Good morning!
Corn and wheat firmer, soybeans lower... Corn and wheat futures posted corrective gains overnight after Russia attacked a key Ukrainian port but have come well off their highs this morning. Soybeans initially traded higher but have weakened. As of 6:30 a.m. CT, corn futures are trading 2 to 3 cents higher, soybeans are 10 to 11 cents lower, winter wheat markets are 5 to 8 cents higher and spring wheat is 3 to 4 cents higher. Front-month crude oil futures are around 60 cents higher and the U.S. dollar index is modestly weaker.
Russia attacks Ukraine’s Danube port... Russia attacked Ukraine’s main inland port across the Danube River from Romania on Wednesday, reportedly causing “serious” damage. Ukraine’s defense ministry said a grain silo was damaged at the Danube port of Izmail in the Odesa region. The port has served as the main alternative route for Ukrainian grain exports since Russia ended the Black Sea grain deal.
Russia reiterates demands for restarting Black Sea grain deal... The Kremlin on Wednesday restated its position on the Black Sea grain deal, saying it was ready to return to it “immediately” once its demands were met. Russian President Vladimir Putin spoke via telephone to Turkish President Tayyip Erdogan, reiterating that a parallel deal improving terms for its own grain and fertilizer exports be implemented. Erdogan emphasized the importance of the deal to global food security.
Kazakhstan’s wheat production falls sharply... Kazakhstan’s grain union forecasts this year’s wheat crop at 14.5 MMT, down 1.9 MMT (11.6%) from 2022. With production at that level, the country will be able to export 8.5 MMT to 9 MMT of wheat in 2023-24, down from 9.5 MMT in 2022-23. The union says Kazakhstan faces strong competition from Russia in some of its traditional markets in the region.
Fitch cuts U.S. credit rating... Rating agency Fitch downgraded the U.S. government’s credit rating to AA+ from AAA, citing fiscal deterioration over the next three years and repeated down-the-wire debt ceiling negotiations that threaten the government’s ability to pay its bills. Standard & Poor’s made a similar downgrade to the U.S. credit rating in 2011. “In Fitch’s view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025,” the rating agency said. Treasury Secretary Janet Yellen called the move “arbitrary and based on outdated data.” Former Treasury Secretary Lawrence Summers said it was “absurd” to think there’s a risk the U.S. will default on its debt, describing the timing of the downgrade as “bizarre and inept.”
BOA reverses call on U.S. recession... Bank of America revoked its forecast for a recession, becoming the first large Wall Street bank to officially reverse its call. Economists pointed to low unemployment and easing price pressures as key to the change. “Recent incoming data has made us reassess our prior view that a mild recession in 2024 is the most likely outcome for the U.S. economy,” the bank wrote in a note to clients. “Growth in economic activity over the past three quarters has averaged 2.3%, the unemployment rate has remained near all-time lows, and wage and price pressures are moving in the right direction, albeit gradually.” BOA forecasts U.S. GDP growth of 2% for the fourth quarter of 2023, 0.7% in 2024, and 1.8% in 2025 That’s about 0.5 percentage points and 0.7 points higher in 2023 and 2024 than assumed previously.
China offers tax relief measures for small firms, rural households... China’s finance ministry unveiled a package of tax relief measures to support small businesses and rural households. The ministry said it would extend a value-added tax (VAT) cut for small taxpayers for an additional four years until the end of 2027. It would exempt value-added tax for small taxpayers with less than 100,000 yuan ($13,921.95) in monthly sales and cut the rate on taxable sales revenues to 1% for those normally eligible for a 3% rate. Those offering guarantees of borrowings or bond issues by rural households, small firms and individual businesses would also be exempted from paying the VAT on revenue generated from the guarantees. The ministry also announced an extension through 2027 of preferential tax terms applying to technology start-ups with no more than 300 employees with gross assets and annual sales revenue both not exceeding 50 million yuan. Despite these efforts, China’s markets and investors remain rattled by the lack of overall economic stimulus offered by Beijing as the Chinese economy continues to slump.
Permanent ag disaster relief program measure introduced... Rep. Mike Thompson (D-Calif.) along with Sens. Dianne Feinstein (D-Calif.) and Alex Padilla (D-Calif.) and Rep. Doug LaMalfa (R-Calif.) introduced the Agricultural Emergency Relief Act. The aim is to establish a permanent relief program for farmers who lose crops due to natural disasters, rectifying the absence of a standing relief program, addressing the administrative changes and subsequent delays that afflict the current relief process. The legislation is designed to provide prompt financial assistance to farmers suffering from disaster-related crop losses and will be particularly beneficial for those that grow specialty crops. Under this legislation, events qualifying for assistance would include droughts, wildfires, floods, hurricanes, derechos, excessive heat and moisture, winter storms and freeze events, including polar vortexes. Farmers applying for relief payments would need to purchase crop insurance for the two years following the receipt of a payment. To cater to specialty crop growers, payment calculations can be based either on the indemnities reported to the USDA or on losses in revenue. The bill also allows Congress to continue to appropriate supplemental disaster funds in response to the level of damage incurred in a specific year or event. The lawmakers urged making the existing Emergency Relief Program (ERP) permanent, stating its importance to ensure the continuity of farming operations and to safeguard U.S. food security.
Wholesale beef prices jump... Wholesale beef prices firmed $4.32 for Choice boxes and $1.87 for Select on Tuesday, while movement improved to 102 loads. That’s the first indication the wholesale beef market may have put in a seasonal low. As we’ve previously noted, packers’ slowdown of slaughter runs to manage tight market-ready supplies should support wholesale prices.
Pork cutout retreats... After a strong gain on Monday, the pork cutout value dropped $1.95 yesterday in what was likely corrective trade. With movement improving to 319.2 loads amid the price drop, there are no strong signs yet the product market has posted a seasonal top. But with slaughter supplies starting to build, a seasonal top in the production market is likely to come sometime this month.
Overnight demand news... Taiwan purchased 65,000 MT of corn expected to be sourced from Brazil. Egypt tendered to buy an unspecified amount of wheat, with results expected later this morning.
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
- 9:30 a.m. Weekly Ethanol Production — EIA
- 2:00 p.m. Broiler Hatchery — NASS