First Thing Today | February 2, 2023

Good morning!

Varied price tone overnight... Soy complex futures traded higher overnight, while wheat favored the upside and corn faded to a mixed tone this morning. As of 6:30 a.m. CT, corn futures are trading fractionally on either side of unchanged, soybeans are 7 to 8 cents higher, SRW wheat futures are around a penny higher, HRW wheat is narrowly mixed and HRS wheat is 2 to 4 cents higher. Front-month crude oil futures are modestly lower and the U.S. dollar index is around 100 points lower.

Weekly Export Sales Report out this morning... For the week ended Jan. 26, traders expect:

StoneX raises Brazilian soybean crop estimate... StoneX raises its Brazilian soybean crop estimate 400,000 MT to a record 154.2 MMT on Wednesday. The firm said, “Despite the concern for the dry weather in southern Brazil, which led to another cut in the coast of Rio Grande do Sul, the prospects for the rest of the country remain very positive.” StoneX forecasts Brazil’s corn crop at a record 129.9 MMT.

Potash prices falling, could drop further... Global potash prices fell 25% in the fourth quarter of last year and could slide further in the first half. Farmers are curbing consumption and inventories are building, signaling a supply-chain refill, Bloomberg Intelligence says.

WSJ comments on Fed stance, market response... “The employment cost index for the 2022 fourth quarter, released this week, showed compensation up 1%, and 5.1% over the preceding 12 months. Personal-consumption expenditure inflation is still 5% on an annual basis while the Fed’s target is 2%. That sounds like more work-to-do to us,” the Wall Street Journal (WSJ) says in a commentary item. “But markets must believe that Mr. Powell doesn’t mean what he says, or else that inflation is going to fall so fast and so clearly that the Fed will stop at one more 25-point increase in March. That would take the fed funds interest rate to 5%, from 4.75% after Wednesday. This would explain the stock and bond rallies on Wednesday. The yield on the 2-year Treasury note fell eight basis points to 4.13%, while the 10-year fell nearly nine points to 3.42%. This is consistent with the generally looser financial conditions that have prevailed since the Fed’s last meeting in December when it raised fed funds by 50 basis points… The Fed is right in our view not to declare premature victory. The worst result would be stop-and-start policy that leaves inflation well above the Fed’s target. Markets can make their bets, but the central bank’s vital job is correcting its historic inflation mistake.”

BOE raises interest rates another 50 basis points... The Bank of England (BOE) raised interest rates another 50 basis points – its 10^th hike – pushing the benchmark lending rate to 4%. But BOE dropped its pledge to keep increasing rates “forcefully” if needed and said inflation had probably peaked. BOE said its string of interest rate hikes since December 2021 were likely to have an increasing impact on the economy. That should help to bring inflation down to about 4% by the end of this year, signaling the series of rate hikes might be coming to a completion. The European Central Bank is also expected to raise interest rates another 50 basis points later this morning.

Stabenow: No cuts in big funding boost for ag-related climate programs... Senate Ag Committee Chair Debbie Stabenow (D-Mich.) insists she will not agree to any cuts to the funding she got in the Inflation Reduction Act for climate-related farming practices. “We’ll negotiate everything, but I’m not interested in any way in rolling back what farmers want on conservation,” she said after the committee’s first farm bill hearing of the year on Wednesday. “It's one of those situations that's really a win-win, because it's not only about addressing the climate crisis, but farmers want more carbon in the soil, because it's healthier soil. Everybody else agrees because they don't want it in the atmosphere.”

Biden, McCarthy make ‘no promises’ on debt, will keep talking... House Speaker Kevin McCarthy (R-Calif.) left a White House meeting with President Joe Biden on Wednesday afternoon saying they had a “good conversation” but made “no agreements, no promises” regarding the debt limit. McCarthy said the discussion went better than he expected and he’s hopeful a deal on raising the debt limit can be reached with Biden well before the deadline when the nation would no longer be able to pay its bills. “I think, at the end of the day, we can find common ground,” McCarthy said.

China’s foreign trade faces ‘extremely severe’ environment... China’s imports and exports are facing an “extremely severe” environment due to the surging risks of global recession and slowing external demand, a commerce ministry official said. Amid the pressing challenge of lackluster demand, Beijing will seek to use timely measures to promote an early recovery of consumption as the main economic driving force and stabilize and upgrade foreign trade and investment.

Slow developing cash cattle market... Cash cattle trade has been slow to develop again this week. Packer bids have been limited as they drag their feet in hopes of getting cattle bought at lower prices on Friday. Feedlots are in no hurry to move any more animals than necessary unless packers raise bids, suggesting trading volume could be light again this week.  

Cash hog market still searching for a low... After four days of gains, the CME lean hog index has posted two days of declines, falling 7 cents to $72.51 (as of Jan. 31). February lean hog futures finished Wednesday $1.465 today’s cash quote, while the April contract had an $11.79 premium. Those premiums will likely limit buyer interest in hog futures.

Overnight demand news... Algeria purchased 30,000 MT of corn expected to be sourced from Argentina. South Korea bought 60,000 MT of feed wheat that can be sourced from the U.S., Australia, Romania or Bulgaria. 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

• 7:30 a.m. Weekly Export Sales — FAS