Good morning!
Corrective buying overnight... Corn, soybean and wheat futures recouped a portion of Monday’s sharp price losses during the overnight session. As of 6:30 a.m. CT, corn futures are trading mostly 3 to 5 cents higher, soybeans are 4 to 7 cents higher, SRW wheat futures are 3 to 6 cents higher, HRW wheat is 7 to 10 cents higher and HRS wheat is 7 to 9 cents higher. Front-month crude oil futures are around 35 cents higher and the U.S. dollar index is about 125 points lower.
Consultant keeps South American crop estimates unchanged... South American crop consultant Dr. Michael Cordonnier kept his Argentine crop estimates at 39 MMT for soybeans and 44 MMT for corn, saying he will monitor weather developments before any additional adjustments after recent rains provided some relief. Cordonnier kept his Brazilian crop forecasts unchanged at 151 MMT for soybeans and 125 MMT for corn.
U.S. expresses ‘grave concerns’ about Mexico’s ag biotech policies... USDA Undersecretary for Trade and Foreign Agricultural Services Alexis Taylor and U.S. Trade Representative (USTR) Chief Agricultural Negotiator Doug McKalip were in Mexico Monday for meetings with officials on Mexico’s decree to phase out the use and importation of genetically engineered corn and other products by Jan. 31, 2024. The U.S. officials relayed “grave concerns” on the matter during the meeting and labeled proposed changes offered by Mexico as “not sufficient” with Mexico’s approach on biotech crops still “not grounded in science,” according to a statement released after the meeting. The U.S. warned the situation “threatens to disrupt billions of dollars in bilateral agricultural trade, cause serious economic harm to U.S. farmers and Mexican livestock producers, and stifle important innovations needed to help producers respond to pressing climate and food security challenges.” U.S. officials warned if the matter is not resolved, the U.S. would consider “all options, including taking formal steps to enforce our rights under the U.S.-Mexico-Canada Agreement (USMCA).” The trade topic will again surface Wednesday when Deputy USTR Jayme White will meet Wednesday with Mexico’s undersecretary of economy Alejandro Encinas in San Diego.
U.S. confronts China on assistance to Russia... The U.S. government confronted China with evidence suggesting some state-owned companies may be providing assistance for Russia that feeds into its war effort in Ukraine. The concerns focus on non-lethal military aid and economic activity that stops short of direct evasion of the sanctions imposed on Russia by the U.S. and its allies. Upshot: Just another thorn in a contentious U.S./China relationship.
Euro zone January business activity returns to growth... Euro zone business activity made a surprise return to modest growth in January, adding to signs the bloc may escape recession. S&P Global’s flash Composite Purchasing Managers’ Index (PMI), which gauges activity in the manufacturing and services sectors, climbed to 50.2 this month from 49.3 in December, marking the first time the index has been above the 50 mark since June.
Unruly GOP-led House Rules panel... House Speaker Kevin McCarthy (R-Calif.) issued the new GOP roster for the House Rules Committee Monday, and he made good on his pledges to give his conference’s hard right three positions on the powerful panel, which decides along with the speaker the bills going to the floor and the scope of amendments. He named Reps. Thomas Massie (R-Ky.), Ralph Norman (R-S.C.) and Chip Roy (R-Texas) to the panel. Norman and Roy were among those initially opposing McCarthy’s speaker bid, and Massie in the past has been a real pain in leadership’s plans. Key for the ag sector: Norman in the past unsuccessfully pushed crop insurance amendments that would have cut premium incentives/subsidies by 15% for producers with specified adjusted gross incomes. Another amendment, co-sponsored by Norman, would have effectively muted the harvest price option.
Biden’s green subsidies are attracting billions of dollars to red states... Republican-leaning states are attracting most of the clean-energy investments spurred by the Biden administration’s Inflation Reduction Act, the Wall Street Journal reports. The act, signed into law in mid-August without any Republican votes, offers beefy tax credits and other support for clean-energy projects ranging from wind farms to factories that make batteries, solar components or hydrogen.
USDA announces more dairy payments, including coming organic dairy effort... USDA will make an additional round of payments to dairy farmers under the Pandemic Market Volatility Assistance Program (PMVAP) for production not originally covered under the effort with payments to total nearly $100 million. The initial phase of PMVAP payments totaled around $250 million and covered production up to 5 million lbs. of sales, with payments covering 80% of revenue losses on fluid milk sales from July-December 2020. The next round will cover fluid milk sales between 5 million lbs. and 9 million pounds. USDA will soon introduce the Organic Dairy Marketing Assistance Program (ODMAP) aimed at smaller organic dairy producers to help them deal with challenges and higher costs they have faced in the last few years. Payments will cover up to 75% of marketing costs for 2023 and up to $100 million has been allocated. Final outlays will depend on enrollment and the projected production for each producer. Funding will come from the Commodity Credit Corporation (CCC) via monies left over from early pandemic aid efforts. Payments will cover up to 5 million lbs. of a producer’s expected production and will be based on a national per-hundredweight payment.
Another winter storm hits the Plains... A third round of recent wintry weather has invaded the Plains, which will further slow cattle performance in feedlots. With packers still trying to restrict paying higher prices for cash cattle as they work to improve margins, signs point toward another extended cash standoff with lower-volume sales levels a distinct possibility. Cash sources expect steady to firmer cash prices compared with last week’s $155.32 average, but active trade may not come until late in the week.
Cash hog market a broken record... The CME lean hog index is down another 52 cents to $72.13 (as of Jan. 20), extending the prolonged seasonal decline from early August of last year to more than $50.00. With market-ready supplies ample to fill near-term slaughter needs, packers are focused on improving their margins ahead of a seasonal firming of cash prices into mid-summer. The pork cutout value firmed 93 cents on Monday to $80.92, though that’s down nearly $15.00 from last year at this time.
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
- 10:00 a.m. Fruit and Tree Nuts Data — ERS
- 10:00 a.m. Vegetables and Pulses Data — ERS