Good morning!
Corn and beans weaker, wheat mixed overnight... Corn and soybean futures extended Tuesday’s declines during overnight trade, while wheat futures traded narrowly mixed. As of 6:30 a.m. CT, corn futures are trading 3 to 5 cents lower, soybeans are 8 to 10 cents lower, SRW and HRS wheat are fractionally to a penny higher and HRW wheat is steady to 3 cents lower. Front-month crude oil futures are modestly lower, while the U.S. dollar index is nearly 400 points higher.
Drought threatening southern Brazil’s soybean crop... A farmer group says persistent drought in Rio Grande do Sul limits soybean crop potential in the state. In the worst-case scenario, output in Brazil’s far southern state could fall by 40% to 12.6 MMT, a large drop from its 21 MMT production potential, said Decio Teixeira, vice-president of Rio Grande do Sul’s farmer group Aprosoja-RS. Conab, Brazil’s crop estimating agency, last week estimated the country’s soybean crop at 152.9 MMT, including 19 MMT in Rio Grande do Sul.
India soymeal exports to soaring... India’s soybean meal exports are increasing sharply as drought has hit output from top exporter Argentina, with 500,000 MT likely to be shipped from the country in February and March combined, three exporters told Reuters. India’s soymeal exports in the first four months of the 2022-23 marketing year, which began Oct. 1, totaled 631,000 MT, nearly matching the 644,000 MT exported the previous year, according to the Soybean Processors Association of India. Indian soymeal is being offered for around $580 to $585 per metric on a free-on-board (FOB) basis for March shipments, compared to $598 offered by Argentina, exporters said. “If global prices sustain at the current level, then India could easily export more than 2 MMT in 2022-23,” said an exporter.
Ukraine calls on UN, Turkey to prevent Russia from obstructing grain deal... Ukraine called on the United Nations and Turkey to press Russia to immediately stop hindering Ukrainian grain shipments. Ukraine has repeatedly accused Russia of delaying grain inspections. Foreign Minister Dmytro Kuleba and Deputy Prime Minister Oleksandr Kubrakov said in a joint statement that “Ukraine is deeply concerned about the destructive actions of Russia,” which result in the delay of the work of the grain corridor and “obstructing the Black Sea Grain Initiative in general. Such a destructive Russian policy has resulted in a systematic decrease of the freight turnover within the Grain Initiative.” The Ukrainian officials said Russia at the same time increased uncontrolled traffic volume through its Azov and Black Sea ports. The agreement was extended by a further 120 days in November and is up for renewal again next month, but Russia has signaled it is unhappy with some aspects of the deal and asked for sanctions affecting its agricultural exports to be lifted.
NOPA crush expected to rebound from December level... Members of the National Oilseed Processors Association (NOPA) are expected to report January soybean crush totaled 181.7 million bu., according to a Reuters survey. If realized, that would be up 2.3% from December but 0.3% less than January 2022. Soyoil stocks are expected to rise to 1.906 billion lbs., which would be up 6.4% from the end of December but down 5.9% from last year.
China issues threats over U.S. high-altitude balloons... China said on Wednesday that U.S. high-altitude balloons flew over its Xinjiang and Tibet regions, and that it will take measures against U.S. entities that undermine Chinese sovereignty as a diplomatic dispute festered. Washington and Beijing are locked in a tussle over flying objects after the U.S. military this month shot down what it called a Chinese spy balloon over the coast of South Carolina. Beijing says its balloon was a civilian research vessel mistakenly blown off course, and that Washington overreacted. “Without the approval of relevant Chinese authorities, it has illegally flown at least 10 times over China’s territorial airspace, including over Xinjiang, Tibet and other provinces,” a Chinese official said. “China is firmly opposed to this and will take countermeasures against relevant U.S. entities that undermine China’s sovereignty and security in accordance with the law.” U.S. Secretary of State Antony Blinken, who postponed a planned trip to Beijing due to the balloon incident, is considering meeting China’s top diplomat Wang Yi in Munich this week, sources have said.
China increases medium-term liquidity, keeps rates unchanged... The People’s Bank of China (PBOC) injected a total 499 billion yuan ($73 billion) via a one-year medium-term lending facility (MLF) to some financial institutions and kept the interest rate unchanged at 2.75% on Wednesday. With CNY 300 billion of MLF loans maturing on the same day, the operation resulted in a net 199 billion yuan ($29 billion) fresh fund injection into the banking system. The central bank also pumped 203 billion yuan through seven-day reverse repos while keeping borrowing cost unchanged at 2%.
Falling ocean-freight rates could help bring down prices on many imports... Retailers are hoping to save millions of dollars on shipping costs when they negotiate contracts with ocean carriers this month, the Wall Street Journal reports. Companies including Costco Wholesale, Hobby Lobby Stores and Party City expect to cut costs by half or more, which in turn could allow them to slow or stop price increases for goods. More recently retailers have pulled back on orders while working through a backlog of inventory, leaving carriers scrambling to fill space on ships. The average contract cost of shipping a container from China to the West Coast was $2,618 as of Feb. 9, down significantly compared with the $8,607 rate on April 1, 2022, according to Xeneta.
IEA forecasts record global oil demand... The International Energy Agency (IEA) raised its forecasts for oil demand this year to a record level, as China’s reopening fueled a surge in air travel across Asia, while also adding to its supply forecast as Russian production remained surprisingly resilient to Western sanctions. The Paris-based energy watchdog said in a monthly report it expects oil demand to grow to a record 101.9 million barrels a day this year, up 200,000 barrels a day from its forecast last month. Demand is expected to grow by 2 million barrels per day this year, of which Asian nations will account for 1.4 million barrels a day and China alone will account for 900,000 barrels a day.
As expected, Biden taps Brainard, Bernstein for top economic positions... President Joe Biden named Lael Brainard, vice chair at the Federal Reserve, as the new director of the National Economic Council. Jared Bernstein was tapped to head the Council of Economic Advisors. Bernstein’s position requires Senate confirmation, which is not expected to be difficult with the Democrats’ 51-seat majority.
France lowers wheat export forecast... France’s ag ministry lowered its 2022-23 wheat export forecast outside the EU by 150,000 MT to 10.45 MMT. The ministry also trimmed its export forecast within the bloc by 50,000 MT to 6.59 MMT. France’s wheat stocks at the end of 2022-23 are now forecast at 2.46 MMT, up 130,000 MT from last month, though that would still be down 11% from last year.
China continues wheat auction... China will auction another 140,000 MT of state-owned wheat reserves on Feb. 22.
Cattle traders stay cautious... Live cattle futures posted modest losses amid corrective trade on Tuesday. While the cash market is firming and long-term fundamentals are bullish, traders have shown a willingness not to build too much premium into futures. February live cattle finished Tuesday $2.53 above last week’s average cash price, while the April contract held a $5.055 premium.
Hog futures show signs of trend reversal... Hog futures followed up Monday’s strong gains with moderate advances yesterday – and are showing signs of pushing above the month-long consolidation range. Such a move would likely attract more chart-based speculative buyer interest. Fundamental support is coming from the firming cash hog index, which continues its recent, steady price climb from the seasonal lows.
Overnight demand news... Thailand purchased 60,000 MT of feed wheat expected to be sourced from Australia. Jordan tendered to buy 120,000 MT of optional origin milling wheat. Japan received no offers for its tender to buy 70,000 MT of feed wheat and 40,000 MT of feed barley.
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
- 11:00 a.m. Monthly Soybean Crush — NOPA
- 2:00 p.m. USDA Agricultural Projections to 2032 — ERS
- 2:00 p.m. Broiler Hatchery — NASS
- 2:00 p.m. Turkey Hatchery — NASS
- 2:00 p.m. Vegetables - Ann. — NASS