First Thing Today | February 3, 2023
Good morning!
Followthrough buying in soybeans, corn and wheat drop... Soybeans extended Thursday’s gains in overnight trade, while the corn and wheat markets faced pressure. As of 6:30 a.m. CT, corn futures are trading 2 to 3 cents lower, soybeans are fractionally to 2 cents higher, HRW wheat futures are 7 to 8 cents lower while SRW and HRS futures are 3 to 5 cents lower. Crude oil futures are modestly weaker while the U.S. dollar index is around 185 points lower.
Two-year low in jobs growth expected... Economists polled by Reuters expect the Labor Department to report the U.S. economy added 185,000 non-farm payrolls in January. That would be down from a gain of 223,000 in December and the smallest increase since January 2021. The unemployment rate is expected to tick up to 3.6% from 3.5% the previous month.
FAO global food price index drops again... The UN Food and Agriculture Organization (FAO) global food price index dropped for the tenth straight month in January and was 17.9% below the March 2022 peak. The January decline was driven by a drop in prices of vegoils, dairy and sugar, while cereal grains and meat remained largely stable. Compared to year-ago, prices were up 1.3% for meat, 2.7% for dairy, 4.8% for cereal grains and 2.8% for sugar, while vegoils dropped 24.5%.
Russia raises wheat export tax... Russia’s wheat export tax for Feb. 8-14 will be 4,496.6 rubles ($64.08) per metric ton based on an indicative price of $307.20. That’s up from a rate of 4,365.3 rubles per metric ton the previous week.
Firm cuts Russia’s 2023 wheat crop forecast... Agriculture consultancy IKAR has cut its forecast for Russia’s 2023 wheat crop by 3 MMT to 84 MMT due to weather issues in some areas. Dryness is a rising concern in southern areas of Russia, while issues with ice crusting and potential winterkill in central production areas.
IMF: China must speed up reform to offset population, productivity issues... China must make reforms to keep state firms competitive, continue opening up and gradually lift the retirement age if it wants to maximize its growth potential, the International Monetary Fund (IMF) says. Rule of thumb: When China’s growth rate rises by one percentage point, growth in other countries increases around 0.3 percentage points, according to recent IMF staff analysis. That underscores how domestic reforms could boost China’s economy and that of others too.
China eyes help for consumers but big stimulus unlikely... China’s policymakers plan to step up support for domestic demand this year but are likely to stop short of major direct consumer subsidies, keeping their focus mainly on investment, three sources close to policy discussions told Reuters. There is speculation hefty household stimulus measures could be announced at a parliament meeting in March. However, sources told Reuters they expect China to stick more closely to its familiar playbook of policies to support key industries and splurge on infrastructure, aiming to shore up jobs and incomes and eventually lift consumer sentiment off record lows.
China’s bad loans shrink a little in 2022... China’s banking sector bad loan ratio stood at 1.71% at the end of 2022, down 0.09 percentage point from a year earlier, the Shanghai Securities News reported, citing the sector’s regulator. Outstanding non-performing loans stood at 3.8 trillion yuan ($563.45 billion) at the end of last year, while the financial institutions disposed of 3.1 trillion yuan in bad assets, including 2.7 trillion yuan in bad loans. However, many analysts believe the actual levels of bad loans may be far higher than official data.
Deese to step down, with no successor yet... President Joe Biden announced Brian Deese — his top economic aide, who has helped steer the White House’s top regulatory and legislative efforts — would step down as director of the National Economic Council. Deese is expected to leave the administration in mid-February, according to a White House official.
DOE asks to halt additional oil reserve sales... The Department of Energy (DOE) is asking Congress to halt the sales of 26 million more barrels of oil from the nation’s emergency supply mandated for this fiscal year as it seeks to refill the Strategic Petroleum Reserve.
GOP introduces WOTUS resolution of disapproval in Senate, House... The resolutions of disapproval of the Biden administration’s Waters of the United States (WOTUS) rule will not likely have the votes in the Senate. Even if it did, President Biden would veto the Congressional Review Act resolution, and there would not be enough votes to override.
Senators reintroduce cattle market bill, but the same hurdles remain... Sens. Chuck Grassley (R-Iowa), Deb Fischer (R-Neb.), Ron Wyden (D-Ore) and Jon Tester (D-Mont.) and 18 other cosponsors on Thursday introduced the bipartisan Cattle Price Discovery and Transparency Act of 2023. The legislation would establish regional cash minimums and equip producers with more market information, including permanently authorizing a cattle contract library. NCBA opposes the measure while it is supported by the U.S. Cattlemen’s Association. Hurdles for the measure remain in both the House and Senate.
Still waiting on cash cattle trade... Packers’ string of success in slow playing cash cattle negotiations may have come to an end. Thursday’s explosive gains in live cattle futures and their need for supplies after limited purchase recently, combined with current feedlots, point to higher cash prices. Some sources believe cash priced could rise upwards of $3 by the end of today’s activity.
Volatility suggests low for hogs in the works... Lean hog futures have held in a sideways range for a couple weeks, though price action has been more volatile the past six sessions. Increased volatility often signals the market trend is about to reverse. In this case, hog futures are working on posting a seasonal low after an extended price decline.
Overnight demand news... Egypt purchased 535,000 MT of wheat – all expected to be sourced from Russia. Taiwan tendered to buy 48,100 MT of U.S. 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
- 2:00 p.m. Dairy Products — NASS
- 2:00 p.m. Peanut Prices — NASS
- 2:30 p.m. Commitments of Traders — CFTC
