Good morning!
Grains weaker overnight... Tuesday’s corrective buying in the grain and soy markets dried up overnight, as corn, soybeans and wheat faced price pressure. As of 6:30 a.m. CT, corn futures are trading 1 to 2 cents lower, soybeans are 6 to 8 cents lower and wheat futures are mostly 3 to 5 cents lower. Front-month crude oil futures are mildly weaker and the U.S. dollar index is trading just above unchanged.
Agroconsult cuts Brazilian soybean crop forecast... Agroconsult cut its Brazilian soybean crop estimate by 1.6 MMT to 152.2 MMT as adverse weather cut yields in key production areas. The Brazil-based firm, which began a tour of Brazil’s main soy producing regions 33 days ago, said it has so far covered almost 30,000 kilometers, representing 60% of the areas it intends to survey. In Mato Grosso, areas planted between the beginning of September and mid-October were the most affected by high temperatures and low rainfall, Agroconsult said. Areas planted in Mato Grosso throughout October and November have shown better potential, despite also being affected by adverse weather. It maintained the average yield estimate for Mato Grosso at 52.5 bags per hectare, 17.7% below last year. Agroconsult lowered its average yield forecast for Mato Grosso do Sul to 57.5 bags per hectare from its previous projection of 59 bags. In Parana and Rio Grande do Sul, average yields potential was cut to 58 and 53 bags per hectare, respectively, compared to 60 and 55.5 before the crop tour, Agroconsult said.
Ukraine calls for EU action against Polish protests... Ukraine called on the European Commission to take robust action after Polish farmers blockaded the border and opened railcars to let grain spill out. Protests from farmers complaining of unfair competition have strained ties between the two countries that were already on edge after truckers blocked border crossings around the turn of the year. Tuesday’s protests from farmers marked an escalation from previous demonstrations, with a near-total blockade of all Ukrainian border crossings and disruption at ports and on roads nationwide. Ukrainian Economy Minister Yulia Svyrydenko said Kyiv has informed the European Commission of the actions of Polish protesters at the Ukrainian border and expected a robust response. Agriculture Minister Mykola Solskyi said the grain was headed to Germany and would not have entered the Polish market. Polish President Andrzej Duda told Ukrainian Radio and the Suspilne broadcaster the Polish government is negotiating with farmers and trade unions and he hopes the issue will be resolved through talks.
April 30 is key date in FY 2024 funding standoff... If there’s not a new budget for fiscal year (FY) 2024 by April 30, it will trigger a 1% across-the-board spending cut. Democrats won’t back a stopgap bill beyond this date. Of note: Axios reports that behind closed doors, House Republicans have shifted from optimism to anticipating a government shutdown, signaling a tough decision ahead for House Speaker Mike Johnson (R-La.). With the March 1 deadline looming for a budget or spending stopgap for 20% of spending (including for USDA), Axios notes Republicans are divided between risking a shutdown in a standoff with Democrats or striking a deal that may jeopardize Johnson’s leadership. Despite Johnson’s optimism about meeting deadlines, Republicans are bracing for the possibility of chaos. While a simple solution would be to pass a deal with Democratic votes, this could mirror the fate of former Speaker Kevin McCarthy (R-Calif.), who faced backlash for collaborating with Democrats. Without a clear backup plan, Republicans face uncertainty and potential challenges in assigning blame for any shutdown. However, there’s still the possibility of another spending stopgap as a temporary solution.
RFA emphasizes importance of SAF model, EPA standards and year-round E15 approval... Renewable Fuels Association (RFA) President Geoff Cooper emphasized the pivotal role of the Biden administration’s decisions regarding ethanol’s future. This includes determining the carbon footprint model for sustainable aviation fuel (SAF), EPA’s tailpipe emissions standards and approval of year-round E15 use. Cooper highlighted concerns over potential adjustments to ethanol’s carbon footprint model and EPA’s proposed tailpipe emissions regulations, which could affect ethanol producers’ participation in tax credits and the automotive industry’s focus on electric cars. He stressed the importance of a fair regulatory framework and year-round availability of E15. Cooper also acknowledged USDA Secretary Tom Vilsack’s support for the biofuels industry, emphasizing USDA’s investments in market opportunities and biofuel development.
Assessing CO2 sequestration potential in U.S. ethanol industry... A recent FarmDoc article by Scott Irwin explores the potential for ethanol plants in the U.S. to reduce their carbon footprint through CO2 sequestration, spurred by incentives in the Inflation Reduction Act (IRA) of 2022. Using operational efficiency data, total CO2 production of U.S. ethanol plants is estimated in a range from 42.4 million tons to 48.9 million tons annually. This represents nearly 1% of total U.S. CO2 emissions. The potential value of tax credits for sequestration is significant, Irwin notes, estimated at $3.75 billion annually, potentially doubling the after-tax income of the ethanol industry. However, implementation costs, including infrastructure and operational expenses, may offset a portion of these credits. Despite the costs, the potential revenue from tax credits remains attractive for ethanol producers.
Biden administration to replace China-made cranes at ports... The U.S. will invest more than $20 billion to replace Chinese cranes operating at its ports. The government will subsidize domestic manufacturing of cargo cranes; it will also set baseline standards for computer networks operating at ports. Officials warned that Chinese cranes, which make up almost 80% of ship-to-shore cranes at American ports, could be vulnerable to disruption by an adversary.
China takes action against big equity market investors... China banned major institutional investors from reducing equity holdings at the open and close of each trading day, Bloomberg News reported, citing people familiar with the situation. The order from China’s securities watchdog was delivered to major asset managers and the proprietary trading desks of brokerages, the report added. China stocks rose for a seventh straight session, as Beijing introduced measures after the Lunar New Year holiday to boost market sentiment and prop up the economy.
USDA’s effort to push out final Phase 1 ERP payments... Total Emergency Relief Program (ERP) payments rose to $8.65 billion as of Feb. 19, up from $8.56 billion the prior week. That included $7.74 billion in Phase 1 ERP payments (up from $7.68 billion the prior week) and Phase 2 payments of $882.78 million (up from $882.6 million). USDA set a deadline of Feb. 16 to make final Phase 1 payments.
Late-week cash cattle trade likely... Packers purchased a large volume of cattle last week – the most since October and the second straight week of big purchases. That likely limits their need for near-term supplies, especially with reduced slaughter runs. Additionally, USDA will release its Cattle on Feed Report Friday afternoon and those weeks are notorious for later-developing cash cattle trade.
Big jump in cash hog index... The CME lean hog index is up $1.05 to $76.80 as of Feb. 19. That’s the biggest daily jump since last summer when the index was surging to a seasonal top. April lean hog futures finished Tuesday at an $8.875 premium to today’s cash quote.
Overnight demand news... Japan purchased 3,140 MT of feed wheat from an unspecified source. Egypt tendered to buy an unspecified amount of soyoil.
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. Fruit and Tree Nuts Data — ERS
- 11:00 a.m. Vegetables and Pulses Data — ERS
- 2:00 p.m. Broiler Hatchery — NASS
- 2:00 p.m. Milk Production — NASS