Good morning!
Price pressure to open the week... Soybeans led overnight price declines amid improved weather in Argentina, while corn and wheat followed to the downside. As of 6:30 a.m. CT, corn futures are trading around 4 cents lower, soybeans are 9 to 14 cents lower and wheat futures are mostly 5 to 10 cents lower. Front-month crude oil futures are around 50 cents higher and the U.S. dollar index is holding near unchanged this morning.
Welcome rains across Argentina... Argentina received enough rain late last week and during the weekend to provide temporary improvements to topsoil moisture, though more will be needed to break the drought pattern. World Weather Inc says Argentina will receive more rains over the next week to 10 day, with rainfall this week expected to be greatest in northwestern areas of the country. Brazil will continue to see mostly favorable weather, though some center-south areas will remain too wet while portions of the far southern state of Rio Grande do Sul will stay too dry.
AgRural lowers Brazilian crop estimates... Brazil-based consulting firm AgRural trimmed its Brazilian soybean crop estimate by 700,000 MT to 152.9 MMT amid cuts to production forecasts in Rio Grande do Sul, Parana and Mato Grosso do Sul, which were partially offset by small increases in other states. The firm lowered its Brazilian corn crop estimate by 400,000 MT to 123.9 MMT given drought stress in Rio Grande do Sul. Both crops would still be record-large. As of last Thursday, AgRural estimated the country’s soybean harvest was 1.8% complete versus 4.7% on this date last year.
Chinese markets closed for Lunar New Year... China’s markets are closed this week as the country celebrates the Lunar New Year holiday. A focal point during the week will be Covid infections and deaths as numbers spiked ahead of the holiday as Beijing removed most of its restrictions and travelers were allowed to move freely throughout the country. Other Asian markets also will be closed for varying periods this week for the Lunar New Year.
Russian official: Grain deal ‘more or less being fulfilled’... Russian Foreign Minister Sergei Lavrov said terms of the Black Sea grain initiative were “more or less being fulfilled.” However, Lavrov also said Russia still faced problems exporting its own agricultural products.
The week ahead in Washington... Congress is back in session this week, with most of the work centering on preparing for legislative battles ahead, including the biggest near-term issue: increasing or suspending the $31.4 trillion debt limit. Both parties need to complete organizational duties, including an accord on committee ratios, while Democrats need to complete panel rosters, including House Ag Committee members. White House Chief of Staff Ron Klain intends to step down in the weeks following President Joe Biden’s State of the Union address. Biden is expected to tap Jeff Zients as his next chief of staff, according to various media reports. The Supreme Court could announce it’s a ruling on the Wates of the U.S. (WOTUS) today. On the economic front, the Conference Board today releases its Leading Economic Index for December. On Friday, The University of Michigan publishes its final reading of consumer sentiment for January. Key agricultural reports this week include USDA’s food price outlook and Cold Storage Report, both which will be released Wednesday.
Fed sets course for milder interest-rate rise in February... Federal Reserve officials are preparing to slow interest-rate increases for the second straight meeting and debate how much higher to raise them after gaining more confidence inflation will ease further this year, the Wall Street Journal (WSJ) reports. They could begin deliberating at the Jan. 31-Feb. 1 gathering how much more softening in labor demand, spending and inflation they would need to see before pausing rate increases. In recent public statements and interviews, Fed officials have said slowing the pace of rate increases to a more traditional 25 basis points would give them more time to assess the impact of the monetary tightening so far, WSJ concludes.
Yellen: Strong labor market, easing inflation ‘very hopeful signs’... Treasury Secretary Janet Yellen said, “We still have a labor market that is very tight. We’re seeing some signs of services inflation that need continued attention, but overall I feel good that inflation is coming down. I do think in the U.S. that we continue to see a strong labor market and progress on inflation, so those are very hopeful signs.” Meanwhile, Yellen said the Federal Reserve likely wouldn’t accept a $1 trillion platinum coin if the Biden administration tried to mint one to avoid breaching the debt limit. Some Biden administration officials and Democrats on Capitol Hill have discussed the possibility Treasury could use an obscure law authorizing platinum coins to circumvent Congress if lawmakers don’t raise the debt ceiling.
Granholm: Don’t limit presidential authority to release oil from SPR... In a letter seen by Reuters, Energy Secretary Jennifer Granholm warned Republicans on the House Energy and Commerce Committee that a measure to limit the presidential authority to release oil from the nation’s Strategic Petroleum Reserve would “significantly weaken this critical energy security tool” and lead to supply shortages in times of crisis and higher gasoline prices.
Egg smuggling attempts amid high prices... High prices are driving an increase in attempts to smuggle eggs into the U.S. from Mexico, according to border officials. “The San Diego Field Office has recently noticed an increase in the number of eggs intercepted at our ports of entry,” director of field operations Jennifer De La O said in a tweet. “Failure to declare agriculture items can result in penalties of up to $10,000,” she said. The rise in attempted egg smuggling can be attributed to the spiking cost of eggs in the U.S., a Customs and Border Protection specialist told CNN. A massive outbreak of avian flu among American chicken flocks has caused egg prices to skyrocket, climbing more than 11% from November to December and nearly 60% annually, according to the Bureau of Labor Statistics.
Cattle on Feed Report: Neutral... USDA estimated there were 11.682 million head of cattle in large feedlots (1,000-plus head) as of Jan. 1, down 355,000 head (2.9%) from year-ago but 30,000 head more than the average pre-report estimate implied. December placements dropped 8.0% from year-ago, while marketings declined 6.1%. All three categories were a little on the negative side of the average pre-report estimates, but not enough to move the market. From an underlying standpoint, the data is bullish as feedlot supplies declined from year-ago for a fourth straight month.
Cash hog index continues to drop... The CME lean hog index is down 63 cents to $72.65 (as of Jan. 19), extending its prolonged seasonal decline. After corrective gains last Friday, February hogs finished $5.175 above the cash index, which will limit additional buying. The upside in futures will be limited to short bouts of corrective buying until the cash market puts in a seasonal low.
Weekend 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
- 10:00 a.m. Export Inspections — AMS