Good morning!
Grains mostly lower overnight... Corn faced followthrough selling overnight, while soybeans more than erased Thursday’s gains and the wheat market was mixed. As of 6:30 a.m. CT, corn futures are trading 2 cents lower, soybeans are 6 to 9 cents lower, SRW wheat is 1 to 2 cents higher, HRW wheat is mostly a nickel lower and HRS wheat is fractionally to a penny lower. Front-month crude oil futures and the U.S. dollar index are both near unchanged this morning.
Red Sea attacks impact supply chains, prices... Iran-backed Houthi militants are escalating attacks on container ships in the Red Sea, impacting a vital trade route, which historically accounted for about 15% of worldwide shipping traffic. Shipping leader Maersk forecasts disruptions lasting up to a year, with additional costs estimated at $1 million per vessel due to route changes. These delays and expenses raise worries of further price hikes for consumers, already grappling with inflation.
Ukraine’s 2024 spring crop seedings likely to be unchanged... Ukraine expects its 2024 spring seedings area to be the same as last year, though it could be slightly lower in a worst-case scenario, Ag Minister Mykola Solsky told Reuters. Ukrainian farmers seeded a total of 12.75 million hectares of spring crops in 2023, including 4 million hectares of corn, 5.3 million hectares of sunflowers and 1.78 million hectares of soybeans. Solsky said farmers reduced winter wheat seedings due to poor weather last fall, which could cause them to increase the area sown to spring wheat. Ukraine sowed 280,000 hectares of spring wheat last year. Solsky said farmers’ shortage of funds caused by the war and difficulties with exports had forced them to save money and use lower quality wheat seed. While winter wheat has survived the winter so far without serious damage, the quality of this year’s harvest was a potential concern.
India’s rice prices continue record climb... Prices of parboiled rice exported from India extended their rally, rising for a fourth consecutive week to a record high as supplies remained limited. India’s 5% broken parboiled variety was quoted at a record $542 to $550 per metric ton this week, up from last week’s $537 to $546. Thailand’s 5% broken rice prices were quoted at $630 per metric ton, down from last week’s $640 rate as market activity slowed. Vietnam’s 5% broken rice was offered at $635 to $640 per metric ton, unchanged from a week ago.
Senate to hold votes beginning this evening on aid to Ukraine, Israel and Taiwan... In a significant move, 17 Republican Senators on Thursday showed their support in a pending measure for military aid for Ukraine, Israel, and Taiwan, despite intra-party tensions over border security and former President Donald Trump’s opposition. The vote on proceeding to the legislative vehicle for the foreign aid package will be at 6 p.m. CT, at a simple majority threshold. Senate Majority Leader Chuck Schumer (D-N.Y.) then is expected to file cloture on the substitute amendment sometime after the vote this evening. That would set up a cloture vote on Sunday. Without an agreement to speed the process, final passage for the legislation would be sometime early next week, likely by Tuesday, sources signal. The bill’s eventual passage in the Senate is likely, though challenges may arise in the House.
China’s new bank loans hit record high in January... Chinese banks extended 4.92 trillion yuan in new loans in January, an all-time high, more than quadrupling December’s 1.17 trillion and exceeding the previous record of 4.9 trillion yuan in the same month last year. The increase came as the Chinese authorities try to shore up the economy and as loans tend to rise in the beginning of the year. Household loans, mostly mortgages, rose to 980.1 billion yuan and corporate loans jumped to 3.86 trillion yuan. Meanwhile, total social financing, which is a broad measure of credit and liquidity, also reached a record high of 6.5 trillion yuan.
Chinese investors dumping global real estate amid domestic crisis... The current trend of Chinese investors and creditors is to sell off their real estate assets globally to raise cash amid a deepening property crisis in China, Bloomberg News reports. Despite the risks of offloading assets in a falling market, the need for liquidity supersedes these concerns. Chinese investors are selling off overseas assets acquired during a decade-long expansion spree. This includes distressed developers seeking cash to stabilize domestic operations and pay off debts. The recent crackdown on excessive borrowing by Beijing has affected even major players in the industry. As a result, properties are being sold at significant discounts, contributing to a thaw in the market freeze and improving price discovery. This shift from buying to selling marks a significant change in the behavior of Chinese developers in these markets. However, the full impact of these disposals on the global commercial real estate market remains uncertain.
IMF urges BOJ to end bond yield control, huge asset buying... The Bank of Japan (BOJ) should consider ending its yield curve control and massive asset purchases, then gradually raise short-term interest rates, the International Monetary Fund (IMF) said, as markets ramp up bets on a near-term turn in the central bank’s ultra-easy policy. As Japan’s economy continues to recover, domestic demand is replacing rising costs as the main driver of inflation with the output gap closing and labor shortages intensifying, IMF said. Measures of underlying price moves show current inflation, which is above BOJ’s 2% target, is broad-based across products and services for the first time in three decades, IMF said. A closed output gap and increasing wages will keep core inflation, excluding fresh food and energy costs, above BOJ’s target until the second half of 2025, it said.
Federal judge declares exemption in Massachusetts farm animal act unconstitutional... Judge William Young from the U.S. District Court for the District of Massachusetts concluded an exemption within Massachusetts’ Prevent Cruelty to Farm Animals Act, (Question 3) violated the dormant Commerce Clause and could be severed from the rest of the law, leaving the remainder intact. Triumph Foods led a challenge against the exemption that allowed pork from federally inspected facilities in Massachusetts to be sold on-site at these plants, bypassing traditional retail locations. For Triumph Foods, an out-of-state processor, to benefit from this exemption, they would need to establish their own federally inspected facility within Massachusetts, which would contravene the Commerce Clause according to Supreme Court precedent. Consequently, out-of-state pork processors face higher costs compared to in-state counterparts when selling pork in Massachusetts. Triumph now has 30 days to file a summary judgment motion asserting that the Federal Meat Inspection Act supersedes state law. The court rejected Massachusetts’s motion to dismiss the case.
Cash cattle trade remains quiet... The standoff between packers and feedlots continued Thursday with little movement, though signs point toward higher cash prices. Feedlots appear unwilling to move cattle at steady/weaker prices and packers may need supplies to fill out near-term slaughter runs unless they decide to further cut hours to manage tight supplies.
Cash hog rally stalls... The CME lean hog index is down 2 cents to $74.00 as of Feb. 7, the first daily decline since Jan. 12 and only the fourth since the beginning of the year. February lean hog futures finished Thursday at a 70-cent discount to today’s cash quote, suggesting traders anticipate cash prices will decline more ahead of the contract’s Feb. 16 settlement. The premium in April hogs declined to $6.35 as of Thursday’s close.
Overnight demand news... Exporters reported no tenders or sales.
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. Feed Grains Database — ERS
- 2:00 p.m. Season Average Price Forecasts — ERS
- 2:00 p.m. U.S. Agricultural Trade Data Update — ERS
- 2:00 p.m. Wheat data — ERS
- 2:00 p.m. Catfish Production — NASS
- 2:00 p.m. Peanut Prices — NASS
- 2:30 p.m. Commitments of Traders — CFTC