Evening Report | February 1, 2023
Check our advice monitor on ProFarmer.com for updates to our marketing plan.
Cotton producers: Make initial 2023-crop sales… December cotton futures have quietly rallied around 15 cents from their fall lows to near 85.00 cents. Given global economic uncertainty that could reduce textile demand, that’s a strong price to start new-crop sales. We advise cotton hedgers and cash-only marketers to sell an initial 20% of expected 2023-crop production for harvest delivery.
Fed slows pace of rate hikes, expects ‘ongoing increases’... As widely expected, the Federal Reserve raised interest rates 25 basis points following its two-day Federal Open Market Committee meeting, lifting the benchmark rate to a range between 4.50% and 4.75%. But the Fed promised “ongoing increases” to interest rates as it continues the battle again inflation.
The post-meeting statement said, “Inflation has eased somewhat but remains elevated.” It said the U.S. economy was enjoying “modest growth” and “robust” job gains, with policymakers still “highly attentive to inflation risks.” As a result, “The (Federal Open Market) Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time.”
The statement noted further rate hikes will be in 25-basis-point increments, while taking into account how the tightening policy impacts the economy.
In his post-meeting press conference, Chair Jerome Powell said he is not fully sure when and at what level the Fed will stop with rate rises as it presses forward with its efforts to cool inflation. “There is more work to do,” he said. But Powell said disinflation is in its early stages.
While the economy is expected to slow, Powell nixed ideas the Fed could pivot this year unless conditions change. The current outlook suggests slower growth, modest gains in unemployment and a slow decline in inflation. As long as “the economy performs broadly in line with those expectations, it will not be appropriate to cut rates this year,” Powell said.
Timely rains expected in Argentina this month, but amounts won’t be great... Argentina received its best rains of the growing season the past week, resulting in the best soil moisture conditions in months. World Weather Inc. says timely rains will continue to fall during the first half of February, but totals will be lighter than normal and coverage will be spotty. Northeaster areas of the country are the driest and are unlikely to see any significant rains through mid-February, so crop stress will increase there.
World Weather says frequent rains will be needed to break the country’s drought, but “the second half of February does not look like it will be able to provide such aggressive rainfall.”
Brazil soybean exports slow, corn shipments stay strong... Brazil exported just 851,878 MT of soybeans in January as old-crop stocks were tight and harvest of new-crop supplies were slowed by wet conditions in central locations. Soybean exports plunged 1.168 MMT (57.8%) from December and were 1.600 MMT (65.3%) lower than last year.
Brazil exported 6.348 MMT of corn last month, down modestly form 6.412 MMT in December but up 3.616 MMT (132.4%) from January 2022.
December soybean crush falls shy of expectations... U.S. processors crushed 187.4 million bu. of soybeans in December, according to USDA, slightly less than the 188.0 million bu. traders expected. The crush pace dropped 2.1 million bu. (1.1%) from November and was 10.8 million bu. (5.4%) less than December 2021.
Despite the smaller-than-expected crush, soyoil stocks rose more than anticipated in December. Soyoil stocks increased 198 million lbs. from November to 2.306 billion lbs., though that was 160 million lbs. less than December 2021.
Corn-for-ethanol use lower than expected... Corn-for-ethanol use totaled 425.3 million bu. in December, according to USDA, less than the pre-report estimate of 438.6 million bushels. Ethanol use declined 24.9 million bu. (5.5%) from November and was 52.6 million bu. (11.0%) lower than December 2021.
Stocks of distillers dried grains with solubles (DDGS) declined to 1.680 million short tons, down 98,879 tons from November and 393,588 tons below December 2021.
U.S. requests second USMCA dispute panel to probe revised Canada dairy TRQ plan... U.S. Trade Representative (USTR) Katherine Tai announced Tuesday the U.S. formally requested a second U.S.-Mexico-Canada Agreement (USMCA) dispute panel to probe Canadian dairy tariff-rate quotas (TRQs). This came after revisions to the quotas following an earlier dispute panel ruling failed to bring Canada into compliance with the pact’s dairy market access provisions.
Canada’s Minister of International Trade, Export Promotion, Small Business and Economic Development Mary Ng criticized the U.S. decision to seek a second dispute panel. “Canada is disappointed that the United States has requested a dispute settlement panel,” she said. “Canada will continue to defend our supply management system and the market access that Canada and the United States have agreed on. We will stand firm against attempts to renegotiate agreements during the dispute settlement panel process.”
Colorado River water use deadline passes without deal... A Jan. 31 deadline to strike a deal on voluntarily cutting water use of the Colorado River has come and passed amid a historic drought and record-low reservoir levels. While a proposal called the “consensus-based modeling alternative,” was jointly submitted by six Western states, California — the largest user of the Colorado River — is not on board. It plans to submit its own plan to protect one of America’s most important natural resources, which supplies water to 40 million people. The federal government might now have to impose cuts that will likely end up in court.
