First Thing Today | February 5, 2024
Good morning!
Beans mixed, corn and wheat lower overnight... Soybeans posted light two-sided trade overnight, while the corn and wheat markets weakened. As of 6:30 a.m. CT, corn futures are trading 1 to 3 cents lower, soybeans are 2 cents lower to a penny higher and wheat futures are 5 to 9 cents lower. Front-month crude oil futures are modestly lower, while the U.S. dollar index is around 350 points higher.
Some relief coming for dry areas of Argentina, mixed bag for Brazil... Hot, dry weather dominated Argentina weather during the weekend, further stressing crops. World Weather Inc. says showers will occur in parts of Argentina through midweek that may reduce some of the stress, with better rainfall chances the second half of the week into next week. Mato Grosso do Sul, Brazil, will get some scattered rainfall this week to help ease its dryness, though more will be needed. Other areas in southern Brazil may have to wait until the weekend or next week for more meaningful rain to ease dryness. The remainder of Brazil crops will stay in good condition.
Rapid soybean harvest, safrinha corn planting continues in Brazil... Brazil’s soybean harvest advanced to 16% done as of last Thursday, according to AgRural, the second fastest rate behind 19% on that date in 2018-19. Hot, dry weather in southern areas of the country pose a threat to later-maturing soybeans, and if they persist, could lead to further cuts to production. AgRural estimated safrinha corn planting reached 27% completed as of last Thursday, the fastest rate in its data back to 2013.
U.S. plans more Middle East attacks... The U.S. intends to launch further strikes at Iran-backed groups in the Middle East, White House National Security Adviser Jake Sullivan said on Sunday, after hitting Tehran-aligned factions in Iraq, Syria and Yemen over the weekend. The U.S. and Britain unleashed attacks against 36 Houthi targets in Yemen, a day after the U.S. military hit Tehran-backed groups in Iraq and Syria in retaliation for a deadly attack on U.S. troops in Jordan.
January weather did not impact Ukrainian winter crops... Weather conditions in late January did not have a negative impact on the condition of Ukrainian winter grain crops, analyst APK-Inform quoted state weather forecasters as saying. Forecasters said minimum soil temperatures decreased, but they “were above critical freezing temperatures.”
Turkey to discuss ‘new methods’ for Ukraine Black Sea grain exports with Russia... Turkish President Tayyip Erdogan will discuss a new mechanism to allow Ukrainian grain exports through the Black Sea with his Russian counterpart Vladimir Putin during his upcoming visit to Turkey, Foreign Minister Hakan Fidan said. Putin is expected to visit Turkey on Feb. 12 to meet Erdogan. There are efforts to find “new methods” to transport Ukrainian grain to the world markets, Fidan said in an interview with private A Haber television. “The previous grain deal worked within a certain mechanism, now it has been seen that there is a possibility of going with a different mechanism, and now there are efforts to concretize this possibility,” Fidan said.
The week ahead in Washington... Behind-the-scenes work on fiscal year (FY) 2024 spending bills continues, with 20% of them (including USDA) having a March 1 deadline and a March 8 deadline for the remaining 80%. As for new farm bill discussions, both chambers are throwing out ideas that, frankly, should have come last year, not now. This further leads most farm bill watchers to conclude consensus on a new measure will not be found this year. The economic focus this week will be Friday’s release of annual revisions to the consumer price index, which affect the previous five years of inflation data, though they are usually relatively minor. Key agricultural data this week will be USDA’s first farm income forecasts for 2024 on Wednesday and Thursday’s Supply & Demand Report.
Senate unveils $118 billion bill combining border reform, foreign aid, and immigration changes... The Senate on Sunday unveiled a comprehensive bipartisan bill with the dual goals of reducing illegal border crossings and supporting Ukraine and Israel. The legislation is set for an initial Senate vote as early as Wednesday but faces stiff opposition from some Republicans. Bottom line: The bill represents an attempt to address border security and international support while facing political challenges and partisan division. With key House Republicans saying the Senate deal is “dead on arrival,” its chances appear doomed, especially as House Speaker Mike Johnson (R-La.) says the House will consider a standalone aid bill involving aid to Israel but not Ukraine.
Powell expects three rate cuts in 2024... Federal Reserve Chair Jerome Powell confirmed in a Sunday interview on CBS’ 60 Minutes the central bank’s rate-setters still anticipate making approximately three quarter-point rate cuts in 2024. Powell mentioned that nearly all members of the Federal Open Market Committee (FOMC) expect the Fed to reduce rates from their current range of 5.25% to 5.50% at some point this year. Although new projections are set to be released on March 20, Powell stated that nothing significant has occurred since December that would prompt a dramatic shift in forecasts. He explained that if the economy were to weaken, the Fed could reduce rates sooner and more rapidly. Conversely, if inflation proves more persistent, rate cuts might be delayed and gradual. Powell emphasized the strength of the labor market and expressed optimism it would continue to perform well. His “base case” is that inflation will continue to decline in the first half of the year due to lower readings from the previous year.
OECD issues caution on inflation, adjusts U.S. rate cut forecast... The Organization for Economic Cooperation and Development (OECD) released interim economic forecasts, expressing caution regarding the ongoing inflationary trend that began in 2021. The organization believes it’s too early to determine whether inflation will subside by 2025, emphasizing that central banks should remain vigilant. Of note: OECD has adjusted its prediction for the first U.S. interest rate cut, anticipating it will occur in the second quarter of this year, which is earlier than its earlier forecast from November, which expected such a move in the second half of the year. Additionally, OECD slightly improved its outlook for the global economy compared to previous assessments. It also raised the growth forecast for the U.S. in 2024, projecting it to be 2.1%, up from the earlier estimate of 1.5%.
Euro zone economy shows some signs of recovery, producer prices plunge... The HCOB Composite purchasing managers index (PMI) for the euro zone compiled by S&P Global rose to 47.9 in January, compared with 47.6 in December. That was the best reading since July, but it remained below the 50 mark that separates growth from contraction. New business inflows reduced at the smallest rate in seven months while new business from external clients experienced the smallest decrease since April 2023. Meanwhile, euro zone producer prices fell 10.6% in December, marking the largest decline in three months, led by a 27.5% plunge in energy prices.
Bullish cash cattle expectations... Packers actively raised cash cattle prices last week and bought a lot of cattle. While that could slow their appetite for cattle this week, it also indicated they were more short-bought on near-term slaughter needs than expected. Cash sources come into the week anticipating firmer cash prices, though active trade isn’t likely until after midweek.
Cash hogs climb while pork cutout stabilizes... The CME lean hog index is up another 41 cents to $73.12 as of Feb. 1, continuing the seasonal climb over the past month, and is now 27 cents above last year at this time. February lean hog futures finished last Friday at a $2.33 premium to today’s cash quote. Meanwhile, the pork cutout value slipped 19 cents on Friday and is holding in the upper-$80.00 range.
Weekend demand news... Exporters reported no tenders or sales.
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. Export Inspections — AMS
- 2:00 p.m. Dairy Products — NASS
