First Thing Today | February 27, 2024

Good morning!

Grains mostly firmer overnight... Soybeans firmed amid followthrough buying overnight, while corn and wheat mildly favored the upside is light trade. As of 6:30 a.m. CT, corn futures are trading steady to fractionally higher, soybeans are 8 to 11 cents higher, SRW wheat is a penny lower to fractionally higher, HRW wheat is fractionally to a penny higher and HRS wheat is 4 to 7 cents higher. Front-month crude oil futures are marginally lower and the U.S. dollar index is around 150 points lower.

Cordonnier leaves South American crop estimates unchanged... South American crop consultant Dr. Michael Cordonnier kept his Brazilian and Argentine crop estimates unchanged given rains last week and more in the forecast this week. Cordonnier estimates Brazil’s production at 145 MMT for soybeans and 112 MMT for corn. He forecasts Argentina’s production at 50 MMT for soybeans and 54 MMT for corn. He has a neutral to lower bias toward crops in both countries.  

HRW crop ratings continue to improve in February... State-level winter wheat crop condition ratings released on Monday signaled more general improvement in the HRW crop over the past month. When the state crop ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the HRW crop improved 4.9 points from the end of January to 350.2 and stood 26.9 points above USDA’s final national rating at the end of November.

Ukraine says more U.S. aid critical to keeping Black Sea grain shipments safe... Ukrainian President Volodymyr Zelenskyy said that without new U.S. military aid his country would be unable to defend a Black Sea shipping corridor that has allowed the country to export millions of tons of grain to global markets. “We... created the new route in the Black Sea,” Zelenskiy told CNN in an interview, describing the shipping corridor as a “big success” for so far allowing the export of about 30 MMT of grain and other agricultural products. But he warned that if the U.S. Congress did not approve $60 billion in new security aid then the future of the shipping corridor would be in doubt.

Vietnam imports husked brown rice from India for re-export... Vietnam is importing husked brown rice from India for the first time in decades to process and export the refined, white variety, trade and government sources told Reuters. Vietnam imported at least 200,000 MT of husked brown rice from India between December and February, the sources said. Vietnam is receiving brisk export orders for rice after India, the world's biggest exporter, imposed a ban on white rice exports in 2023.

Indonesia plans to double palm oil replanting subsidy... Indonesia plans to double its palm oil replanting subsidy to boost farmer participation in the program. The new subsidy will rise to 60 million rupiah ($3,833.87) per hectare, the country’s economy minister said, without giving a date of when the higher payments will be enacted. Farmers receive subsidies to buy palm seedlings and cultivate new palm trees to replace older, less fruitful trees. However, participation has been slow because of administrative hurdles and farmers’ concerns over loss of income while they wait for the trees to mature.

Countdown to shutdown... With less than four days until a crucial deadline for federal funding extension, Congress has begun preparations for a partial government shutdown. While a bipartisan spending deal is possible, disagreements persist on issues like aid to Ukraine and border security. House Speaker Mike Johnson (R-La.) faces pressure from his conservative faction, complicating resolution. Without a short-term deal by Friday, several departments, including USDA, Energy, Transportation, Veterans Affairs, and others, could run out of funds, affecting about 20% of the federal government and key priorities like military construction. Meanwhile, President Joe Biden and congressional leaders will meet this morning at the White House on these issues.

Yellen praises U.S. economy’s strength amid global economic talks... Treasury Secretary Janet Yellen will highlight the U.S. economy’s robustness as a significant factor in global economic resilience during meetings with top officials from G20 and developed nations in Sao Paulo, Brazil. Yellen’s prepared remarks underscore predictions of a worldwide economic slowdown in 2023, as forecast by the International Monetary Fund and others, did not come to fruition.

USDA announces updates to DMC program... Updates to the Dairy Margin Coverage (DMC) program will allow eligible dairy producers to enroll starting Feb. 28 with retroactive enrollment to Jan. 1. Details published in the Federal Register include a one-time adjustment to production history, extending DMC through 2024, and extending eligibility of multi-year contracts until Dec. 31, 2024. The discounted premium rate will apply to the adjusted production history. Signup runs until April 29, with past extensions common.

ERP payments show modest rise... There was only a slight increase in Emergency Relief Program (ERP) payments, despite USDA’s efforts to finalize payments under Phase 1. As of Feb. 25, total ERP payments stood at $8.63 billion, showing minimal change from the previous week. Phase 1 ERP payments rose to $7.75 billion from $7.74 billion, while Phase 2 payments increased to $883.1 million from $882.8 million.

Oil lobby challenges Biden’s LNG export pause, market concerns raised... Top oil industry lobbying groups, including the American Petroleum Institute, are challenging via a petition the Biden administration’s halt on approving new liquefied natural gas (LNG) exports. They argue the indefinite delay contradicts a legal requirement for the Energy Department to issue permits for LNG exports unless it’s clearly against public interest. Additionally, a trade group representing LNG exporters expressed concerns about the pause, stating it could have adverse effects on the market, making it difficult for U.S. developers to secure financial commitments and complete projects before the next global supply surge.

Cold Storage Report: Friendly compared to seasonal tendencies... USDA’s Cold Storage Report showed beef stocks declined contra-seasonally during January, while pork stocks rose less than average. Frozen beef stocks at the end of January totaled 475.4 million lbs., down 4.9 million lbs. from December, whereas the five-year average was a 2.9-million-lb. increase during the month. Beef stocks fell 59.8 million lbs. (11.2%) from January 2023 and were 40.1 million lbs. (7.8%) below the five-year average. Pork stocks rose 40.6 million lbs. during January to 468.0 million pounds. The five-year average was a 48.6-million-lb. increase during the month. Pork stocks declined 51.1 million lbs. (9.8%) from January 2023 and were 51.8 million lbs. (10.0%) lower than the five-year average.

Beef packer margins remain deeply negative... Wholesale beef prices continued their climb on Monday, with Choice up $1.18 to $301.79, while Select firmed $1.68 to $287.99. While wholesale beef prices are climbing as retailers begin purchases for post-Easter features, cash cattle prices firmed $2.60 last week to $182.95, the highest since the first week of November. As a result, packer margins remain deep in the red, which will keep them in management mode amid tight market-ready supplies.

Traders narrow hog futures premium to cash index... The CME lean hog index is up another 36 cents to $79.46 as of Feb. 23. After Monday’s decline, April lean hog futures finished at a $6.815 premium to today’s cash quote. Despite a persistent seasonal rise in the cash index, traders are hesitant to allow the premium in the nearby contract to get too wide. The five-year average increase in the cash index from now until mid-April is nearly $7.50.

Overnight demand news... Taiwan tendered to buy up to 65,000 MT of corn from the U.S., Brazil, Argentina or South Africa. Indonesia tendered to buy 300,000 MT of 5% broken grade white rice from unspecified origins.

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

• 11:00 a.m. Weekly Weather: State Stories — NASS
• 2:00 p.m. Cattle - Statistical Bulletin — NASS