First Thing Today | February 16, 2023

Good morning!

Corn and soybeans weaker, wheat mixed overnight... Corn, soybeans and SRW wheat faced light followthrough selling during overnight trade, while HRW and HRS wheat mildly rebounded. As of 6:30 a.m. CT, corn futures are trading around a penny lower, soybeans are 1 to 3 cents lower, SRW wheat is 2 to 4 cents lower, HRW wheat is mostly 1 to 3 cents higher and HRS wheat is 4 to 5 cents higher. Front-month crude oil futures are modestly firmer, while the U.S. dollar index is around 175 points lower.

AgRural cuts Brazilian soybean crop estimate... Brazil-based consulting firm AgRural cut its Brazilian soybean crop estimate by 2.1 MMT to a still-record 150.9 MMT due to impacts from drought in the far southern state of Rio Grande do Sul (RGDS). AgRural estimates RGDS’s crop at 16.1 MMT, down 4.3 MMT from its prior forecast. As we reported earlier this week, RGDS farmer group Aprosoja-RS says the state’s soybean crop could shrink to 12.6 MMT under a worst-case scenario. AgRural says expected high yields in Mato Grosso, Goiás and the northeastern states will partly offset losses in RGDS.

Weekly Export Sales Report out this morning... For the week ended Feb. 9, traders expect:

Reviewing CBO’s baseline for ag-related forecasts for the first trillion-dollar-plus farm bill... For the 10-year period beginning with fiscal year 2024, the Congressional Budget Office (CBO) projects total outlays for USDA Mandatory Farm Programs, Conservation Programs, and the Supplemental Nutrition Assistance Program (SNAP) total approximately $1.4 trillion, an increase of nearly 65% or $559 billion from the score of the 2018 Farm Bill at enactment. Once outlays related to the Inflation Reduction Act (IRA) are included with other miscellaneous farm bill titles, the total cost of the next farm bill is expected to approach $1.5 trillion – the first trillion-dollar farm bill in U.S. history. Based on the 10-year period of 2024 to 2033, SNAP (food stamp) spending is nearly 82% larger than the 2018 Farm Bill score at enactment of $663 billion. As it relates to farm programs such as crop insurance and commodity programs, crop insurance outlays including delivery expenses, premium cost-sharing, and underwriting gains across fiscal years 2024 to 2033 are projected at $97 billion, representing 7% of total expected outlays. Outlays for commodity support programs such as Price Loss Coverage (PLC), Agriculture Risk Coverage (ARC), Dairy Margin Coverage, and Livestock and Tree Disaster Programs, among others, are estimated at $62 billion across fiscal years 2024 to 2033, approximately 4% of the total score. Outlays for conservation programs, not including additional budget authority and outlays related to the IRA, such as the Conservation Reserve Program, the Environmental Quality Incentives Program, or the Conservation Stewardship Program, among others (and including sequestration) are estimated at $57.5 billion across fiscal years 2024 to 2033. Click here for more details.

Update on China balloon situation... U.S. Ambassador to Japan Rahm Emanuel said the Chinese balloon’s intrusion into the U.S. was part of a pattern of aggressive behavior by Beijing. Emanuel noted China’s recent beaming of military-grade laser on a Philippine coast guard patrol vessel, the harassment of U.S. planes by Chinese jets and China’s opening of illegal police stations in the U.S., Ireland and other countries. Meanwhile, a Washington Post (WaPo) story Tuesday evening said the Chinese balloon situation may have indeed been a mistake, as China contended. “U.S. monitors watched as the balloon settled into a flight path that would appear to have taken it over the U.S. territory of Guam. But somewhere along that easterly route, the craft took an unexpected northern turn, according to several U.S. officials, who said analysts are now examining the possibility China didn’t intend to penetrate the American heartland with their airborne surveillance device,” WaPo reported.

“This new account suggests that the ensuing international crisis that has ratcheted up tensions between Washington and Beijing may have been at least partly the result of a mistake.”

China starts small with GMO corn production... China will likely plant less than 1% of its corn fields with genetically modified varieties this year, two people familiar with the plans told Reuters. The ag ministry has designated around 4 million mu (267,000 hectares or 660,000 acres) to be planted with GMO corn this year, said a senior manager at a Chinese seed developer briefed on the plans. Several varieties will be planted in certain counties of Inner Mongolia, Jilin, Hebei and Yunnan provinces, he said. “It’s a large-scale trial, not a fully fledged commercial release,” said a second industry source who has also been briefed on the plans. The plans could still change, said both sources, although planting typically starts in about two months and farmers are already buying seed.

China to buy domestic soybeans for state reserves... China’s state stockpiler Sinograin will buy 10,875 MT of domestic soybeans from the 2022 crop for state reserves on Feb. 17.

Fed’s next vice chair... The Wall Street Journal reported the White House was considering Austan Goolsbee, president of the Chicago Fed, to be the Federal Reserve’s next vice chair. Goolsbee would replace Lael Brainard, who will take over as director of the National Economic Council later this month. Before heading to the Chicago Fed last month, Goolsbee, 53, served as a top economic adviser to former President Barack Obama and before his appointment this year was a professor of economics at the University of Chicago’s Booth School of Business.

ECB official: Slow the pace of rate increases... The European Central Bank (ECB) should start raising its interest rates in smaller increments and avoid committing to future moves as inflation in the euro zone falls, ECB board member Fabio Panetta said. He called for caution, saying a string of hikes that saw the central bank raise rates by 300 basis points since July had yet to be completely felt by the economy. “With rates now moving into restrictive territory, it is the extent and duration of monetary policy restriction that matters,” Panetta said. “By smoothing our policy rate hikes – that is, moving in small steps – we can ensure that we calibrate both elements more precisely in the light of the incoming information and our reaction function.”

Malpass to exit as head of World Bank... World Bank President David Malpass will step down at the end of June after more than four years leading the multilateral development bank, it was announced on Wednesday. “Having made much progress, and after a good deal of thought, I’ve decided to pursue new challenges,” Malpass said in a statement.

Waiting on cash cattle trade... Live cattle futures paused on Wednesday as traders waited on active cash cattle trade to develop. So far, only light sales in the $159 to $161 range have been reported. Packers still hope to get cattle bought at steady/weaker prices, while feedlots expect firmer prices. After active trade last week, there’s a possibility this week’s volume could be light unless either side flinches. Meanwhile, boxed beef prices continued to charge higher, with Choice up $3.61 yesterday, while Select gained $2.41. Strengthening wholesale beef prices have kept packer margins in the black despite the recent rise in cash cattle prices.

Cash hog prices firm again, pork cutout drops... The CME lean hog index is up another 44 cents to $75.62 (as of Feb. 14), the tenth straight daily gain and 14 of the last 16 it has been higher. The pork cutout value dropped 94 cents but remained above the $80.00 mark, a level at which packers had been unable to sustain prior to this week.

Overnight demand news... Japan purchased 76,203 MT of wheat in its weekly tender, including 22,178 MT U.S., 31,000 MT Canadian and 23,025 MT Australian. Thailand purchased 60,000 MT of feed wheat expected to be sourced from the Black Sea region. Tunisia tendered to buy 100,000 MT of soft milling wheat and 75,000 MT of feed barley – both optional origin.

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
• 2:00 p.m. Tree Nuts: World Markets and Trade — FAS