Good morning!
Grains solidly lower to start the week... Corn, soybeans and wheat faced increased selling pressure during overnight price action and are trading near session lows this morning. As of 6:30 a.m. CT, corn futures are trading 2 to 4 cents lower, soybeans are 6 to 8 cents lower and wheat futures are 7 to 12 cents lower. Front-month crude oil futures are trading just above unchanged and the U.S. dollar index is more than 100 points higher.
Middle East tensions rise as drone attack kills three U.S. troops; Biden vows revenge... A drone attack on a base in Jordan killed three U.S. troops on Sunday, and at least 34 others were injured, with President Joe Biden blaming Iran-backed militants and vowing to hold the perpetrators to account. It is the first time U.S. military personnel have been killed by hostile fire in the Middle East since the start of the Israel/Hamas war, and the incident will further raise tensions in the region and fuel fears of a broader conflict directly involving Iran. Hamas said the death of the soldiers shows Washington’s backing for Israel could put it at odds with the whole Muslim world if the Gaza war continues. A spokesman for Iran’s Foreign Ministry, Nasser Kanaani, said at a news conference on Monday that the militias “do not take orders” from Iran and act independently to oppose “any aggression and occupation.” He said accusations that Iran had ordered the strike were “baseless,” and blamed Israel and the U.S. for fueling instability in the region.
Crop stress will build in Argentina, mixed bag for Brazil... Argentina will continue to dry out this week, stressing corn and soybeans, especially in Buenos Aires and La Pampa. World Weather Inc. says there is better rainfall potential for the country next week. The forecaster notes southern and western Brazil will remain mostly dry this week, though rains should gradually move into these areas next week. Northeastern Brazil will continue to receive favorable rainfall.
Brazil’s soybean harvest continues rapid pace... Brazil’s soybean harvest reached 11% done as of last Thursday, according to AgRural, ahead of the 5% clip last year. Although the harvest continued at a fast pace, progress lost a little momentum due to increased rainfall in several states, including top producer Mato Grosso, which has had a frustrating growing season. AgRural noted “rains arrived at a good time in areas of several states that had been filling under strong heat and low humidity, especially in Paraná.” AgRural estimated safrinha corn planting reached 11% done, ahead of 5% last year at this time.
Cold snap helps India’s wheat crop but warm weather forecasts pose risk... An extended cold spell helped India’s wheat crop during its vegetative growth, but a rise in temperatures expected in the next few days, could impact the crop during the crucial grain formation stage. “Because of cold weather we’re expecting a little better yield than normal 3.5 tons per hectare, and that’s why we’ll easily achieve the production of the target of 114 million metric tons,” Gyanendra Singh, the director of the state-run Directorate Of Wheat Research, told Reuters. Although India’s fertile plains have seen a chilly winter, a lack of snowfall in the mountainous regions has raised concerns of a sudden, abrupt rise in temperatures. Both minimum and maximum temperatures in northern and north-western states have started to rise, an official of the state-run India Meteorological Department said. In February, maximum temperatures could be 5 degrees Celsius above normal in Punjab, Haryana and Rajasthan states, part of India’s grain belt, he said. Weather during the next eight weeks will determine the crop size.
Egypt temporary suspends wheat futures trade... Egypt will temporarily suspend wheat trading on the Egyptian Mercantile Exchange due to speculation that led to high prices. The country’s supply ministry also noted the country plans to import around 7 MMT of wheat this year.
Shipping costs continue to rise... Conflict in the Red Sea is causing disruptions to global shipments, leading to varying outcomes for companies and raising concerns about potential inflation spikes. Approximately 21% of global container ships rely on the Suez Canal, which connects the Red Sea and the Mediterranean, according to Jefferies. The International Monetary Fund has previously found that when shipping costs double — as they have in the past month — it can cause global consumer prices to rise by 0.7 percentage points in the coming year.
House, Senate negotiators reach deal on top-line allocations for 12 annual gov’t-funding bills... An agreement has been reached that allows lawmakers to start negotiating details of a spending package for fiscal year (FY) 2024, Bloomberg reports. Sen. Patty Murray (D-Wash.) and Rep. Kay Granger (R-Texas), the Appropriations Committees chairs, had been negotiating the funding amounts since a Jan. 7 agreement on high-level defense and non-defense levels. Congress faces funding deadlines on March 1 and March 8. The agreement was first reported by Congressional Quarterly on Saturday.
The week ahead in Washington... The House and Senate are in session, with key agenda items include funding for fiscal year (FY) 2024, a possible but unlikely border security package (dead-on-arrival in the House) and a tax package that previously had momentum but is leaking some of its optimistic air. Farm bill talks are all behind-closed-doors among leaders and staff except lawmakers from both parties issuing various positioning remarks, with odds rising of no measure this year. The Federal Open Market Committee is widely expected to hold interest rates unchanged at the conclusion of the two-day monetary policy meeting on Wednesday, though traders will be looking for indications of when rate cuts will begin. The Labor Department will issue the January employment data on Friday. USDA will issue its twice-yearly Cattle Inventory Report on Wednesday.
Senators respond to Stabenow’s crop insurance proposal... Some Senators have responded to Senate Agriculture Committee Chair Debbie Stabenow’s (D-Mich.) crop insurance proposal for the new farm bill that includes offering producers an annual choice between PLC/ARC at current reference prices or a STAX-type area-wide crop insurance policy. Sen. John Boozman (R-Ark.) mentioned the proposal has sparked a lot of discussion. Reports note Sen. Jerry Moran (R-Kan.) has concerns the proposal suggests a choice between Title One of the farm bill and crop insurance benefits, which should not be mutually exclusive. Sen. John Hoeven (R-N.D.) stated the proposal does not provide sufficient improvements to the farm safety net to earn his support, advocating for improvements to reference prices and increased premium support under crop insurance.
Embattled Chinese developer Evergrande ordered to liquidate... A Hong Kong court on Monday ordered the liquidation of property giant China Evergrande Group, sparking concerns of a deepening crisis in China’s real estate sector. Justice Linda Chan decided to liquidate the world’s most indebted developer, with more than $300 billion of total liabilities, after noting Evergrande had been unable to offer a concrete restructuring plan more than two years after defaulting on its offshore debt and following several court hearings. “It is time for the court to say enough is enough,” Chan said in court on Monday. The decision sets the stage for what is expected to be a drawn-out and complicated process with potential political considerations as investors watch whether Chinese courts will recognize Hong Kong’s ruling. Evergrande applied for another adjournment on Monday as its lawyer said it had made “some progress” on the restructuring proposal. As part of the latest offer, the developer proposed creditors swap their debts into all the shares the company holds in its two Hong Kong units, compared to stakes of about 30% in the subsidiaries ahead of the last hearing in December.
China’s industrial profits fell 2.3% in 2023... Profits at China’s industrial firms fell 2.3% in 2023, their second straight yearly decline, due to sluggish demand at home and abroad. Last year’s profit decline was chiefly due to sharply lower factory-gate prices, driven by over-capacity in some industries, economist Nie Wen at Hwabao Trust in Shanghai told Reuters. Industrial profits will likely rise by between 5% and 6% this year, as a slight improvement in demand and historic lows in inventories in China, Europe, U.S. and Japan will lead to a rebound in industrial prices, Nie said. There were some signs of improvement at the end of the year. For December, industrial profits rose 16.8% from a year earlier, down from a 29.5% jump in November but showing gains for a fifth straight month.
Bayer’s Monsanto hit with $2.2 billion Roundup verdict... A Pennsylvania jury has ordered Bayer AG’s Monsanto unit to pay over $2.2 billion to a former Roundup user who attributed his cancer to the weedkiller. This verdict is the largest in five years of litigation surrounding the herbicide. John McKivison, a former landscaper, was awarded $250 million for his losses and $2 billion in punitive damages, claiming that his use of Roundup at work and at home led to his cancer. Monsanto has won 10 out of 16 recent Roundup trials but has faced significant losses, including a $1.5 billion verdict in Missouri in November. Bayer, which acquired Monsanto in 2018, is under substantial pressure due to the mounting liability associated with Roundup lawsuits. The company has set aside up to $16 billion to resolve over 100,000 Roundup cases. Bayer disagrees with the jury’s verdict and plans to appeal, stating that it conflicts with scientific evidence and regulatory assessments.
Bullish cash cattle hopes... Packers raised cash cattle bids last week and traders anticipate firmer cash prices again this week as plants try to normalize slaughter schedules following holiday- and weather-related delays. Packers are still thought to be short-bought on near-term needs, though fresh availability of contract supplies with the flip of the calendar could somewhat limit their demand for cash cattle.
Cash hogs continue steady climb, pork prices stabilize... The CME lean hog index is up another 23 cents to $69.90 as of Jan. 25, extending the slow and steady seasonal climb this month. February lean hog futures finished Friday just over $5.00 above today’s cash quote. Wholesale pork prices firmed 60 cents on Friday to $89.51 and have stabilized in the upper $80.00 range after failing to sustain last Monday’s push above the $90.00 level.
Weekend demand news... South Korea tendered to buy 100,000 MT of U.S. or Australian milling wheat. Jordan tendered to buy up to 120,000 MT of optional origin milling wheat. Turkey tendered to sell and export 150,000 MT of durum wheat. Egypt tendered to buy at least 20,000 MT of optional origin white, wholly milled short grain rice.
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
- 2:00 p.m. Livestock and Meat Domestic Data — ERS
- 2:00 p.m. Egg Products — NASS