Good morning!
Markets firm ahead of USDA reports... Grain and soy futures traded solidly higher overnight, led by old-crop soybeans. As of 6:30 a.m. CT, corn futures are trading 1 to 2 cents higher, soybeans are mostly 7 to 11 cents higher and wheat futures are mostly 4 to 8 cents higher. Front-month crude oil futures are around 75 cents higher and the U.S. dollar index is more than 300 points lower this morning.
USDA February crop reports out later this morning... USDA is expected to make minor adjustments to its U.S. balance sheets in the Supply & Demand Report at 11 a.m. CT. Traders expect USDA to report U.S. ending stocks at 1.266 billion bu. for corn (up from 1.242 billion bu. in January), 211 million bu. for soybeans (up from 210 million bu.) and 576 million bu. for wheat (up from 567 million bu.). The bigger focus will be any changes to USDA’s global production forecasts. Traders expect USDA to lower its Argentine corn and soybean crop forecasts, with little change anticipated for the Brazilian projections.
Brazil raises soybean crop estimate, cuts corn forecast... Conab raised its Brazilian soybean crop estimate by 177,000 MT from last month to a record 152.9 MMT. The soybean export forecast for 2022-23 remained at 93.9 MMT. The Brazilian government’s crop estimating agency cut its corn production forecast by 1.319 MMT to 123.7 MMT, citing delays to safrinha corn planting. This was Conab’s first assessment of safrinha production. Despite the lower production estimate, Conab raised its 2022-23 corn export forecast by 2 MMT to 47 MMT.
SOTU highlights... President Joe Biden’s State of the Union (SOTU) address made clear he will run for re-election as the speech could have been titled “Let’s Finish the Job” because he kept repeating the refrain — eight times precisely. It was filled with dramatic moments. He also used the speech to press his economic priorities, from bolstering American manufacturing to extending his climate efforts. Click here for more details.
Fed’s Powell again says additional rate hikes coming... Fed Chair Jerome Powell in remarks Tuesday acknowledged the stronger-than-expected jobs update from January, noting that is a sign of inflation. Markets brushed aside Powell’s remark that the Fed could go beyond the level signaled in December in projections relative to the Fed funds rate, a level which after last week’s Fed meeting Powell reiterated was at 5% to 5.25%. “If we continue to get, for example, strong labor market reports or higher inflation reports, it may well be the case that we have do more and raise rates more than is priced in,” Powell cautioned. He also indicated there is “a significant road ahead” relative to the Fed’s battle to get inflation to come back down to their 2% target. He still signaled more rate increases are coming “and then we’ll have to look around and see whether we’ve done enough.”
Ukraine grain exports fall sharply... Ukraine’s grain exports so far in 2022-23 are down 11.7 MMT (29.3%) from the same period last year to 28.2 MMT due to a smaller harvest and logistical difficulties caused by the Russian invasion, the country’s ag ministry said. The volume included 16.2 MMT of corn, 10.1 MMT of wheat and 1.9 MMT of barley.
Russia not satisfied with progress on export deal... Russian Deputy Foreign Minister Alexander Grushko said work to unblock its ag exports under the Black Sea grain deal was unsatisfactory, accusing the European Union of failing to deliver on its promises, TASS news agency reported. Russia has long contended its exports of grains and fertilizers are being held up by sanctions and other restrictions.
China makes no changes to corn, soybean or cotton balance sheets... China’s ag ministry made no adjustments to its 2022-23 supply or usage forecasts for corn, soybeans or cotton this month. Its only change was a modest increase to the edible oil consumption forecast.
China will auction more wheat reserves... China will auction another 140,000 MT of state-owned wheat stocks on Feb. 15 as it continues to clear out older supplies from its reserves.
Fitch raises China’s economic growth forecast... Rating agency Fitch revised up its forecast for China’s economic growth this year to 5.0% from 4.1% previously as consumption and broader activity are recovering faster than initially anticipated after the end of the zero-Covid regime. Fitch said China’s economic recovery will be primarily led by consumption, noting that many high-frequency indicators have recently rebounded though they remain below pre-pandemic norms.
Extended cash cattle negotiations expected... Packers have been slow to establish this week’s cash cattle bids, suggesting trade will again be pushed deep into the week. While the extended negotiations benefited packers for weeks, that changed last week and feedlots are expected to have the upper hand again when trade eventually turns active. Most sources are expecting the cash market to firm at least another $1 to $2 this week after gaining nearly $3 last week.
Pork cutout more than gives back Monday’s gains... After firming $2.53 on Monday, the pork cutout value dropped $3.06 yesterday, with all cuts lower. Packers have struggled to maintain the cutout above $80.00 but movement on price pullbacks remains strong, signaling solid underlying demand. Packers moved 342.1 loads on Tuesday.
Overnight demand news... Japan is seeking 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
- 10:00 a.m. Livestock and Meat International Trade Data — ERS
- 11:00 a.m. Cotton Ginnings — NASS
- 11:00 a.m. Crop Production — NASS
- 11:15 a.m. Cotton: World Markets and Trade — FAS
- 11:15 a.m. Grains: World Markets and Trade — FAS
- 11:15 a.m. Oilseeds: World Markets and Trade — FAS
- 11:15 a.m. World Agricultural Production — FAS
- 2:00 p.m. Broiler Hatchery — NASS