Good morning!
Quiet trade overnight... Corn, soybeans and wheat traded in relatively narrow ranges during two-sided overnight price action. As of 6:30 a.m. CT, corn futures are trading fractionally to a penny higher in most contracts, soybeans are mostly 1 to 3 cents higher, SRW wheat is 2 to 3 cents lower, HRW wheat is around a penny lower and HRS wheat is 2 to 3 cents higher. Front-month crude oil futures are more than $2.50 lower and the U.S. dollar index is more than 700 points higher this morning.
Presidents Day schedule... Grain and livestock markets will trade normal hours today. Markets and government offices are closed Monday, Feb. 20, for Presidents Day. Therefore, there will be no Pro Farmer market updates next Monday. Grain markets reopen with overnight trade at 7:00 p.m. CT on Monday, Feb. 20. Livestock markets resume trade at 8:30 a.m. CT on Tuesday, Feb. 21.
Black Sea grain deal talks will begin soon... Negotiations will start in a week on extending the Black Sea grain export deal, according to a senior Ukrainian official. The agreement was extended by a further 120 days on Nov. 18. “Negotiations on extending the grain corridor will begin in a week and then we will understand the positions of all parties,” Ukrainian Deputy Infrastructure Minister Yuriy Vaskov said. “We see that the enemy is starting to put forward new conditions. We understand that it will be difficult – as it was in November. I think common sense will prevail and the corridor will be extended,” he said.
China’s winter wheat ‘better than normal’... China’s winter wheat crop is generally better than normal, but there is variation, with some areas thriving and some weaker, Vice Premier Hu Chunhua said after inspecting the crop in central provinces. He urged careful field management to ensure a healthy crop, according to state-run news agency Xinhua.
Strong French wheat crop conditions... France’s wheat crop conditions remain strong, with 93% of the crop rated good/excellent by the country’s ag ministry. That’s slightly below the 95% good/excellent rating at this time last year. While crop ratings are strong, there are some concerns with recent dry weather and a potential lack of soil moisture ahead of spring.
GAO: Reducing crop insurance costs could fund other priorities... The General Accountability Office (GAO) released a report that those wanting to change crop insurance program features will try to use to their advantage. The report identifies changes it says “Congress could make to the program to reduce its costs.” GAO has suggested Congress:
- Reduce subsidies to high-income participants by creating an income limit.
- Adjust compensation to insurance companies to better align with market rates.
GAO recommends USDA actions on climate change... Following a request from Rep. Chellie Pingree (D-Maine), the Government Accountability Office (GAO) on Thursday released a report recommending 13 measures USDA could implement to enhance farmers’ climate resilience and limit federal fiscal exposure from climate change. One of the options could require farmers to adopt climate-resilient practices to be eligible for crop insurance subsidies.
What one Washington veteran said about GAO... “GAO has its own agenda. It just recently advocated more climate programs. Now it is urging Congress to adopt harmful changes to crop insurance. What insurance system do you know takes action to reduce good risk in the risk pool? That’s what GAO urges. That will be punitive to producers excluded from crop insurance while hurting the producers left in the pool who will pay higher premiums. That’s low hanging fruit in understanding how insurance works. The proposed cuts to private sector delivery don’t bother to consider the deep cuts from the 2011 SRA that continue. If Congress is serious about saving money and reforming, it should seriously consider eliminating GAO. That’s not hyperbole. The agency simply has not lived up to its purpose. It’s just another opinion rather than a serious and sober analysis of how to achieve efficiencies within the constructs of the law decided by Congress.”
Fed officials say more rate hikes needed to lower inflation... Cleveland Fed president Loretta Mester said there was a “compelling economic case” for the central bank to raise interest rates by a half-percentage point at the last policy meeting, rather than just a one-quarter point. Mester also said this week’s consumer price index data was a “cautionary tale against concluding too soon” that inflation will quickly recede. St. Louis Fed president James Bullard did not offer a view on what was next for monetary policy. But he noted that central bank action is important to ensure inflation pressures continue to abate. “Inflation remains too high but has declined,” Bullard said, adding “continued policy rate increases can help lock in a disinflationary trend during 2023, even with ongoing growth and strong labor markets.” Neither Mester nor Bullard are voting Fed members this year.
CFTC aims for Feb. 24 return of Commitments of Traders report... The Commitments of Traders (COT) report that was to be published this afternoon will be delayed, the Commodity Futures Trading Commission (CFTC) said Thursday, as “reporting firms are continuing to experience some issues submitting timely and accurate data to the CFTC.” Agency staff anticipate resuming publication of COT data Feb. 24 with the data originally scheduled to be published on Feb. 3. “Thereafter, staff intends to sequentially issue the missed COT reports in an expedited manner, subject to reporting firms submitting accurate and complete data,” CFTC said. If timely, accurate and complete information of the backlogged data can be provided by reporting firms, CFTC said the missed COT reports will be published by mid-March. Once that happens, CFTC said they anticipate publishing the data on its usual weekly schedule.
U.S. consumer debt surges... The sum of money owed by U.S. households climbed considerably during the fourth quarter, rising by $394 billion, at $16.9 trillion. That’s the largest quarterly increase in household debt in two decades, taking balances $2.75 trillion higher than before the pandemic at the end of 2019, according to the New York Fed’s Household Debt and Credit Report. Not helping the situation was the U.S. central bank’s rate hiking cycle, which has raised the borrowing costs on everything from credit cards to mortgages and auto loans. Serious delinquency rates of 90 days or more are creeping up too, and while the metric is not near dangerous levels yet, it will be an item to watch as the year progresses.
Price of eggs exceeds ground beef... Bloomberg notes a global bird flu outbreak that has wiped out about 100 million poultry and high production costs pushed the price of 12 eggs to a record $4.82 in January, up from less than $2 a year earlier. Meanwhile, the price of a pound of ground chuck dropped to $4.64 from a peak of $5.12 last August.
China to buy pork for state reserves... The national average of pork prices against grain prices has fallen below the warning level of 5 to 1. As a result, China plans to buy 20,000 MT of pork for state reserves. This will be the first pork stockpiling this year. China’s state planner also announced it will continue to strengthen hog production capacity and price control and stabilize hog market operations.
Wholesale beef prices surging... Choice boxed beef prices firmed another $3.88, while Select rose $1.45 on Thursday. Choice beef has jumped nearly $15 since Feb. 3 and is almost $37 above the December low. Surging wholesale beef prices have improved packers’ margins significantly, giving them incentive to actively compete for a tightening supply of market-ready cattle.
Big jump in pork cutout... The pork cutout value more than recouped Wednesday’s loses with a $2.12 jump yesterday. All cuts except ribs were sharply higher, led by a $6.51 rise in bellies. Meanwhile, the CME lean hog index continues its rise, firming another 23 cents to $75.85 (as of Feb. 15). After losses the past two days, the premium in April lean hog futures dipped below $10 on Thursday’s close.
Overnight demand news... South Korea purchased 138,000 MT of optional origin corn.
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
- 8:00 a.m. Food Expenditure Series — ERS
- 2:00 p.m. Farms and Land in Farms — NASS
- 2:00 p.m. Peanut Prices — NASS
- 2:00 p.m. Potato Stocks — NASS
- 2:30 p.m. Commitments of Traders — CFTC