Good morning!
Corrective selling overnight... Grain and soy complex futures traded lower overnight amid corrective selling and pressure from outside markets. As of 6:30 a.m. CT, corn futures are trading 1 to 2 cents lower, soybeans are 5 to 8 cents lower and wheat futures are mostly 4 to 8 cents lower. Front-month crude oil futures are around 75 cents lower and the U.S. dollar index is about 125 points higher.
Consultant maintains Brazil and Argentina crop estimates, cuts Uruguay bean crop... Recent rains across Argentina were the best of the growing season and enough to stabilize crops for now, according to South American crop consultant Dr. Michael Cordonnier, though more rains will be needed. Cordonnier kept his Argentine crop estimates at 39 MMT for soybeans and 44 MMT for corn. He also maintained his Brazilian crop estimates at 151 MMT for soybeans and 125 MMT for corn. Cordonnier cut his Uruguay soybean crop estimate by 300,000 MT to 2.2 MMT given persistent hot, dry conditions. He estimates total South American (Brazil, Argentina, Paraguay, Uruguay and Bolivia) soybean production at 204.7 MMT, which would be up 21.1 MMT (11.5%) from last year. His South American corn production forecast of 176 MMT would be up 3.6 MMT (2.1%) from last year.
HRW conditions decline further in January... Individual state crop conditions ratings showed further deterioration of the HRW wheat crop during January. The “good” to “excellent” ratings for HRW wheat stood at 21% in Kansas (up two points from the end of December), 17% in Oklahoma (down 21 points), 14% in Texas (no December rating), 38% in Colorado (down 12 points), 22% in Nebraska (up four points), 22% in South Dakota (up six points) and 16% in Montana (down six points). When the updated crop condition ratings were plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500 point scale, with 500 being perfect), the HRW crop dropped 9.2 points from the end of December (using the November rating for Texas) to a rating of 269.1. The HRW crop went into dormancy with the lowest fall CCI rating on record of 280.3. Click here for more details.
Central European countries ask EU to ease problems caused by influx of Ukrainian grain... Six central European countries have asked the European Union to take steps to mitigate problems caused by increased Ukrainian grain imports into the region, saying the influx has cut prices and hurt local farmers, government officials said. Hungary, Poland, the Czech Republic, Slovakia, Romania and Bulgaria asked the EU to transport Ukrainian grain beyond the embattle country’s immediate neighbors and to provide assistance. “If the EU acts in unity to help overland grain exports, then the burden should also be shared equally among member states,” an official from Hungary’s ag ministry said.
Global economy is poised to slow this year, before rebounding next year... The International Monetary Fund’s (IMF) outlook is less gloomy than its October forecast, and “could represent a turning point, with growth bottoming out and inflation declining.” IMF notes China’s sudden re-opening “paves the way for a rapid rebound in activity. And global financial conditions have improved as inflation pressures started to abate. This, and a weakening of the U.S. dollar from its November high, provided some modest relief to emerging and developing countries.” IMF forecasts global economic growth will slow from 3.4% in 2022 to 2.9% this year and then rebound to 3.1% in 2024. It projects U.S. growth will slow to 1.4% in 2023. IMF expects euro zone GDP to bottom out at 0.7% this year. IMF forecasts China’s growth will rebound to 5.2% this year as activity and mobility recover after the lifting of Covid restrictions.
China’s manufacturing sector expands in January... China’s official manufacturing purchasing managers index (PMI) increased to 50.1 in January from 47.0 the previous month, marking the first expansion in the factory sector since September 2022. New orders rebounded for the first time in seven months during January, while exports declined at a slower rate.
Eurozone economy posts surprise expansion in Q4, curbing recession fears... The euro zone economy grew 0.1% in the final quarter of 2022, easing from a 0.3% expansion in the previous three-month period but beating market consensus of a 0.1% contraction, a preliminary estimate showed. It was the weakest pace of expansion since the first three months of 2021 as demand and activity were hit by high inflation and rising borrowing costs, and supply chain bottlenecks. Amongst the bloc’s largest economies, GDP grew in Spain (0.2%, the same as in Q3) and France (0.1% vs. 0.2%), but contracted in Germany (-0.2% vs. 0.5%) and Italy (-0.1% vs. 0.5%).
Russia boosts China trade to counter Western sanctions... Trade between China and Russia boomed last year, providing a lifeline to Russia’s beleaguered economy and showing the limits of Western sanctions. A report by the D.C.-based nongovernmental organization Free Russia Foundation said Moscow boosted imports of technologies critical to its war in Ukraine including semiconductors and microchips from China. China’s increased purchases of Russian exports, driven by energy sales, more than offset the declines from major Western trading partners.
Indonesia says higher biofuel blend will not disrupt domestic cooking oil supply... Indonesia’s plan to launch biodiesel with 35% mix of palm oil-based fuel (B35) this week will not disrupt the domestic supply of cooking oil, Coordinating Minister of Economic Affairs Airlangga Hartarto said. He said the country has enough production of crude palm oil and the five-percentage-point increase in the biodiesel mix would compensate for declining demand from Europe.
USDA aid payments rise... Payments under the Emergency Relief Program (ERP) increased to $7.37 billion as of Jan. 29, up from $7.33 billion the previous week. The total includes non-specialty crop payments of $6.26 billion ($6.25 billion prior) and specialty crop payments of $1.11 billion ($1.10 billion prior). Payments under the Coronavirus Food Assistance Program 2 (CFAP 2) rose to $19.35 billion as of Jan. 29, up from $19.34 billion the prior week, including $14.46 billion in original CFAP 2 payments ($14.45 billion prior) and top-up payments of $4.89 billion ($4.87 billion prior).
China’s hog numbers continue to rise... China’s sow herd increased 0.6% in December from November to 43.9 million head, according to ag ministry data. Sow inventories rose 1.4% from the end of 2021. China’s pig herd increased 1.9% in December from the month before to 452.6 million head and was 0.7% larger than the previous year.
Cattle Inventory Report expected to show additional cattle herd contraction... Traders expect USDA’s Cattle Inventory Report this afternoon will show further contraction of the U.S. cattle herd. Based on an Urner Barry survey, analysts expect the Jan. 1 U.S. cattle herd to be down 2.9% from year-ago, with beef cows/heifers down 4.2% and beef replacement heifers 3.5% under year-ago. The dairy cow inventory is anticipated to be down 0.1%, while milk replacement heifers are expected to rise 0.1%. The annual calf crop is expected to decline 2.6%.
Cattle traders build in some premium... February live cattle futures finished Monday $3.50 above last week’s average cash cattle price, while the April contract held an $8.10 premium. Traders finally started to build in some premium amid stressful feedlot conditions and expectations the cash market will begin an extended price rally.
Cash hog index extends upturn... The CME lean hog index is up 7 cents to $72.71 (as of Jan. 27), extending its string of gains to four straight days. While the index is up only 61 cents during that four-day stretch, it’s the longest string of gains since a five-day rally in late October.
Overnight demand news... Jordan purchased 60,000 MT of optional origin milling wheat. Egypt tendered to buy up to 60,000 MT of wheat via the World Food Bank.
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. State Stories — NASS
- 2:00 p.m. Agricultural Prices — NASS
- 2:00 p.m. Cattle — NASS
- 2:00 p.m. Sheep and Goats — NASS