reduce its balance sheet via QT. So, don’t be surprised if the Fed, regardless of its rate decision, announces a reduction in monthly Quantitative Tightening or a cessation of QT until such time as there’s more clarity on the banking situation (which means a pause in QT indefinitely). If that occurs, that would be a positive for the markets as it would remove a source of tightening in financial conditions, but at the same time not result in the Fed completely ‘blinking’ in the face of banking stress.”

U.K. inflation unexpectedly rises... The annual consumer inflation rate in the U.K. rose to 10.4% in February from 10.1% in January, the first increase in four months. Economists expected inflation to cool to 9.9%. Food inflation hit its highest since 1977, due to shortages of salad produce and other vegetables. Upward pressure also came from the prices of drinks and clothes.

Highlights of meeting between Chinese leader Xi Jinping and Russian President Vladimir Putin... The two leaders made a sweeping affirmation of their alignment across several issues – and shared mistrust of the U.S. – in a lengthy statement following talks between the two leaders in Moscow this week.

• Xi’s parting message reiterated his view that global power dynamics are shifting. “Together, we should push forward these changes that have not happened for 100 years. Take care,” he said during a goodbye handshake with Putin, alluding to what Xi sees as an era where the West is fading, and China is ascendent.
• Meetings resulted in more than a dozen agreements bolstering cooperation in areas from trade and technology to state propaganda, according to a Kremlin list. The leaders’ central statement focused on how the two countries would “deepen” their relationship.
• No breakthrough on resolving the conflict in Ukraine. Both leaders called for the cessation of actions that “increase tensions” and “prolong” the war in Ukraine, according to their joint statement released by China’s Foreign Ministry. The statement did not acknowledge that Russia’s invasion and military assault were the cause of ongoing violence and humanitarian crisis in Ukraine.
• Leaders urged NATO to “respect the sovereignty, security, interests,” of other countries — a reference that appeared to echo long-standing rhetoric from both countries blaming the Western security alliance for provoking Russia to invade.
• Putin said that “many of the provisions” could be “taken as the basis” for a peaceful settlement in Ukraine, “when the West and Kyiv are ready for it,” in comments to reporters following Tuesday talks. But the proposal is seen as a nonstarter in the West and Ukraine, because it includes no provision that Moscow withdraw its troops from Ukrainian land.

One of the more pressing considerations from Kyiv’s perspective, the prospects of China supplying Russia with military equipment remain unclear.

Ukrainian grain exports top 36 MMT... Through March 22, Ukraine’s grain exports this month reached 3.99 MMT. Since July 1, Ukraine has exported 36.3 MMT of grain, according to the country’s ag ministry. That total included 21.3 MMT of corn, 12.4 MMT of wheat and 2.25 MMT of barley.

EPA’s Regan will testify today... EPA Administrator Michael Regan will testify today about the White House’s fiscal 2024 budget request before the Senate Environment and Public Works Committee. The budget plan would boost the agency’s funding to a record $12 billion, a 19% increase over the current enacted level. Included in the budget blueprint are:

• Funding to hire 1,960 new staffers, to bring its workforce to more than 17,000 nationwide.
• A 247% increase for the agency’s environmental justice efforts.
• A 60% boost to help states implement air quality programs, and
• A 37% rise in chemicals oversight spending.

Lawmakers will likely ask Regan about the Waters of the U.S. (WOTUS) rule that went into effect on Monday for most states. Ethanol and biodiesel mandated amounts relative to the Renewable Fuel Standard (RFS) are other areas of interest lawmakers may ask about.

Army Corps confirms pre-2015 WOTUS definition being used in Texas, Idaho... The U.S. Army Corps of Engineers said the Biden administration’s definition of what constitutes waters of the U.S. (WOTUS) is in place in all states except Texas and Idaho after a preliminary injunction in federal court. “In light of the preliminary injunction, the agencies are interpreting ‘waters of the United States’ consistent with the pre-2015 regulatory regime in Idaho and Texas until further notice,” Army Corps spokesman Douglas Garman said. Being watched: Another suit led by West Virginia, the largest of the suits brought so far as it includes 24 states. Still awaited: The U.S. Supreme Court ruling in the Sackett v. EPA case. There is no date for when the Supreme Court will issue its ruling in that case.

Argentina exports first shipment of beef to Mexico... Argentina on Tuesday shipped its first cargo of beef to Mexico after over a decade of talks to open the Mexican market, Argentina’s agriculture secretariat said. Argentine meatpacker ArreBeef exported one metric ton of different beef cuts, the secretariat said, adding that another 21 meat exporters were licensed to ship to Mexico.

Lab-grown chicken approved... Eat Just is the second alternative-foods startup after Upside Foods to win an initial FDA approval to sell chicken grown in bioreactors to the American public. But other hurdles remain: The company needs more USDA approvals and must continue to meet additional regulatory requirements before it can start mass commercial sales.

Wholesale beef prices continue to drop... Choice boxed beef prices fell another $1.10 on Tuesday and are now $10.28 below the March 6 peak. Despite the fall in wholesale beef prices, packer margins have remained in the black. That will give them incentive to be more aggressive with cash bids amid a tightening supply of market-ready cattle once the wholesale market posts a seasonal low, which should come soon.

Attitudes toward hogs continue to erode... After dropping on Monday, the CME lean index is down another 88 cents today (as of March 20). Over the past two days, the cash index has given back $1.34 of the $7.90 rally from the Jan. 23 low. April lean hog futures finished Tuesday $8.40 below where the market ended Jan. 23 and at a $1.62 discount to today’s cash quote, signaling attitudes have eroded even amid the seasonal rise in cash prices.

Overnight demand news... Jordan tendered to buy up to 120,000 MT of optional origin 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

• 9:30 a.m. Weekly Ethanol Production — EIA
• 2:00 p.m. Broiler Hatchery — NASS