Good morning!
Followthrough selling overnight... Heavier selling pressure was seen in grain and soy futures overnight, especially the soybean and winter wheat markets, after disappointing finishes on Monday. As of 6:30 a.m. CT, corn futures are trading fractionally to a penny lower, soybeans are 5 to 8 cents lower, SRW wheat is around a dime lower, HRW wheat is 15 to 16 cents lower and spring wheat is 3 to 5 cents lower. Front-month crude oil futures are around 40 cents higher and the U.S. dollar index is about 300 points higher.
Consultant further cuts Argentine crop estimates... South American crop consultant Dr. Michael Cordonnier cut his Argentine soybean crop estimate another 2 MMT to 41 MMT, noting “continued dryness and the possibility not all intended soybeans will get planted.” Cordonnier cut his Argentine corn crop estimate 1 MMT to 45 MMT “due mostly to expected low yields of early planted corn.” He maintained a lower bias toward both crops. Cordonnier acknowledged drought in far southern Brazil and excessive rainfall in central areas of the country, but he kept his Brazilian soybean and corn crop estimates at 151 MMT and 125 MMT, respectively.
China pivots beyond Covid... An item in the Financial Times (FT) speculates on China’s approach to stimulating domestic demand and also seeking to improve foreign relations. The item is titled Xi Jinping’s plan to reset China’s economy and win back friends. Citing Chinese officials and government advisers, FT says Beijing “is putting together policies aimed at improving diplomatic ties that have soured badly and boosting a deeply strained economy.” The main goals are to restore robust growth to China’s slowing economy, improve the lot of hundreds of millions of Chinese rural workers, stabilize the ailing property market and shore up a crisis afflicting the finances of scores of local governments, the officials and government advisers say. The focus is on ties with Europe, which have been badly damaged by China’s support for its partner Russia throughout Moscow’s war against Ukraine.
Fed chair speaks today... Fed chair Jerome Powell is speaking today at a Riksbank conference on central bank independence, making it unclear whether he will push back against the recent softening in U.S. financial conditions. The market does not buy into the Fed’s narrative of the funds rate being taken to 5.00% or higher and being kept there for a long time.
India could produce record wheat crop... India’s wheat production is set to jump to a record after all-time high prices prompted farmers to expand planting areas with high-yielding varieties and good weather conditions. “This year production could rise to 112 MMT because of the higher area and favorable weather,” Gyanendra Singh, director at the Indian Institute of Wheat and Barley Research, told Reuters. Farmers planted wheat on 33.22 million hectares to wheat, up nearly 1% from last year. Meanwhile, India media reports the Indian government is reviewing export curbs on wheat and sugar.
House narrowly approves rules package... The package passed on Monday evening in a mostly party-line vote of 220-213, with just one Republican (Tony Gonzales of Texas) voting “no.” It includes the Holman rule, which allows lawmakers to use spending bills to defund specific programs and fire federal officials or reduce their pay; makes it harder for lawmakers to raise the debt limit; and paves the way for the creation of a new select subcommittee under the Judiciary Committee focused on the “weaponization” of the federal government. The package requires that lawmakers receive the text of bills 72 hours ahead of a vote. It ends proxy voting, a procedure instituted by Democrats during the Covid pandemic. It also stipulates legislation must address a “single subject,” to discourage sprawling legislation that mashes together numerous pieces of unrelated bills. Not all of Speaker Kevin McCarthy’s (R-Calif.) promises to conservatives are enumerated in the rules. There is a separate, three-page document that Republicans have kept secret.
Supreme Court turns down case on rail, air unions’ court access... The U.S. Supreme Court declined to consider a case that had the potential to roll back union access to federal courts for labor disputes involving railroads and airlines.
Chinese new bank loans rose in December, set record in 2022... New bank lending in China unexpectedly rose in December from the previous month, with 2022 setting a high for lending as the central bank continued to support the Covid-hit economy. Chinese banks extended 1.4 trillion yuan ($206.7 billion) in new yuan loans in December, up from November and beating analysts’ expectations, according to data released by the People’s Bank of China. New bank lending hit a record 21.31 trillion yuan in 2022, up from the previous high of 19.95 trillion yuan in 2021.
Signs point toward higher cash cattle prices... Packer demand for cash cattle is expected to be greater this week as slaughter schedules return to normal following the holidays and weather disruptions. With Choice beef prices surging $3.15 on Monday and the Choice/Select spread at a strong $26.54, signs point toward packers paying higher prices for cash cattle than last week’s $157.74 average.
Cash hog pressure likely to persist a while longer... The CME lean hog index is down another 70 cents to $76.79 (as of Jan. 6), matching the level from Jan. 19 last year. While hog slaughter is expected to run about 2% under year-ago through the first half of 2023, based on USDA’s Hogs & Pigs Report data, near-term numbers could be stronger than that as plants catch up after recent slowdowns. As a result, the cash market will likely continue to soften near-term as market-ready supplies remain ample.
Overnight demand news... South Korea purchased 68,000 MT of corn expected to be sourced from South America. Japan is seeking 89,735 MT of milling wheat in its weekly tender.
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
- No reports scheduled.