Good morning!
Light grain trade overnight... Corn, soybeans and wheat held in tight ranges in light overnight price action. As of 6:30 a.m. CT, corn futures are trading fractionally lower, soybeans are mostly 1 to 2 cents lower, SRW wheat futures are narrowly mixed, while HRW and HRS wheat are mostly 2 to 4 cents higher. Front-month crude oil futures are around 75 cents higher and the U.S. dollar index is near unchanged.
Weekly Export Sales Report out this morning... For the week ended Jan. 18, traders expect:
| 2023-24 expectations (in MT) | Last week (in MT) |
Corn | 725,000-1,400,000 | 1,251,109 |
Wheat | 200,000-625,000 | 707,632 |
Soybeans | 700,000-1,200,000 | 781,277 |
Soymeal | 150,000-450,000 | 349,224 |
Soyoil | (5,000)-10,000 | 83 |
Red Sea attacks continue... Iranian-backed Houthi militants in Yemen have stepped up attacks on vessels in the Red Sea, saying they fired ballistic missiles at U.S. warships protecting the two U.S. commercial vessels. Shipping firm Maersk said nearby explosions forced two ships operated by its U.S. subsidiary and carrying U.S. military supplies to turn around when they were transiting the Bab al-Mandab Strait off Yemen.
New shipping end-arounds to Red Sea fracas... Hapag-Lloyd unveiled a new shipping route to avoid the risky area in the southern Red Sea. This alternative route will divert cargo from Jebel Ali port across the Arabian peninsula to Jeddah, where it will link up with a maritime shuttle service, bypassing the danger zone near Yemen. Another alternative is air freight. Bloomberg Intelligence expects the Red Sea diversions “could boost air cargo on select Middle East-Europe and Asia-Europe routes if tensions extend into” the second quarter. Air cargo volumes increased in the first two weeks of 2024 — when they usually fall, according to the Bloomberg Intelligence report.
India’s parboiled rice export prices hit record high... Rates of parboiled rice exported from top hub India advanced to record highs this week on limited supplies and steady demand from Asian and African buyers. India’s 5% broken parboiled variety was quoted at record $533 to $542 per metric ton this week. Export prices for rice from Vietnam and Thailand declined. Vietnam’s 5% broken rice was offered at $630 per metric ton, down from $653 per ton a week ago. Thailand’s 5% broken rice prices were quoted at $663 to $665 per ton, down slightly from $665 last week.
No more easy money for some banks... The Federal Reserve has increased the rate on its emergency loan program in an effort to prevent arbitrage and curb the excessive use of what the Economist described as a “free-money machine.” Banks had been borrowing extensively from this program due to its favorable terms. The new policy states the rate on the emergency loans will not be lower than the borrowing rate on reserve balances. This change is implemented immediately to address the situation.
Rubin warns of U.S. fiscal peril, calls for tax increases... Former Treasury Secretary Robert Rubin, on Bloomberg Television’s Wall Street Week with David Westin, expressed deep concern about the state of the U.S. federal deficits, characterizing it as a “terrible place.” He has called for tax increases to address the worsening fiscal situation. Rubin cited the risks posed by the growing deficits, including the potential for higher interest rates, which have already seen a 3-percentage-point surge in longer-term Treasury yields due in part to the fiscal outlook’s impact on inflation. He emphasized the current risks are greater than those faced in the early 1990s when measures were taken to reduce the deficit. Rubin estimated that approximately 60% of the increase in debt from 2000 to 2022 can be attributed to tax cuts implemented by Republican administrations. He urged a realistic approach to address the deficit, indicating tax increases will likely be necessary. Despite recent economic growth, the federal budget gap remains historically large, standing at about 6% of GDP, with rising interest costs on the debt contributing to the problem.
China says U.S. causing ‘trouble and provocation’ in Taiwan Strait... China criticized the U.S. for causing “trouble and provocation” after an American Navy warship sailed through the sensitive Taiwan Strait since presidential and parliamentary elections on the island. “U.S. warships and planes have caused trouble and provocation on China’s doorstep, and carried out large-scale, high-frequency activities in waters and airspace around China,” Chinese Defense Ministry spokesperson Colonel Wu Qian said. The U.S. Navy said the destroyer USS John Finn transited through a corridor in the Taiwan Strait that was “beyond the territorial sea of any coastal state.” Wu said China’s response in driving away the ship was “justified, reasonable, professional and restrained.”
China eases rules for bank loans on commercial property... China said it is widening the uses for commercial property lending by banks in its latest effort to ease a liquidity crunch facing troubled real estate firms. According to a notice jointly issued by the central bank and the financial regulator, by the end of this year banks will be able to provide commercial property loans to eligible developers to allow them to pay off debts that are not necessarily related to the project pledged as collateral. Currently, the loans are only able to be used to supplement the property’s operating capital, or to repay debts generated by the construction of the project, or acquisition of the property, used as collateral. Banks should, based on factors such as the operating conditions of the property, assessed value and the borrower’s debt repayment ability, reasonably determine the loan amount, the regulators said. An official with China’s National Financial Regulatory Administration also said financial institutions should not blindly withdraw and cut off loans for eligible property projects that have encountered temporary difficulties on construction.
China allows qualified pork imports from Russia... China’s customs administration began allowing the import of pork from qualified regions of Russia on Wednesday. Pork imports from regions of Russia without African swine fever are now allowed.
Cash cattle start trading at higher prices... Cash sources reported initial cash cattle trade around $174.00 in Texas on Wednesday, which would be up $1.00 from last week’s activity in the state. While movement was limited in other areas, this sets the expectation cash prices will be at least $1.00 higher than last week’s average of $173.76.
Cash hog index climbing but still below year-ago... The CME lean hog index is up another 63 cents to $69.39 (as of Jan. 23). Since bottoming at the beginning of this month, the cash index is up $4.34. Last year at this time, the cash index was just putting in a seasonal low, though this year’s price is still $2.72 below year-ago.
Overnight demand news... Japan purchased 88,710 MT of milling wheat in its weekly tender, including 32,985 MT U.S. and 55,725 MT Canadian.
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
- 7:30 a.m. Weekly Export Sales — FAS
- 8:00 a.m. Food Price Outlook — ERS
- 2:00 p.m. Citrus: World Markets and Trade — FAS
- 2:00 p.m. Livestock Slaughter — NASS
- 2:00 p.m. Poultry Slaughter — NASS