Good morning!
Mild followthrough selling in grains overnight... Corn, soybeans and wheat faced mild followthrough selling overnight after heavy losses to open the new year on Tuesday. As of 6:30 a.m. CT, corn futures are trading steady to fractionally lower, soybeans are 1 to 2 cents lower, winter wheat futures are mostly 2 to 4 cents lower and spring wheat futures are around a penny lower. Front-month crude oil futures are near unchanged, while the U.S. dollar index is around 250 points higher.
HRW crop ratings improve during December... State-level winter wheat crop condition ratings released on Tuesday signaled general improvement in the HRW crop over the past month, led by top producer Kansas. When the state crop ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the HRW crop improved 10.5 points from the end of November to 333.8.
India’s wheat stocks remain plentiful despite sales... India’s wheat inventories are likely to remain above the buffer norm on April 1 despite the ongoing sale of the grain from state reserves, a senior government official said. The country’s wheat stocks at state warehouses have dropped to 16.47 MMT as of Jan. 1, said Ashok Kumar Meena, chairman of the Food Corporation of India. That’s the lowest since 2017. India has sold 5.8 MMT of wheat from state reserves since June 1 to tame domestic prices, prompting speculation inventories would fall below 6 MMT by April 1. However, the official said they will remain above the normal level of 7.46 MMT.
Anemic Sierra Nevada snowpack signals slow start for California’s water needs... California water officials reported the snowpack statewide was 25% of average for this time of year. It’s the worst start for California’s watershed in a decade. The state relies on the snowpack for roughly a third of its water supply, and it also helps protect against wildfires in the dry, hot months in summer and fall. The California Department of Water Resources ahead of its first survey of the water year, which began Oct. 1, said the network of gauges up and down the Sierra measured the snowpack at 19% of normal in the southern Sierra, 27% in the central Sierra and 28% in the northern Sierra. Statewide, the amount of snow saved in the mountains accounts for 12% of what’s average come April 1, when the water year’s last survey is performed.
Markets rethinking degree of expected U.S. interest rate cuts... Markets had been pricing in as much as 160 basis points of interest rate cuts in 2024, double what the Fed had projected. But traders seemingly reassessed their outlook at the start of the new year, with markets now pricing in less than a 150-point cut. Minutes from the Fed’s last meeting are scheduled to be released this afternoon and will help traders gauge the central bank’s thinking around monetary easing.
Agreement needed on spending levels to avoid gov’t shutdown... Avoiding a government shutdown hinges on reaching a bipartisan agreement regarding fiscal year (FY) 2024 spending levels. Negotiations are ongoing between House Speaker Mike Johnson (R-La.) and Senate Majority Leader Chuck Schumer (D-N.Y.). Of note: Some reports signal Democrats are potentially considering further cuts to nondefense spending. However, even if an agreement is reached, there may be obstacles. Rep. Chip Roy (R-Texas) has called on Johnson to withhold funding unless the House GOP’s substantial border bill is passed concurrently.
China’s top banks tighten exposure to smaller peers to curb credit risk... Some of China’s top banks have sharpened scrutiny of smaller peers’ asset quality and have tightened standards for interbank lending, three sources told Reuters, in an effort to curb credit risk as a deepening property debt crisis ripples through the economy. Two of China’s biggest state-owned banks and a leading joint-stock bank have stepped up reviews of smaller lenders over the past couple of months to identify those with poor asset quality and have a high risk of default, the sources said. The two state-owned banks have decided to reduce interbank lending limits and set shorter maturity periods for smaller peers deemed high risk, said two of the sources. The cautious approach taken by some big banks in dealing with smaller peers could exacerbate capital woes for the latter as they have fewer other fundraising options, which could force Beijing to step in with more supportive measures.
Another rise in ERP Phase 2 payments... Payments under the Emergency Relief Program (ERP) totaled $8.32 billion as of Jan. 1, up from $8.31 billion the prior week. ERP Phase 2 payments are now at $867.79 million to 10,307 recipients, up from $854.57 million to 10,182 recipients the prior week.
Phase 1 payments remained at $7.45 billion.
Wholesale beef prices plunge... Cash cattle prices firmed for a second straight week to close out 2023 and cattle futures bucked the general commodity selloff Tuesday with strong gains. Wholesale beef prices dropped sharply, with Choice down $5.37 and Select $1.47 lower. Cash cattle prices are expected to trade higher again this week, but with packer margins in the red, wholesale prices likely need to stabilize to keep them actively bidding for cash cattle once they have near-term slaughter needs replenished after the holidays.
Cash hog prices continue to slide... The CME lean hog index is down another 30 cents to $65.05 (as of Dec. 29), marking a new low on the seasonal decline. After sharp losses on Tuesday, the premium February lean hog futures held to today’s cash index was down to 27.5 cents.
Overnight demand news... Taiwan tendered to buy 82,975 MT of U.S. milling wheat.
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
- 11:00 a.m. Weekly Weather: State Stories — NASS
- 2:00 p.m. Broiler Hatchery — NASS
- 2:00 p.m. Citrus Fruits - Statistical Bulletin — NASS
- 2:00 p.m. Noncitrus Fruits and Nuts - Statistical Bulletin — NASS
- 2:00 p.m. Vegetables - Statistical Bulletin — NASS