First Thing Today | February 26, 2024
Good morning!
Grains lower to start the week... Corn, soybeans and wheat traded lower overnight, with nearby corn and soybeans falling to new contract lows. As of 6:30 a.m. CT, corn and soybean futures are trading 2 to 3 cents lower, while wheat futures are 5 to 8 cents lower. Front-month crude oil futures are around 40 cents lower and the U.S. dollar index is nearly 200 points lower.
AgRural cuts Brazilian soybean crop forecast... Brazil-based consulting firm AgRural cut its Brazilian soybean crop forecast by 2.4 MMT to 147.7 MMT, with reductions mainly in Paraná and Mato Grosso do Sul, which suffered from heat and irregular rains in January and part of February. AgRural noted Brazil’s soybean harvest reached 40% complete as of last Thursday, ahead of 33% on that date last year. It estimated safrinha corn planting at 73% done, ahead of 56% at this time last year.
South American weather mostly favorable this week... Brazil weather over the next 10 days will leave Mato Grosso do Sul, western Sao Paulo and a few areas in northwestern Parana drier than usual with a rising need for greater rainfall, according to World Weather Inc., while all other areas of the country will have plentiful rains. Most of Argentina will get at least some rain in the next 10 days, although southern areas will have need for greater amounts to prevent the region from becoming too dry in the first part of March.
Kyiv urges Polish punishment for Ukrainian grain spills... Kyiv has urged Poland to punish those responsible for spills of a Ukrainian grain cargo at the border over the weekend, Deputy Prime Minister Oleksandr Kubrakov said. Around 160 MT of Ukrainian grain were destroyed at a Polish railway station amid protests in what a senior Ukrainian official said on Sunday was an act of “impunity and irresponsibility.” Polish farmers are protesting what they describe as unfair competition from Ukraine and European Union environment regulations, blocking border crossings with Ukraine and deliberately spilling trains loaded with Ukrainian grain.
Indonesia allocates additional rice import quotas... Indonesia allocated an additional rice import quota of 1.6 MMT for 2024, as dryness linked to the El Nino weather pattern caused domestic supply concerns. The latest import quota, which is on top of 2 MMT previously approved for 2024, comes amid expectations the January-March harvest will be lower than last year due to below-normal rains in Java – the country’s key rice growing region.
Administration’s update to GREET model expected this week... The biofuels industry and corn producers await an update of the Energy Department’s GREET model for calculating greenhouse gas emissions. Revisions expected to be unveiled by March 1 will determine whether corn-based ethanol used to make sustainable aviation fuel (SAF) will qualify for tax credits. With both USDA Secretary Tom Vilsack and EPA Administrator Michael Regan at this week’s Commodity Classic where they both appear on Friday, expect them to comment on the announcement, likely putting their spin on the details. Vilsack told ethanol producers last week he’s pushing to ensure they can qualify for tax incentives.
The week ahead in Washington... The Senate returns today, while the House is out until Wednesday. Congress faces another threat of a partial government shutdown looms if spending measures aren’t reached by March 1 for 20% of agencies, including USDA; March 8 for the rest. House Speaker Mike Johnson (R-La.) aims to prevent a government shutdown by pushing a set of spending bills together as a single package, known as a “minibus” before the March 1 deadline. He briefed GOP lawmakers on this plan, emphasizing that while major policy changes are unlikely, there will be victories within the bills. He also mentioned the possibility of a temporary funding extension through another continuing resolution if negotiations require more time, though he prefers to avoid this option. If there’s no new budget for fiscal year 2024 by April 30, it will trigger a 1% across-the-board spending cut. Democrats won’t back a stopgap bill beyond this date. USDA’ Vilsack testifies Wednesday before the Senate Agriculture Committee on Wednesday. The economic focus will be Thursday’s personal consumption expenditures price index, the Fed’s preferred inflation gauge.
Johnson: Funding measure logjam holding up new farm bill... House Speaker Mike Johnson conveyed to his colleagues during a private conference call on Friday night that while he had initially aimed to complete the farm bill by this March, the ongoing funding issues have forced a delay in this timeline. This delay has been widely expected among lawmakers, with Johnson’s acknowledgment making it clear that a farm bill won’t progress in the coming weeks, possibly not until early April. Johnson emphasized completion of appropriations bills is a prerequisite for advancing the farm bill, underscoring the interconnectedness of legislative priorities. Farm bill watchers know the appropriations snags are just one of the hurdles stopping farm bill development as major differences linger over additional funding and policy issues, with differences also evident among the House and Senate approaches. Bottom line: It now appears unlikely a new farm bill will move through the House Agriculture Committee by the end of March, given the current circumstances.
Japan’s Nikkei index hits all-time high... Japan’s Nikkei stock index posted a record high for the second consecutive session on Monday. This rise in stock prices has provided a buffer against potential negative impacts from an anticipated interest rate hike by the Bank of Japan (BOJ), which would mark the first monetary tightening in 14 years. Potential policy tightening by BOJ could also signal its readiness to counter excessive asset price inflation and alleviate downward pressure on the yen.
China explores ways to attract foreign investment... Chinese cabinet officials said they would take further steps to optimize China’s business environment and stabilize foreign investment. Foreign direct investment (FDI) into China fell 11.7% annually to 112.71 billion yuan ($15.66 billion) in January. Compared with the previous month, however, FDI surged 20.4%.
China’s sow herd liquidation continues... China’s sow herd totaled 40.67 million head at the end of January, down 1.8% on a monthly basis and 6.9% below year-ago, according to ag ministry data. Hog slaughter jumped 28.6% from year-ago during January to 37.25 million head, though that was down 6.4% from the previous month.
Cold Storage Report out this afternoon... Due to technical issues, USDA delayed the Cold Storage Report from last Friday to this afternoon. The five-year average is a 2.9-million-lb. increase in beef stocks and a 48.6-million-lb. rise in pork stocks during the month.
Limited reaction expected to Cattle on Feed Report... USDA’s Cattle on Feed Report showed the Feb. 1 feedlot inventory up 0.4% from year-ago, while placements dropped 7.4% and marketings inched down 0.1%. The underlying data in the report is bullish as there continues to be a tightening supply of cattle moving into feedlots, with placements down from year-ago levels for a third straight month – a trend that will continue. But with placements near the top end of the wide range of pre-report estimates, it could take away some of the friendliness of the data. Still, we expect limited market response, especially after reports of higher cash cattle trade after the report Friday afternoon.
Cash hog index continues to rise, pork cutout drops... The CME lean hog index is up 32 cents to $79.10 as of Feb. 22, extending the seasonal price climb. The pork cutout value dropped 73 cents on Friday to $91.16, as a $9.36 decline in primal bellies more than offset gains in the other cuts.
Weekend demand news... South Korea purchased 172,300 MT of wheat – 85,900 MT U.S., 50,000 MT Australian and 36,400 MT Canadian.
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. Chickens and Eggs — NASS
- 2:00 p.m. Crop Values — NASS
- 2:00 p.m. Peanut Stocks and Processing — NASS
- 2:00 p.m. Trout Production — NASS
- 2:00 p.m. Cold Storage — NASS
