Good morning!
Corn and beans weaker, wheat firmer this morning... Corn and soybean futures mildly favored the downside in quiet, two-sided overnight trade, while wheat firmed. As of 6:30 a.m. CT, corn futures are trading around a penny lower, soybeans are mostly 3 to 4 cents lower, winter wheat markets are 2 to 4 cents higher and spring wheat is 6 to 7 cents higher. Front-month crude oil futures are around 60 cents higher and the U.S. dollar index is up nearly 300 points.
Weekly Export Sales Report out this morning... For the week ended Dec. 28, traders expect:
| 2023-24 expectations (in MT) | Last week (in MT) |
Corn | 500,000-1,200,000 | 1,242,116 |
Wheat | 150,000-450,000 | 276,406 |
Soybeans | 500,000-1,300,000 | 983,894 |
Soymeal | 50,000-400,000 | 268,541 |
Soyoil | 0-10,000 | 901 |
Attaché cuts Brazilian soybean crop estimate... The U.S. ag attaché in Brazil cut the country’s soybean crop forecast by 3.5 MMT to 158.5 MMT “due to poor weather outlooks resulting from El Niño, particularly in the Centre West states.” That’s still well above most private crop forecasters, many of which are in the low 150-MMT area. In December, USDA lowered its Brazilian soybean production forecast to 161 MMT.
U.S. winter wheat crop should survive coming cold spell... An arctic airmass is forecast to move into the central U.S. over the next two weeks, causing temperatures to gradually drop between 10 and 25 degrees Fahrenheit below normal, becoming cold enough to threaten any snow-free winter wheat areas. But World Weather Inc. notes there will be multiple snowfall opportunities ahead of the coldest temps, which should insulate the crop and limit risk of winterkill damage.
Slower jobs growth expected in December... Economists polled by Reuters expect the Labor Department to report non-farm payrolls increased 170,000 in December, which would be down from a 199,000 gain the previous month. The unemployment rate is expected to tick up to 3.8%.
FAO food price index drops in December... The UN Food and Agriculture Organization global food price index dropped 1.5% from November as decreases in the price for sugar, vegoils and meat more than offset increases in dairy products and cereal grains. The December index was down 10.1% from last year and for 2023 as a whole, the index was 13.7% lower than the average value in 2022. Compared to year-ago, prices declined 1.8% for meat, 16.0% for dairy, 16.6% for cereal grains and 15.4% for vegoils, while sugar prices rose 14.8%.
Houthi drone again launched from Yemen in Red Sea escalation... A Houthi drone ship filled with explosives detonated Thursday after being launched from Yemen and coming within “a couple of miles” of U.S. Navy and commercial vessels in the Red Sea. The U.S. and allies this week warned of “consequences.” Meanwhile, shipping company Maersk announced it will redirect all vessels originally scheduled to pass through the Red Sea and Gulf of Aden to now travel around the Cape of Good Hope for the foreseeable future. This decision comes as a response to the ongoing security risks in the region, characterized by volatility and elevated security threats.
China’s state banks take further actions to stem yuan losses... China’s major state-owned banks were active in onshore and offshore foreign exchange markets this week trying to contain the yuan’s slide, four people with direct knowledge of the matter told Reuters. The state banks were seen swapping yuan for U.S. dollars in the onshore swap market before quickly selling those dollars in the spot market to support the yuan from Wednesday to Friday, two of the sources said. The big banks were also curtailing their lending in offshore yuan markets on Friday with the aim of keeping liquidity tight, two other sources said, in a move that could raise the cost of shorting the Chinese currency.
Chinese markets signal expectations of more economic stimulus... China’s government bonds extended gains on Friday, with 10-year yields touching the lowest in nearly four years, on rising expectations of more stimulus to aid the country’s economic recovery. Yields on the benchmark 10-year government bond fell to 2.52%, the lowest since April 2020. “The People’s Bank of China may start to shift its focus from FX stability more towards monetary easing,” said Jingyang Chen, Asian FX strategist at HSBC, expecting a rate cut in China would come after the U.S. Federal Reserve kicks off its monetary easing.
Euro zone consumer inflation increases in December... Consumer inflation increased to 2.9% over year-ago in December, according to initial data, climbing from an over two-year low of 2.4% in November and the first uptick since April. Core inflation, excluding unprocessed food and energy costs, slowed to 3.9% from 4.2% the previous month, the lowest since March 2022. An even narrower measure of core prices, which also excludes alcohol and tobacco, fell to 3.4% from 3.6% in November.
HPAI outbreak to raise egg prices due to reduced hen supply... The ongoing highly pathogenic avian influenza (HPAI) outbreak, responsible for the deaths of approximately 80 million birds since its onset in 2022, is anticipated to lead to a reduction in the supply of egg-laying hens in the United States. Consequently, this is expected to result in higher wholesale egg prices.
Beef margins plunge... After packers bought cattle around $175.00 in the northern market earlier this week, feedlots raised asking prices to $177.00 in the Southern Plains. It appears this week’s average cash cattle price will rise at least $2.00. While cash prices are rising, wholesale beef continues to drop, with Choice down another $2.13 and Select 3 cents lower on Thursday. That combination pushed beef processor margins deeper into the red.
Cash hog index firms again... The CME lean hog index is up 67 cents to $65.86 (as of Jan. 3), marking back-to-back increases and the biggest daily gain since last July. February lean hog futures jumped $3.75 on Thursday to finish $3.19 above today’s cash quote.
Overnight demand news... South Korea purchased 88,700 MT of U.S. milling wheat. Taiwan purchased 82,975 MT of U.S. milling wheat and tendered to buy 65,000 MT of corn that can be sourced from the U.S., Brazil, Argentina or South Africa.
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
- 7:30 a.m. Employment Situation — BLS
- 2:00 p.m. Dairy Products — NASS
- 2:00 p.m. Peanut Prices — NASS
- 2:30 p.m. Commitments of Traders — CFTC