First Thing Today | February 8, 2024

Good morning!

Quiet grain trade ahead of USDA’s reports... Wheat traded lower overnight, while soybeans firmed and corn chopped around unchanged in quiet price action ahead of USDA’s February crop reports later this morning. As of 6:30 a.m. CT, corn futures are trading steady to fractionally higher, soybeans are 2 to 4 cents higher, winter wheat markets are 7 to 10 cents lower and spring wheat is 4 to 5 cents lower. Front-month crude oil futures are about 80 cents higher and the U.S. dollar index is up more than 200 points this morning.

Modest changes expected in February USDA crop reports... Traders anticipate slightly smaller U.S. ending stocks for corn and wheat and a rise in carryover for soybeans in USDA’s Supply & Demand Report at 11:00 a.m. CT. The average pre-report estimates peg ending stocks at 2.146 billion bu. for corn (2.162 billion bu. in January), 284 million bu. for soybeans (268 million bu.) and 647 million bu. for wheat (648 million bu.). A greater focus will be placed on USDA’s South American production forecasts, especially for Brazil. While USDA is expected to trim its Brazilian soybean and corn crop forecasts, they will likely remain above those from private crop watchers.

Brazil cuts soybean, corn crop and export forecasts... Brazilian crop estimating agency Conab cut Brazil’s soybean crop forecast 5.9 MMT from last month to 149.4 MMT. Conab lowered its corn crop forecast 3.9 MMT to 113.7 MMT, with 3.1 MMT of the decline due to a smaller outlook for safrinha production. February is the first month Conab incorporates field observations into its safrinha corn crop forecast. Conab now expects year-over-year declines of 3.4% for soybeans and 13.8% for corn from last year’s record production for both crops. Given the smaller production estimates, Conab reduced its 2023-24 export projections by 4.3 MMT for soybeans to 94.2 MMT and by 3 MMT for corn to 32 MMT.

Weekly Export Sales Report out this morning... For the week ended Feb. 1, traders expect:

Farm income shocker could press stalled farm-state lawmakers to act on new farm bill... USDA forecasts a significant $40 billion plunge in 2024 farm income versus 2023, which was down $26 billion from 2022. It is the lowest net farm income and net cash farm income forecast since 2020. Government payments would be the smallest in the last 10 years, while expenses continue to rise and receipts for crops (corn and soybeans notably) are seen falling. Impacts from USDA’s farm income forecasts quickly entered the farm bill debate, with Sen. John Boozman (R-Ark.), ranking on the Senate Ag Committee, saying: “Our current farm safety net is not equipped to handle the challenges our farmers are facing. The gravity of the situation drives home the need for Congress to make meaningful investments in the farm bill’s safety net programs.” USDA Secretary Tom Vilsack tried to put a positive spin on the forecasts, saying that “after the three highest consecutive years on record in 2021-2023,” farm incomes had returned to “slightly below historic levels.” During a speech to the National Association of State Departments of Agriculture, Vilsack said the recent good years had left American farmers in a good situation financially and that most would be able to survive the downturn.

Smaller Canadian wheat stocks, bigger canola inventories expected... Analysts expect Statistics Canada to report Canadian wheat stocks at 20.7 MMT as of Dec. 31, which would be down from 23.0 MMT last year at that time. Canola stocks are expected to total 13.0 MMT, which would be up from 12.7 MMT last year. Canadian grain stocks will be released tat 7:30 a.m. CT.

India further lowers wheat stocks limit... India again lowered the stock limit of wheat that traders can hold to increase availability and moderate prices. The limit on wheat stocks held by traders and wholesalers was cut to 500 MT from the previous 1,000 MT. This is the third time since June 2023 the wheat stocks limit has been reduced.

Russia, UN may discuss grain, fertilizer exports... Officials from Russia and the United Nations may meet this month to discuss facilitating Russian agricultural and fertilizer exports, RIA news agency reported, citing Russian UN envoy Gennady Gatilov. Moscow has insisted sanctions be lifted from companies and banks involved in Russian agricultural and fertilizer exports.

China raises cotton import forecast... China’s ag ministry now forecasts the country will import 2 MMT of cotton in 2023-24, which is up 150,000 MMT (8.1%) from its prior outlook and would be a 570,000-MT (39.9%) increase from last year. The ministry left its soybean and corn import forecasts unchanged.

Chinese deflation risks build... China’s consumer prices fell at their steepest pace in more than 14 years in January while producer prices also dropped, fueling deflationary concerns in the world’s second largest economy. China’s consumer prices fell 0.8% from year-ago in January, marking the fourth straight monthly decline and the biggest drop since September 2009.  Food prices declined at a record pace (-5.9% vs. -3.7% in December). China’s producer prices fell 2.5% from year-ago in January. While that was the smallest decline in four months, it marked the 16^th straight monthly contraction in factory gate prices.

Logistics operators observing signs of a freight rebound... Ocean imports to the U.S. are increasing, intermodal rail volumes are on the rise and truckers are receiving signals indicating a strengthening demand at the beginning of the year. The Wall Street Journal says this turnaround signals a shift for freight companies that have struggled since retailers reduced restocking efforts, causing shipping markets to plummet. Now, with destocking efforts concluded, supply chains are replenishing. The Logistics Managers’ Index experienced a surge last month, and reports indicate transportation prices are climbing. While Asia’s Lunar New Year may contribute to demand, indications of a strengthening American economy suggest increased goods movement within logistics pipelines.

Wholesale beef prices rebounding... After falling to $293.08 on Feb. 2, Choice boxed beef prices have rebounded $1.90 the past three days, including a 91-cent gain on Wednesday. Select beef has pushed back above $285.00. Despite the strength, packer cutting margins remain deep in the red, which has limited their willingness to actively establish cash cattle bids so far this week.  

Pork cutout fading... After recently trading in the upper-$80.00 range, wholesale pork prices have faced heavy pressure this week, falling another $2.24 on Wednesday to $83.99, as packers discount prices to move product after recent big slaughters. While the cash hog advance continues, it has slowed, rising 16 cents to $74.02 as of Feb. 6.

Overnight demand news... Japan purchased 136,321 MT of milling wheat it in weekly tender, including 54,036 MT U.S., 25,750 MT Canadian and 56,535 MT Australian.

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
• 11:00 a.m. Supply & Demand Report — WAOB
• 11:00 a.m. Livestock and Meat International Trade Data — ERS
• 11:00 a.m. Cotton Ginnings — NASS
• 11:00 a.m. Crop Production — NASS
• 11:15 a.m. Cotton: World Markets and Trade — FAS
• 11:15 a.m. Grains: World Markets and Trade — FAS
• 11:15 a.m. Oilseeds: World Markets and Trade — FAS
• 11:15 a.m. World Agricultural Production — FAS