Evening Report | January 6, 2023

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Check our advice monitor on ProFarmer.com for updates to our marketing plan.

 

Your Pro Farmer newsletter is now available... The new year kicked off with a wave of fund liquidation in the grain and soy markets amid broader risk aversion as macroeconomic concerns built over surging Covid-19 infections in China. Corn and soybean traders ignored declining crop condition ratings and production potential in Argentina, as Brazil remained on pace to produce record crops. Economic impacts from China’s move away from its zero-Covid policy is just one of many key factors that will likely influence agriculture over the next year, along with progress on a new farm bill, China’s relations with Taiwan and the Russia/Ukraine war. We also take a look at some bigger-picture issues that could impact agriculture this year and beyond in this week’s News page 4 feature. We cover all of these items and much more in this week’s newsletter, which you can access here.

 

Argentine crop stress to continue... World Weather Inc. anticipates scattered showers and cooler temps with a frontal passage through Argentina during the middle of next week but amounts and coverage levels won’t be enough to halt crop stress. South American crop consultant Dr. Michael Cordonnier told us this morning he anticipates lowering his Argentine soybean and corn crop estimates next week.

Southern Brazil is also likely to remain mostly dry into the middle of next week, with some potential for scattered showers by the latter part of this week. Growing conditions will remain mostly favorable in other areas of Brazil, though rainfall could be too prevalent in some locations.

World Weather says there will be a notable decline in the cool waters at the surface of the eastern equatorial Pacific over the next two to four weeks as La Niña fades, which will bring better rainfall potential to Argentina, though that would be too late for some of the country’s crops.

 

Mexico president to discuss corn dispute with Biden next week... Mexican President Andres Manuel Lopez Obrador will discuss with President Joe Biden a dispute over GMO corn imports in a meeting next week, he said Friday. The countries have been at odds over a Mexican decree that would ban GMO corn and phase out the herbicide glyphosate.

 

Jobs growth slows, wages rise less than expected... The U.S. economy added 223,000 non-farm payrolls in December, down from November’s revised number of 256,000 jobs added but above expectations for an increase of 200,000. Hourly earnings rose a less-than-expected 0.3%. The unemployment rate dropped to 3.5% from 3.7% previously.

 

Fed's Bostic: jobs data another sign economy is gradually slowing... The latest U.S. jobs figures are another sign that the economy is gradually slowing and should that continue the Federal Reserve can step down to a quarter percentage point interest rate hike at its next policy meeting, Atlanta Fed President Raphael Bostic said on Friday. But he cautioned against placing too much emphasis on the pace of wage growth, saying that was “not driving the dynamic” on inflation but still need careful monitoring.

“Today I would be comfortable with either a 50 or a 25 (basis point increase). If I start to hear signs that the labor market is starting to ease a bit in terms of its tightness then I might lean more into the 25 basis point position,” Bostic told CNBC.

Bostic said the data did not change his outlook and reiterated the central bank would need to raise rates further and hold them at that peak until “well” into 2024 to tame inflation, which remains well above the Fed’s 2% target.

“I’ve been looking for the economy to continually slow from the strong position it was at in the summer time,” Bostic said. “This is just a next step in that... it’s going incrementally... because of that we got to stay the course, inflation is too high, we need to reduce those imbalances.”

Traders priced in 70% odds of just a 25-basis-point increase in interest rates following the Jan. 31-Feb. 1 monetary policy meeting.

 

Thompson outlines farm bill issues... Representative-elect Glenn “GT” Thompson (R-Pa.) told us on AgriTalk the following regarding the new farm bill:

  • Extension of the 2018 Farm Bill that expires Sept. 30 “would be a missed opportunity.”
  • Ad-hoc disaster relief is “not reliable” and he would like to incorporate some of that into other programs, including crop insurance to better serve farmers and lenders.
  • Senate Ag Chair Debbie Stabenow’s (D-Mich.) surprise announcement she won’t seek re-election in 2024 will have no farm bill impact. Thompson looks forward to again working with Stabenow on another farm bill.
  • USDA’s use of CCC funds must be refined.
  • There may be “drama” in the farm bill debate, but “we always put out a good product that’s bipartisan.”
  • Debate on a new farm bill will stretch into September and they’ll likely have to use the final days before the Sept. 30 expiration, but they will get new legislation done.
 

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