Good morning!
Corn and soybeans weaker, wheat mixed overnight... Corn and soybean futures are weaker this morning after two-sided trade earlier in the overnight session, while wheat futures are narrowly mixed. As of 6:30 a.m. CT, corn futures are trading mostly 1 to 2 cents lower, soybeans are mostly 5 to 6 cents lower, SRW and HRW wheat futures are 2 cents lower to 4 cents higher and HRS wheat is a penny lower to fractionally higher. Front-month crude oil futures are modestly firmer and the U.S. dollar index is around 300 points higher this morning.
U.S./China uncertainty over balloon incident... The U.S. shot down a Chinese surveillance balloon on Saturday and is working to recover its remnants from the Atlantic Ocean off the South Carolina border. China has repeatedly said the balloon was intended for scientific purposes and had blown off course. Beijing called the U.S. shooting down of the balloon an “obvious overreaction” and “firmly opposes and strongly protests against this,” Vice Foreign Minister Xie Feng said. “The unintended entry of this airship (into the U.S.) is entirely an isolated, accidental incident. It tests the sincerity the U.S. has in improving and stabilizing bilateral relations and the way it handles crisis,” Chinese foreign ministry spokesperson Mao Ning said. “We hope the U.S. will work with China to properly handle our differences, avoid miscalculation and misunderstanding and harming our mutual trust.” Mao said another balloon, spotted over Latin America, was an unmanned civilian airship on a test flight that “severely deviated and unintendedly entered the space above Latin America because it was affected by the weather and because it has limited self-steering capability.” Sevens Report said, “The Chinese spy balloon drama dominated weekend headlines but it’s unlikely to materially alter U.S./China relations and as such shouldn’t be an influence on markets.”
Hot, dry weather in Argentina, southern Brazil this week... Forecasts call for net drying across Argentina this week as spotty rains won’t be enough to offset evaporation rates amid hot temps. Rains and cooler temps are expected next week across Argentina, but coverage levels and amounts are unlikely to be enough to provide more than temporary relief. Far southern Brazil is also expected to be dry over the next week. Rains will continue in central Brazil, resulting in further delays to soybean harvest and safrinha corn planting, though frequency and intensity of the rainfall shouldn’t be as great as recent weeks.
Brazil soybean harvest, safrinha corn planting remains delayed... Brazil’s soybean harvest advanced just four percentage points to 9% complete as of last Thursday, according to AgRural. That was seven points behind the same time last year. Safrinha corn planting advanced to 12%, up seven percentage points on the week, though just half of last year’s pace for the date. AgRural said, “There is still no major concern with the planting window, as producers are able to accelerate planting as soon as weather conditions improve. But the rains need to stop soon.”
Russian grain exports to be stronger in second half of 2022-23... Russia exported 29 MMT of grain in the first half of the 2022-23 marketing year. The country’s first deputy ag minister says Russian grain exports could total between 30 MMT and 35 MMT.
The week ahead in Washington... President Joe Biden gives his State of the Union address on Tuesday evening to a joint session of Congress. The downing of the Chinese spy balloon will likely be part of the topics the president talks about. The ag sector will watch to see whether Biden mentions a new farm bill as one of the possible bills that could see bipartisan support and action yet this year. A House Transportation and Infrastructure Committee hearing will be held Wednesday on the Biden administration’s new “waters of the U.S.” (WOTUS) rule, which redefines the wetlands and streams that fall under federal jurisdiction via the Clean Water Act. On Thursday, the Senate Ag Committee will hold a farm bill hearing on commodity programs, crop insurance and farm credit. USDA’s Supply & Demand Report is out Wednesday, with the farm income forecast coming Tuesday.
China sells nearly all wheat put up for auction... China sold 137,701 MT of state-owned wheat reserves put up for auction last week – 98.68% of the total volume offered. The average sales price was 2,830 yuan ($417.11) per metric ton.
Indonesia to suspend some palm oil export permits... Indonesia will suspend some palm oil export permits to secure domestic supply amid rising cooking oil prices ahead of upcoming Islamic festivals, senior cabinet minister Luhut Pandjaitan said. Palm oil exporters had accumulated large shipment quotas last year and they now had little incentive to supply the domestic market, he said. Indonesia issues export permits for palm oil companies that have already sold a proportion of their products to the domestic market, under a policy known as Domestic Market Obligation (DMO). Firman Hidayat, an official at the same ministry, said about one-third of existing export quotas could be used now, while the rest could be used after May 1. Exporters could increase their quota when they raised supplies to the domestic market, he said.
U.S., Brazil to join India’s global push to boost biofuels demand... The U.S. and Brazil, two of the world’s largest biofuels markets, are joining an India-led International Biofuels Alliance that will aim to boost demand for the lower-emissions energy source. Further details will be outlined during the three-day India Energy Week forum opening today in Bengaluru.
More crossover SUVs to qualify for EV tax credits in U.S. reversal... The Biden administration will allow more crossover SUVs to qualify for the newly revamped electric vehicle (EV) tax credit following lobbying by automakers such as General Motors and Stellantis. The change announced Friday by the Treasury Department effectively expands the number of buyers who can take advantage of a $7,500 consumer tax credit by broadening the definition of how a sport-utility vehicle is defined.
EU agrees to export cap on Russian refined-oil products... The EU agreed to a cap of $100 per barrel on exports of Russia’s refined-oil products, such as diesel, that took effect on Sunday. Fuel oil and other low-value exports will be capped at $45. A cap of $60 already applies to Russian crude. Insurers and shippers are prohibited from dealing in items covered by the cap unless they were bought below or at the designated price.
China to replenish pork reserves to stabilize market... China will stockpile pork to replenish state reserves, as pork prices triggered a warning level. The national average of pork prices against grain prices, was 4.96 between Jan. 30 and Feb. 3, falling below the warning level of 5, the National Development and Reform Commission said. China has a three-level warning system for excessive ups and downs in hog prices. The commission said it would work with relevant departments to immediately start the stockpiling work for state reserves and guide local governments to purchase pork.
Bullish cash cattle hopes... Cash cattle prices firmed late Friday, though traders will have to wait until later today to get the official average price from USDA. With packers thought to be short-bought on near-term slaughter needs, traders start the week with bullish hopes for cash trade. After strong gains late last week, nearby live cattle futures reflect bullish cash expectations.
Cash hog index firms... The CME lean hog index is up 20 cents to $73.05 (as of Feb. 2) and has now risen six of the past eight sessions. February lean hog futures finished last week nearly $2.00 above the cash index, while the April contract held nearly a $13.50 premium.
Weekend demand news... Egypt purchased 60,000 MT of Ukrainian corn. South Korea purchased 65,000 MT of feed wheat to be sourced from the U.S., Australia, Romania or Bulgaria.
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