First Thing Today | September 20, 2023
Good morning!
Grains mildly firmer overnight... Corn, soybeans and wheat posted mild corrective gains during a lightly traded overnight session. As of 6:30 a.m. CT, corn futures are trading fractionally higher, soybeans are around a penny higher and wheat futures are 6 to 8 cents higher. Front-month crude oil futures are around 50 cents lower and the U.S. dollar index is 175 points lower.
Russia raises grain export forecast... Russia’s ag minister says he expects the country to export 60 MMT of grain this year. Wheat will account for the bulk of that total, though he didn’t give a specific wheat export figure. He noted the country has harvested 123 MMT of grain out of an expected 130 MMT.
Poland promises to safeguard grain market amid rising Ukraine tensions... Polish President Andrzej Duda pledged to protect Poland’s grain market from an influx of Ukrainian grain, emphasizing the need for control over such imports. “We cannot allow that Ukrainian grain is sold on the Polish market without any control,” Duda said in a Bloomberg Television interview in New York on Tuesday. Duda expressed concerns about the impact on Polish citizens and urged Ukraine to refrain from public attacks amid a dispute that has strained the close ties between the two countries in their united stance against Russia’s invasion of Ukraine. Tensions have arisen recently, with Ukraine criticizing Poland’s decision to impose a ban on grain imports in response to farmer protests over declining grain prices. Ukraine filed a complaint with the World Trade Organization regarding the restrictions. Ukraine has proposed a mechanism to control exports of key crops to the European Union, seeking approval from the bloc for the initiative. If accepted, Ukrainian exporters will receive licenses to ship specified crops while ensuring volumes remain within agreed limits. Observers say Poland’s closure of its grain market to Ukrainian imports is politically driven with an election coming Oct. 15.
Fed expected to pause... The Fed is widely expected to hold interest rates unchanged following the two-day monetary policy meeting. If that’s the case, economists and traders will pay close attention to updated economic forecasts from Fed officials and Chair Jerome Powell’s post-meeting press conference for indications of future monetary policy moves.
China leaves benchmark lending rates unchanged... China kept benchmark lending rates unchanged, as expected. The one-year loan prime rate (LPR) was kept at 3.45%, while the five-year LPR was unchanged at 4.20%. Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages.
UK consumer inflation unexpectedly declines... The United Kingdom’s annual consumer inflation rate dropped to an 18-month low of 6.7% in August, down from July’s 6.8%. Core inflation, which strips out food and energy prices, fell sharply to 6.2% from 6.9% in July.
House GOP leadership fails to advance Pentagon spending bill... It was another setback Tuesday for House Republican leadership, this time for their effort to advance the Pentagon spending bill as five renegade GOP lawmakers voted against the rule, leading to its defeat. This incident reflects the ongoing challenges faced by House Republicans in finding consensus on funding the federal government, with the looming deadline of Sept. 30 for agencies to run out of money. Earlier Tuesday, House Republicans had abandoned a procedural vote aimed at funding the gov’t for 30 days. There are 11 days until a shutdown. And the House is out Monday for Yom Kippur. Some speculate GOP leadership will load up a stopgap spending bill with key Republican priorities, pass it, and hope for negotiations with Senate Democrats to keep the government funded or amend the bill and return it to the House. But even if that is the approach taken, it’s still not clear if House Speaker Kevin McCarthy (R-Calif.) can get enough GOP votes as some of the Republican renegades may vote no on anything offered.
Stabenow, Chambliss discuss key farm bill issues... Senate Ag Committee Chairwoman Debbie Stabenow (D-Mich.) and former Sen. Saxby Chambliss (R-Ga.), who chaired the committee when he was in the Senate, spoke Tuesday at a Bipartisan Policy Center event on the farm bill. Stabenow expressed concerns about a potential government shutdown within the next two weeks, describing it as “self-inflicted.” She also indicated her aim for the Senate is to pass the farm bill in December, suggesting she doesn’t have much confidence in the House’s ability to pass a farm bill soon. While the House typically moves first on the farm bill, current expectations are that the less politically fractured Senate will take the lead this time. Chambliss asked Stabenow whether she believes there is sufficient farm bill baseline funding to tackle priorities including ensuring nutrition assistance keeps pace with higher food prices and updating farm risk management programs to help farmers impacted by rising production costs. Stabenow said there isn’t but she’s “looking under every rock” for more funding.
Thompson: Awaiting CBO scores on farm bill programs... House Ag Committee Chairman Glenn “GT” Thompson (R-Pa.) addressed concerns and priorities related to the new farm bill at an Axios event on Tuesday. Thompson noted the committee is still waiting for Congressional Budget Office (CBO) scores for certain farm bill programs. Thompson stressed the importance of recognizing the unique deadlines associated with the farm bill. While it officially expires on Sept. 30, he referred to Dec. 31 as the “functional deadline” for most aspects of the bill. For certain crop-related matters, the deadlines extend into the following year due to the growing season. He underscored the significance of the next farm bill, describing it as founded on public-private partnerships and essential for national security. He envisioned it not only serving farmers through 2028 but also becoming a platform for the future, emphasizing that American agriculture thrives on “science, technology, and innovation.” Addressing his priorities for the farm bill, Thompson highlighted the need to address rising input costs, update farm safety net reference prices, boost efforts to sequester carbon and promote U.S. ag competitiveness.
Vilsack emphasizes climate-smart focus for farm bill’s conservation funds... USDA Secretary Tom Vilsack discussed his hopes for the upcoming farm bill and the allocation of $20 billion in conservation funding from the Inflation Reduction Act (IRA/Climate Bill) during an Axios event on Tuesday. Vilsack wants the farm bill to prioritize climate-smart practices and enable the continued use of the Commodity Credit Corporation budget authority to support those initiatives. He emphasized the nature of the new farm bill remains uncertain, with the focus on transitioning to the “next iteration” of farm policy. Vilsack argued that commodities cultivated or raised using climate-smart methods should carry a premium or receive market incentives, pointing out that numerous farmers have expressed their willingness to embrace climate-smart practices. Vilsack revealed USDA has received more than $2.5 billion in requests for various conservation program funding, calling the demand “extraordinary” and noting it is three and a half times greater than the money USDA has for those initiatives.
Key reversals in cattle futures... Live cattle futures posted contract highs on Tuesday before closing below the previous day’s lows, marking key reversals on the daily charts. While that could signal a short-term top, it would take active followthrough selling and a weekly low-range close to be an early warning sign of a major top. Supply-side fundamentals are still fully bullish but we have some demand concerns.
Cash hogs weaken, pork cutout firms... The CME lean hog index is down 23 cents, marking the third straight daily decline. Still, the market has shown signs of stabilizing over the past couple of weeks. The pork cutout value firmed 17 cents on Tuesday.
Overnight demand news... South Korea purchased 50,000 MT of Australian milling wheat and tendered to buy 50,000 MT of U.S. milling wheat. Egypt tendered to buy an unspecified amount of wheat from multiple origins.
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
- 10:00 a.m. Fruit and Tree Nuts Data — ERS
- 10:00 a.m. Vegetables and Pulses Data — ERS
- 1:00 p.m. FOMC Meeting Concludes — Fed
- 2:00 p.m. Broiler Hatchery — NASS
