Good morning!
Beans firmer, corn and wheat weaker overnight... Soybeans traded higher amid corrective buying overnight, while corn and wheat favored the downside. As of 6:30 a.m. CT, corn futures are trading fractionally lower, soybeans are 6 to 10 cents higher, winter wheat markets are 6 to 7 cents lower and spring wheat is mostly 2 to 4 cents lower. Front-month crude oil futures are around 50 cents lower and the U.S. dollar index is mildly firmer.
Brazil’s rainfall to remain erratic... World Weather Inc. says, “Weekend rainfall was rarely more than 0.50 inch in center-west, center-south or northeastern Brazil, although there were a few areas in western and southern Mato Grosso do Sul that received more than 1.00 inch of rain along with a couple of southwestern Mato Grosso locations. Center-west, center-south and northeastern Brazil will continue to experience erratic rainfall during the next 10 days. Temperatures will be warm and net drying is still expected in many areas this week, despite some periodic showers each day.” Conditions in southern Brazil and across much of Argentina’s key crop areas are expected to remain mostly favorable.
Brazil’s soybean planting continues to lag as weather concerns remain... AgRural says Brazil’s soybean planting reached 91% done as of last Thursday, behind last year’s 95% pace. The Brazil-based consultancy said, “Although the biggest concern remains in Mato Grosso, where rainfall is still below normal and very high temperatures continue to weigh on productivity, the North/Northeast region of the country is also a concern, as scattered precipitation and heat make progress difficult for planting and harm the initial development of crops.”
Milei warns economic shock unavoidable... New Argentine President Javier Milei took office on Sunday, warning in his first official speech he had no alternative to a sharp, painful fiscal shock to fix the country’s worst economic crisis in decades. “There is no alternative to a shock adjustment,” he said. “There is no money. The outgoing government has left us on track towards hyperinflation. We are going to do everything we can to avoid such a catastrophe.” While the speech was light on details, he said key steps would include a fiscal adjustment equivalent to 5% of the country’s GDP through cuts that he said would fall on “the state and not the private sector.”
Panama Canal grain shipment delays to last well into next year... Bulk shippers hauling grains from the U.S. Gulf to Asia are sailing longer routes and paying higher freight costs to avoid vessel congestion and record-high transit fees in the drought-hit Panama Canal. Ships moving crops have faced wait times of up to three weeks to pass through the canal as container vessels and others that sail on more regular schedules are scooping up the few transit slots available. The restrictions could continue to impede grain shipments well into 2024, as the region’s rainy season won’t come until spring. The Panama Canal Authority restricted vessel transits this autumn as a severe drought limited supplies of water needed to operate its lock system. Only 22 daily transits are currently allowed, down from around 35 in normal conditions. By February, transits will shrink further to 18 a day.
The week ahead in Washington... Congress is in this week before leaving for an extended holiday break until early January. The must-pass list includes fiscal year 2024 spending, foreign aid, reauthorization of the Federal Aviation Administration and work on a new farm bill, though these items will be punted until early next year. President Joe Biden will hot Ukrainian President Volodymyr Zelenskyy at the White House on Tuesday as discussions on a Ukraine aid deal remain stalled in Congress. The Federal Reserve’s two-day monetary policy meeting Tuesday and Wednesday will be the economic focus. The Fed is widely expected to continue its recent pause to monetary policy, but key will be the so-called “dot plot” economic projections and comments from Chair Jerome Powell via his post-meeting press conference.
COP28 seeks deal on fossil fuels... The COP28 climate summit ends on Tuesday with the role of fossil fuels in the spotlight. COP28 leaders released a draft containing five options for how to proceed with fossil fuels (what many consider the most important part of the summit), ranging from phasing them out to not addressing them at all. OPEC, the cartel of major oil-producing countries, caused an uproar when it wrote a letter urging its member states to reject any mention of a fossil-fuel phaseout in the final text of the agreement. China and the U.S. continued intensive talks to find language on fossil fuels that can bring the two-week summit to a successful conclusion.
Weaker global economic outlook... The global economy will grow just 2.7% in 2024, versus 3.1% this year, Bloomberg Economics said. That would be the world’s third-worst year since the burst of the dotcom bubble, only after 2009 and 2020.
Deflationary concerns build in China... China’s consumer price index (CPI) fell 0.5% annually in November, the second straight month of consumer price deflation and the sharpest decline since November 2020. The cost of food decreased at the strongest pace in over two years (-4.2% vs. -4.0% in October) amid a further drop in pork prices. Core CPI, which excludes food and energy prices, increased 0.6% from year-ago in November, the same as in October. China’s producer price index dropped 3.0% annually in November, faster than a 2.6% fall in the previous month. This was the 14th straight month of producer price deflation and the steepest figure since August.
Chinese pork prices continue to drop... Chinese pork prices experienced a decline of more than 6% in the past week, despite efforts by Chinese authorities to support the market, raising concerns about deflation in the largest economy in Asia, Bloomberg News reports. The average national price for pork dropped to the lowest level since April 2022. Moreover, prices have fallen by almost 25% from their peak in early August. In response to these falling prices, the Chinese government announced in late November it would purchase pork to stock the nation’s strategic reserves. This marked the third round of such purchases this year, but these efforts have not been sufficient to halt the decline. Authorities are also encouraging farmers to sell their hogs when they are ready for market instead of holding onto livestock. Looking ahead, the outlook for China’s pork industry remains pessimistic. Consumption is expected to remain sluggish after the Spring Festival holidays in mid-February, while hog production is anticipated to increase, according to the agriculture ministry’s recent statements.
Hong Kong suspends some poultry imports, including areas of U.S., announces ASF outbreak... Hong Kong suspended imports of poultry meat and products from areas in the U.S., United Kingdom and Poland with outbreaks of highly pathogenic avian influenza (HPAI). Meanwhile, Hong Kong detected an outbreak of African swine fever (ASF) at a farm with 900 pigs in the New Territories district.
Cattle still searching for a low... Live cattle futures and feeders posted strong corrective gains last Friday, but both markets must post strong followthrough to signal market lows are in place. Until futures find a bottom, the cash market is likely to remain under pressure. Wholesale beef prices are also looking to stabilize, though movement remains strong, extending the string of days with more than 150 loads changing hands on Friday.
Cash hog price fall, pork firms... The CME lean hog index is down another 36 cents to $68.76 and has dropped $37.24 from its late-July peak. The pork cutout value firmed $2.30 on Friday and continues to show signs of stabilization in the mid-$80.00 range. Daily Livestock Report says, “What’s the relationship of cash and cutout to index? We ran a simple regression using daily values for both 2022 and 2023. Clearly there has been a change, with the cutout having a bigger impact this year than last year. In the last 30 days (Nov. 7 ‐ Dec. 7), the cash price has declined $15.80/cwt., thus accounting for a $5.70/cwt. decline in the index. The pork cutout during this period declined $4.40/cwt., resulting in a $2.60/cwt. decline in the CME index.”
Weekend demand news... Algeria tendered to buy a 50,000 MT of optional origin soft milling wheat. Bangladesh tendered to buy 50,000 MT of optional origin milling wheat. Tunisia tendered to buy 100,000 MT of soft milling wheat, 75,000 MT of durum wheat and 50,000 MT of feed wheat – all optional origin.
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
- 11:00 a.m. Feed Grains Database — ERS
- 2:00 p.m. Season Average Price Forecasts — ERS
- 2:00 p.m. Wheat Data — ERS