First Thing Today | February 7, 2023
Good morning!
Beans firmer, corn weaker and wheat mixed overnight... Soybean futures recouped a portion of Monday’s losses overnight, while the corn market gave back yesterday’s gains and wheat futures showed a varied tone. As of 6:30 a.m. CT, corn futures are trading 1 to 2 cents lower, soybeans are 4 to 8 cents higher, winter wheat futures are mostly 1 to 3 cents lower and spring wheat is fractionally to 2 cents higher. Front-month crude oil futures are more than $1.00 higher and the U.S. dollar index is trading just above unchanged.
Consultant cuts Argentine soybean crop forecast... After two weeks of relatively favorable weather, the forecast for Argentina is hotter and drier, “which the earlier planted soybeans can ill afford,” according to South American crop consultant Dr. Michael Cordonnier. As a result, he cut his Argentine soybean crop forecast by 1 MMT to 38 MMT and noted “the estimate could easily move lower with an extended period of hot and dry weather.” Cordonnier left his Argentine corn crop forecast at 44 MMT but warned “any extended period of hot and dry weather going forward would result in a lower corn estimate.” Cordonnier kept his Brazilian crop estimates at 151 MMT for soybeans and 125 MMT for corn. For corn he noted, “Given the slow planting pace of the safrinha corn, I think the weather over the next several months will have to be better than average to achieve that number.”
Mexico addresses concerns about U.S. GMO corn... If U.S. GMO corn passes the sanitary filters of the Federal Commission for Protection against Sanitary Risks (Cofepris), it will have no problem entering Mexico, said Mexico’s Secretary of Economy Raquel Buenrostro. Without specifying a date, Buenrostro anticipated a new decree will be published in a few days, which she says will address U.S. concerns and should eliminate the possibility of the U.S. starting a dispute settlement process against Mexico under the U.S.-Mexico-Canada Agreement. “In the new drafting proposal, an article was included, ‘claritito,’ which said that transgenic corn would be evaluated by Cofepris on a scientific basis, which is our regulatory health authority, and that it could work together with the regulatory health authorities of other countries. Then there would be no problem because the science is already there. And if they prove that there is no harm to health, then it will be approved. If Cofepris says that it does not generate any harm, the product is approved,” Buenrostro told El Economista.
SOTU ‘prebuttal’... House Speaker Kevin McCarthy (R-Calif.) on Monday offered a “prebuttal” of sorts ahead of President Joe Biden’s State of the Union (SOTU) address this evening, urging him to enter negotiations with Republicans on a “responsible” debt limit increase that avoids any U.S. payment default while also addressing the country’s longer-term fiscal challenges. “Our national debt is high, too high, and the problem is getting worse, not better,” McCarthy said. “We need a different approach — no drawing lines in the sand and saying ‘it’s my way or the highway,’” the Speaker said. “But most of all, no blank checks for runaway spending.” Biden is expected to urge quadrupling the tax on corporate stock buybacks, according to the White House. He also plans to call for a billionaire minimum income tax (which would levy a 20% minimum rate on U.S. households with net wealth of more than $100 million), and push to expand the $35-a-month price cap on insulin to all users, not just those on Medicare, the White House said. Meanwhile, the ag sector will watch to see whether Biden mentions a new farm bill as legislature that could see bipartisan support and action this year.
Biden: U.S./China relations not weakened by balloon incident... President Biden said on Monday relations between Washington and Beijing were not weakened by the United States’ downing of a suspected Chinese spy balloon over the weekend. Biden said, “We made it clear to China what we’re going to do. They understand our position. We’re not going to back off. We did the right thing and it’s not a question of weakening or strengthening – it’s reality.” When asked on Tuesday whether China had asked the U.S. to return the debris from the downed balloon, Chinese foreign ministry spokesperson Mao Ning said the balloon belonged to China. “This balloon is not American. The Chinese government will continue to defend its legitimate rights and interests,” she said. Mao also said she did not have more information on what equipment the balloon was carrying.
China/Brazil agree on yuan clearing in Brazil... China and Brazil’s central banks signed a memorandum of understanding on setting up yuan clearing arrangements in Brazil, the People’s Bank of China (PBOC) said. The establishment of such arrangements would be beneficial to cross-border transactions, and further promote bilateral trade and investment facilitation, PBOC said.
Russia not planning grain purchases for state reserves... Russia’s ag ministry is not planning to purchase grain for the intervention fund in 2023, First Deputy Prime Minister Oksana Lut said on Monday. The fund purchased about 3 MMT of grain last year, Lut said.
American Crystal shutting down Montana sugar plant... American Crystal Sugar Co. will close its Sidney, Montana, plant because Montana-Dakota Beet Growers Association farmers showed there no longer was adequate interest in growing enough of the crop to sustain operations. Plant closure procedures will begin April 14. Sidney Sugars Inc. completed processing the 2022 crop in December but will continue cleanup work in the factory until April and warehouse operations will last into summer.
Indonesia to review palm oil export quota ratio... Indonesia will review its palm oil export quota ratios amid rising prices of domestic cooking oil, a government official said. Indonesia currently allows companies to export six times the volume they have sold to the domestic market. The country said on Monday it would suspend some existing palm oil export permits until the end of April. The Indonesian government regulates the price of palm oil sold under the Domestic Market Obligation (DMO). Authorities will also review the price set for the DMO.
USDA disaster aid payments edge higher... Payments under the Emergency Relief Program (ERP) as of Feb. 5 totaled $7.38 billion, up from $7.37 billion the prior week. The payments include $6.27 billion for non-specialty crops ($6.26 billion prior) and $1.11 billion for specialty crops (virtually unchanged). There is no word yet on ERP Phase 2 payouts as enrollment only started Jan. 23. There’s also no word yet from USDA as to whether any of the remaining 25% of ERP Phase 1 payments will be made. USDA has previously said ERP Phase 1 payments for crops will be prorated by 75% to ensure that total ERP payments, including payments under ERP Phase 2, do not exceed the available funding. The recently passed $1.7 trillion omnibus spending bill had $3.7 billion in farm disaster aid to cover eligible 2022 crop and livestock losses. USDA continues to work on that program’s details. Amounts paid under the Coronavirus Food Assistance Program 1 (CFAP 1) remained essentially the same while payments under CFAP 2 now total $19.37 billion, up from $19.35 billion the prior week. Original CFAP 2 payments are at $14.48 billion ($14.46 billion prior) and $4.89 billion for top-up payments (unchanged).
Volvo joining a growing list of manufacturers considering move to America... Volvo is considering moving investments to the U.S. if Europe doesn’t bolster aid in response to Biden’s landmark green subsidy push. The Inflation Reduction Act (IRA) will strongly increase demand for emissions-free trucks in the U.S., said Volvo Chief Executive Officer Martin Lundstedt. Meanwhile, Treasury Secretary Janet Yellen discussed the IRA with European Commission Executive Vice President Margrethe Vestager over a call Monday. Yellen also discussed the EU’s Green Deal Industrial Plan.
No word yet from CFTC on when Commitments of Traders report will be released... The Commodity Futures Trading Commission (CFTC) on Feb. 2 announced the weekly Commitments of Traders report scheduled for Feb. 3 would not be released due to a cyber attack on ION Cleared Derivatives. The agency said the report would be released once all trades can be reported and the regulator has received the information and validated the data from firms. CFTC has not yet announced when the report scheduled for release Feb. 3 will be released.
Cash prices surge on low-volume trade... The average cash cattle price surged $2.92 to $158.17 last week, the highest price since the end of May 2015. While that’s supportive, the most bullish aspect of last week’s trade is that packers purchased only 64,000 head of cattle and just 50,000 head in the five-state area. As a result, packers are still short-bought on near-term slaughter needs, signaling cash prices will likely rise again this week – and potentially post strong gains again.
Building case for seasonal cash hog bottom... The CME lean hog index is 24 cents higher to $73.29 (as of Feb. 3), marking gains in seven of the past nine days. While that supported February lean hog futures, which exit the board a week from today, deferred futures faced heavy selling tied to concerns about U.S./Chinese relations and the potential impact on U.S. pork demand. Traders have modest seasonal premiums built into spring- and summer-month hog futures – way too small in our opinion.
Overnight demand news... South Korea purchased 138,000 MT of corn – 70,000 MT to be sourced from South America and 68,000 MT optional origin. Jordan passed on a tender to buy 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
- 10:00 a.m. Highlights From the February 2023 Farm Income Forecast — ERS
