First Thing Today | March 9, 2023

Good morning!

Soybeans and corn firmer, wheat mixed... Corn and soybeans traded higher overnight, while the wheat market turned mixed this morning after corrective gains earlier in the session. As of 6:30 a.m. CT, corn futures are trading 1 to 3 cents higher, soybeans are 4 to 8 cents higher, SRW wheat is narrowly mixed, HRW wheat is steady to a penny lower and HRS wheat is mostly 6 to 7 cents higher. Front-month crude oil futures are trading just above unchanged and the U.S. dollar index is around 250 points lower.

Exchange slashes Argentine soybean, corn crop forecasts... The Rosario Grain Exchange slashed its estimate of Argentina’s soybean crop by 7.5 MMT to 27 MMT. That would be the smallest crop since the country produced 21.2 MMT of soybeans in 1999 – and warned there could be additional crop losses if temps don’t moderate and there aren’t timely late-season rains. The exchange also slashed its corn crop forecast by 7.5 MMT to 35 MMT. “Argentina is suffering from a climate scenario without precedent in modern agriculture,” the exchange said. “There are no weather conditions on the horizon which allow us to offer an estimated minimum for the harvest.”

Brazil trims soybean crop estimate, raises corn production forecast... Conab lowered Brazil’s soybean crop forecast by 1.5 MMT from last month to 151.4 MMT, though that would still be record production. The Brazilian government’s official crop estimating agency raised its corn crop forecast by 930,000 MT to a record 124.7 MMT. Conab cut its 2022-23 soybean export forecast by 910,000 MT to 92.99 MMT, while it raised corn exports 1 MMT to 48 MMT.

Russia: Still ‘a lot of questions’ with Black Sea grain deal... The Kremlin said on Thursday there were still “a lot of questions” remaining over the Black Sea grain deal, and that there were currently no plans for talks between President Vladimir Putin and UN Secretary-General Antonio Guterres. “There are still a lot of questions about the final recipients, questions about where most of the grain is going. And of course, questions about the second part of the agreements are well known to all,” Kremlin spokesman Dmitry Peskov said. The “second part” of the deal refers to a memorandum of understanding with the UN, which facilitates Russian food and fertilizer exports.

Ukraine’s grain production could fall 37% this year... Ukrainian grain harvest may fall 37% to 34 MMT in 2023 because of a smaller grain sowing area and lower yield, Ukraine's national academy of agricultural science said. The academy also said a possibly larger area under oilseeds could result in a 13% rise in Ukraine’s oilseed harvest, which it said could reach 19.3 MMT. The scientists said in a report that based on preliminary estimates, Ukraine would face a 45% reduction in the area seeded to grains, while yields could decline 15% to 30% from last year.

Weekly Export Sales Report out this morning... For the week ended March 2, traders expect:

Powell: No decision yet on March rate hike... Fed Chair Jerome Powell said no decision has been made on the size of this month’s rate increase, telling a House panel Wednesday it’ll hinge on incoming job and inflation numbers. He reiterated the Fed will probably hike more and potentially faster if data warrant and again urged lawmakers to raise the debt ceiling. Rep. Ayanna Pressley (D-Mass.) asked Powell: “To prevent a recession, will you pause future interest rate hikes?” Powell responded: “We’re not seeking to have a recession, and we don’t think we need to have a recession.” Traders are now pricing in a 76% probability of a 50-basis-points hike in March, up from 31% a week ago, according to CME’s FedWatch tool. Some analysts now see the Fed funds rate peaking at 6%.

Citadel chief warns economic downturn looming... Ken Griffin, CEO of Citadel LLC, told Bloomberg household savings are shriveling and surging interest rates are choking growth. Consumers had saved up a large chunk of cash during the pandemic, but the subsequent excess spending has spurred higher inflation and put pressure on the Fed to tighten policy. “We have the setup for a recession unfolding,” the billionaire investor said. He called for the Fed to be clearer and more consistent with its messaging, and to stifle any hopes of easing monetary policy. “Every time they take the foot off the brake — or the market perceives they’re taking their foot off the brake — and the job’s not done, they make their work even harder,” Griffin said.

China’s CPI rises at slowest rate in a year, PPI continues to deflate... China’s consumer price index (CPI) in February was 1.0% higher than a year earlier, rising at the slowest pace since February 2022. Both food and non-food prices slowed sharply, as consumers stayed cautious despite a removal of zero-Covid policy. Food inflation hit its lowest in nine months at 2.6% above year-ago due to a sharp drop in pork prices. China’s producer price index (PPI) fell 1.4%, the fifth straight month of producer deflation and the steepest decline since November 2020, driven by weaker commodity prices. China’s inflation data indicates there’s worries about Beijing providing more stimulus to support an economic recovery.

Biden releases budget proposal today... President Joe Biden’s fiscal year 2024 budget proposals released today will be a political document designed to reveal what GOP conservatives seek to take away and the potential U.S. default they are threatening if the House keeps insisting on big reductions in spending. The president’s blueprint will not become law. It’s an opening bid at the start of lengthy negotiations heading into the summer and fall – if not longer. Biden says nearly $3 trillion in proposed measures would reduce deficits over 10 years. As expected, proposed tax increases opposed by conservatives, play a big role in the president’s revenue math.

Choice beef price drop attracts buying... Choice boxed beef prices dropped $3.15 Wednesday and are down $5.42 from their recent peak at $290.20. While that suggests the wholesale market may have put in a short-term price top, the decline triggered strong retailer interest as packers moved 165 loads of beef on the day, including 121.3 loads of Choice cuts. Strong retailer demand under the market and a seasonal tendency for price strength during spring limit the downside.

Methodical climb in cash hog index continues... The CME lean hog index is up another 20 cents to $79.29 (as of March 7). While the cash index is $7.18 off the late-January low, it’s nearly $20 below last year at this time. The slow climb higher in the cash index is limiting traders’ willingness to build in too much premium for spring- and summer-month hog futures.

Overnight demand news... Japan purchased 80,570 MT of milling wheat in its weekly tender, including 50,970 MT of U.S. and 29,600 MT Canadian. Algeria purchased 200,000 MT of durum wheat, with more purchases possible. Saudi Arabia tendered to buy 480,000 MT of 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
• 10:00 a.m. Livestock and Meat International Trade Data — ERS
• 11:00 a.m. Feed Grains Database — ERS
• 2:00 p.m. Season Average Price Forecasts — ERS
• 2:00 p.m. Wheat Data — ERS