First Thing Today | January 30, 2023
Good morning!
Soybeans lead overnight price gains... Grain and soy futures opened the week with solid gains, led by sharp advances in soybeans. As of 6:30 a.m. CT, corn futures are trading around 3 cents higher, soybeans are 12 to 18 cents higher, winter wheat futures are 7 to 10 cents higher and spring wheat is 2 to 3 cents higher. Front-month crude oil futures are trading near unchanged, while the U.S. dollar index is around 100 points lower this morning.
One more round of rains before Argentina turns drier again... Rain in western and southern areas of Argentina this week will be important since the following 10 days will be drier, especially in the central and south, according to World Weather Inc. The forecaster says, “Rain this week in western and southern Argentina will be sufficient in maintaining a mostly better environment for summer crop development and improvement; however after Thursday and lasting through mid-week next week there will be a steady rate of drying across the nation raising moisture stress for some areas over time... This drier bias fits well with the 2008-09 crop year in which similar extremes in weather were noted. If the trend is correct portions of Argentina will be drying down again during February, but conditions may not get back to the same level of stress as that reported earlier in January. Nevertheless, a boost in rainfall will be needed by mid-February.”
Brazil rains to keep soybean harvest slow... Some center-south crop areas of Brazil received significant rain varying from 1 to 3 inches over the weekend. Brazil weather is expected to continue a little wetter than desired in some early soybean maturation and harvest areas, according to World Weather. The forecaster says, “Overall crop conditions in the nation were still rated very good, although less frequent and less significant rain is needed in center-south and center-west crop areas to promote early season soybean maturation and harvesting as well as safrinha corn planting.”
Brazil soybean harvest reaches 5% done... Brazil’s soybean harvest advanced three percentage points to 5% complete as of last Thursday, according to AgRural. That was half the pace of last year’s harvest on that date. Given the soybean harvest delays, safrinha corn planting was 5% done, behind last year’s 14% at that time.
Limited winterkill concerns for U.S. winter wheat... Snow fell ahead of the bitterly cold temps that have moved into the central U.S., which provided insulation for the U.S. winter wheat crop. World Weather says, “Winterkill or wheat damage cannot be ruled out, although the impact is not likely to be very great.”
The week ahead in Washington... Work on the debt limit and spending will continue in Washington. President Joe Biden will meet Wednesday with House Speaker Kevin McCarthy (R-Calif.) to discuss the debt limit. McCarthy said in a recent interview House Republicans “won’t touch Medicare or Social Security” in their negotiations with the White House over spending cuts and raising the federal debt limit. There are two major economic events this week. On Wednesday, the Fed will announce its latest shift in interest rates, with markets widely expecting a 25-basis-point increase. As usual, the post-meeting press conference by Chair Jerome Powell will be closely monitored for clues about the Fed’s next moves. On Friday, the Labor Department will release the January employment data. Key agricultural data will include Tuesday’s Cattle Inventory Report from USDA.
China says Covid situation at ‘low level’ after holiday... China said the Covid-19 situation in the country was at a “low level” and that fever clinic visits due to the virus during the Lunar New Year dropped about 40% from before the week-long holiday. The number of severe Covid cases and deaths was also trending downward, Chinese health officials said. Meanwhile, passenger trips during the annual travel rush period reached 892 million between Jan. 7 and Jan. 29, up 56% from last year, a transport ministry official said, though that was down 46.9% from the same period in 2019.
Chinese manufacturing PMI drops in December... China’s official manufacturing purchasing managers index (PMI) dropped to 47.0 in December from 48.0 the previous month, marking the third straight monthly decline as the rapid spread of Covid infections hurt production. The December figure marked the steepest pace of contraction in factory activity since February 2020, with output (44.6), new orders (43.9) and export sales (44.2) all falling at faster rates.
Euro zone economic sentiment hits seven-month high... The European Commission’s index of economic sentiment rose to 99.9 in January – the highest reading since June 2022. The monthly survey showed consumer inflation expectations fell to 17.7 in January from 23.2 in December, well below the long-term average of 20.0. Optimism in industry rose to 1.3 from -0.6 in December, while optimism in services rose to 10.7 from 7.7. Consumer confidence improved in January to -20.9 from -22.1 and in the retail sector to -0.8 from -2.7.
Court grants request from two small refiners to halt their RFS compliance... The Fifth Circuit Court of Appeals Friday granted a request from two small refiners that they be allowed to halt their compliance under the Renewable Fuel Standard (RFS) after they were denied small refiner exemptions (SREs) by EPA. EPA rejected the requests of the two refiners and scores of other small refiners dating back to 2016, citing their interpretation of provisions in the Clean Air Act allowing for SREs. The court decision prevents EPA from applying the new standard on prior requests and grants a stay in the matter until the court can determine whether the agency’s new standard can legally be applied. EPA said it was reviewing the decision. Some predict other firms will follow this suit relative to previously requested SREs.
Diesel prices headed higher... A ban on Russian oil that starts Feb. 5 could lead to tighter global supplies and higher prices for products such as diesel, says a Barron’s article (link). U.S. distillate inventories, which include diesel, stand 20% below the five-year average. Oil Price Information Service, a sister company of the Wall Street Journal, writes that the decline in diesel prices at the pump in recent months won’t likely be duplicated in 2023 because many of the same elements that drove the surge in prices remain in place.
EPA dragging out decision on year-round E15 requests from several states... Attorneys general (AGs) representing seven Midwest states are against asking EPA to issue a waiver that would allow E15 to be sold in the region, starting this summer. In a letter to EPA Administrator Michael Regan, the AGs note that a group of governors formally petitioned for the waiver more than 270 days ago. “Without prompt action, there is a risk that E15 gasoline will not be available during the 2023 summer driving season and vehicle emissions will be higher than if EPA followed its obligations under the Clean Air Act,” the AGs wrote. EPA’s proposal on the states’ request has been under review at the Office of Management and Budget (OMB) since Dec. 5 with seven meetings held on the plan. Currently, EPA has targeted releasing its decision in March, well beyond the statutory deadline. A total of nine states have sought waivers, but the plan under review at OMB appears to only cover eight states.
China sells all wheat put up for auction... China sold all 140,066 MT of state-owned wheat reserves put up for auction. The average sales price was 2,961 yuan ($438.58) per metric ton.
Bullish cash cattle hopes... Packers started raising cash cattle prices late Friday, though traders will have to wait until later today to get the official average cash price and sales volume for last week. It appears packers will need to be more aggressive in their pursuit of cash cattle this week after dragging their feet over the past month. But they will have fresh contract supplies available with the flip of the calendar, which would limit their aggressiveness in the negotiated market this week.
Cash hog index rises for third straight day... The CME lean hog index is up 12 cents to $72.64 (as of Jan. 26), marking the third straight daily increase. That’s the first time the index has been up for three straight days since Dec. 12-14, and gives further hope the seasonal low is in place. February lean hog futures finished Friday $3.235 above today’s cash quote. April hogs finished at a $13.81 premium.
Weekend demand news... Egypt tendered to buy an unspecified amount of optional origin corn. Algeria tendered to buy a nominal 50,000 MT of optional origin durum 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
- 10:00 a.m. Export Inspections — AMS
- 2:00 p.m. Egg Products — NASS
