Good morning!
Grains mostly weaker this morning... Grain futures posted two-sided trade overnight, though markets are mostly weaker this morning. As of 6:30 a.m. CT, corn futures are steady to a penny lower, soybeans are mostly 2 to 4 cents lower, SRW wheat is 9 to 10 cents lower, HRW wheat is 5 to 6 cents lower and HRS wheat is mostly 2 to 3 cents lower. Front-month crude oil futures are around $2.00 lower and the U.S. dollar index is modestly firmer.
Generally favorable South American weather outlook... Weekend rainfall in South America was heaviest in northeastern Brazil and central Argentina while net drying occurred in other areas. Temperatures were hot in northern Paraguay, southwestern Brazil and northern Argentina. In Brazil, recent drying in Parana, Mato Grosso do Sul and Sao Paulo will continue through Wednesday with warmer-than-normal temps before showers and cooler weather move in late this week into next week. Timely rains are expected across most of Brazil, Argentina, Uruguay and Paraguay over the next two weeks, according to World Weather Inc.
Volatile weather threatens Ukraine’s winter crops... Sudden changes in weather conditions across Ukraine recently and frequent thaws could have a negative impact on winter cereals this year, reducing their resistance, consultancy APK-Inform quoted government scientists as saying. “Potential risks under changing weather conditions are quite high,” the scientists noted, as it reduces hardiness of winter crops. The scientists said the second half of December and the beginning of January had been abnormally warm weather, but the thaw has now been replaced by deep frosts over most the country.
Ukraine’s grain exports running nearly 18% behind year-ago... Since July 1, Ukraine exported 19.4 MMT of grain, down 4.2 MMT (17.8%) from the same period last year. The exports included 10.3 MMT of corn, 7.8 MMT of wheat and 1.2 MMT of barley.
China resumes state wheat reserve sales... China sold 14,823 MT (73.8%) of state-owned wheat reserves put up for auction last week. The average sales price was 2,564 yuan ($360.96) per metric ton.
India’s ag exports to rise despite curbs on wheat, rice and sugar... India’s agricultural exports will rise in 2023-24 despite limits on wheat, rice and sugar, the country’s trade minister said. “We had agri exports in the aggregate of about $53 billion in 2022-23, and we expect the number to increase in the current year despite the restrictions placed on export of rice, wheat or sugar,” trade minister Piyush Goyal said. Data from state-run trade body APEDA showed exports of meat and dairy, cereal preparations and fruits and vegetables rose between April and November.
The week ahead in Washington... House and Senate negotiators sealed an agreement Sunday to unlock final fiscal year (FY) 2024 appropriations bills (click here for details), after nailing down defense and nondefense spending limits. But there are still significant policy disagreements that often become attached to essential spending bills and the threat of a government shutdown remains. The stopgap measure for four of the spending bills, including USDA, expires Jan. 19 with the other eight funded through Feb. 2. This tight timeframe leaves lawmakers with little time to draft the final legislation and secure its passage in both chambers to avoid a partial government shutdown. Economic reports of note this week include inflation updates, with the consumer price index out on Thursday and producer price index on Friday. For agriculture, Friday will be one of the biggest report days of the year, with USDA scheduled to issue its Annual Production Summary (final 2023-crop estimates), WASDE Report, Quarterly Grains Stocks and Winter Wheat Seedings.
China tells LGFVs to stop issuing offshore 364-day bonds... Chinese regulators have told heavily indebted local government financing vehicles (LGFVs) to stop issuing offshore bonds with a 364-day duration, closing a regulatory loophole that had allowed them to increase borrowing further last year, four sources familiar with the matter told Reuters. LGFVs were set up by Chinese local governments to fund infrastructure investment, and their combined debt has ballooned to roughly $9 trillion, posing a major risk to a slowing economy. The latest guidance comes after a rush by many LGFVs to raise 364-day offshore bonds, seemingly in a bid to circumvent regulation that requires them to seek approval for offshore borrowings with maturities longer than a year.
Euro zone economic sentiment reaches seven-month high... The economic sentiment indicator in the euro zone rose to 96.4 in December, up from the revised 94.0 of the previous month. That was the highest level since May, as confidence improved in all sectors despite an uptick in inflation expectations.
Philippines extends reduced pork tariffs, boosting U.S. exports... Philippines President Ferdinand Marcos Jr. signed an executive order extending the reduced tariff rates on imported pork for the third consecutive year. The in-quota duty will remain at 15%, and the out-of-quota rate will be 25%. These measures were initially implemented in May 2021 in response to an African swine fever (ASF) outbreak, which led to a pork shortage in the country. This policy has significantly boosted U.S. pork exports to the Philippines, reaching a record $205 million in 2021, representing a nearly 79% increase. However, after the increased MAV expired in January 2022, exports decreased to just under $135 million that year, with an estimated value of about $120 million in 2023. Despite the drop, these figures remain higher than historical levels. The lowered tariffs have played a key role in driving increased U.S. pork exports to the country, making it one of the top 10 markets for American pork products.
China to sell pork from state reserves... China will release 30,000 MT of frozen pork from state reserves on Jan. 10. Late last year, China made a series of pork purchases to support declining hog prices.
Wholesale beef prices halt price drop... Choice boxed beef prices firmed $1.26 on Friday, while Select was 71 cents higher, halting the recent price drop in wholesale prices. With cutting margins deep in the red, packers will try to manage near-term slaughter needs as best they can without having to aggressively bids for supplies.
Cash hog index ticks down... After consecutive days of gains, the CME lean hog index ticked down a penny to $65.85 (as of Jan. 4). February lean hog futures finished last Friday $4.15 above today’s cash quote, which may limit buying until there are clearer signs of a seasonal low in the cash market.
Weekend demand news... Jordan tendered to buy up to 120,000 MT of optional origin 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
- 10:00 a.m. Export Inspections — AMS