First Thing Today | March 6, 2023

Grain and soy futures faced pressure overnight amid a lack of bullish news and negative outside markets.

Pro Farmer's First Thing Today
Pro Farmer’s First Thing Today
(Pro Farmer)

Good morning!

Price pressure to start the week... Grain and soy futures faced pressure overnight amid a lack of bullish news and negative outside markets. As of 6:30 a.m. CT, corn futures are trading 2 to 3 cents lower, soybeans are 5 to 6 cents lower and wheat futures are 7 to 11 cents lower. Front-month crude oil futures are more than $1 lower and the U.S. dollar index is modestly firmer.

Turkey working to renew Black Sea grain deal... Turkish Foreign Minister Mevlut Cavusoglu said on Sunday that Ankara is working hard to extend the Black Sea grain deal. “We are working hard for the smooth implementation and further extension of the Black Sea grain deal,” Cavusoglu said in a speech at a United Nations conference. Russia has said it would only agree to extend the Black Sea grain deal if the interests of its own agricultural producers are taken into account. On Sunday, Maria Zakharova, a spokeswoman for the Russian foreign ministry, reiterated this position. “If this agreement is equal, then we have always fulfilled our part and are going to fulfil it in all the agreements,” she said according to TASS news wire, adding that Russia would be against “goading and machinations.”

Slightly better forecast for South America... Dry areas of southwest Argentina are likely to receive some rains this week. Central and southeastern areas of Argentina will be mostly dry this week but could receive needed rains next week. Weather in south-central Brazil is expected to gradually improve as intensity and frequency of rains will diminish, though some areas will continue to receive heavy rainfall and soils will remain too wet for rapid advancement of soybean harvest and safrinha corn planting.

Brazil soybean harvest 43% done, safrinha corn planting 70% complete... AgRural estimates Brazil’s soybean harvest reached 43% complete as of last Thursday, though rains continued to slow those efforts. The firm said planting of the safrinha corn crop advanced to 70% done, though that was behind 80% at this time last year.

Ukraine’s winter grain crop in mostly favorable condition... Most of Ukraine’s winter grain crops are in “good” condition and could produce average yields, Ukraine’s academy of agricultural science was quoted as saying on Monday. “The analysis of the viability of winter wheat... showed that the vast majority of plants – 92% to 97%, depending on the predecessor and sowing date – were in relatively good condition,” APK-Inform consultancy quoted a report by the academy as saying. “There are good reasons to make preliminary forecasts for the formation of yields that will be close to the long-term average,” the report said.

China sets lowest economic growth target in decades... Officials are aiming for around 5% GDP growth this year, a relatively conservative goal, and its lowest target for more than three decades, as global headwinds add to domestic fiscal concerns. Analysts said this year’s conservative economic growth target would be easier for President Xi Jinping’s new economic team to meet, after falling far short of its goal in 2022. Last year, Beijing targeted 5.5% GDP growth, although the economy only grew by 3%, according to official numbers.

Other key items from China’s weekend confab... According to a draft budget presented to the National People’s Congress – the country’s rubber-stamp legislature:

  • China will push to increase grain production by 50 million tons, under a new drive to bolster food security. Keeping grain output above 650 million tons is crucial to ensure adequate supply and maintain stable prices.
  • Defense spending will grow 7.2% this year, the most since 2019 and higher than the 5.7% growth in public expenditure.
  • Beijing will target “unregulated” expansion in the real estate sector and seek to shore up the balance sheets of high-quality developers.
  • Chinese leaders called for a “whole nation strategy” to beat the U.S. in basic science and technologies ranging from AI to space.
  • Create about 12 million urban jobs and keep the unemployment rate at about 5.5%.
  • China raised its fiscal deficit projection to 3% of GDP.
  • Other priorities included “intensifying efforts to attract and utilize foreign investment,” “preventing and defusing” financial risks, stabilizing grain production, continuing green development and developing social programs.

Vilsack to announce add-ons to meat sector funding today... USDA Secretary Top Vilsack will speak today to the annual meeting of the National Farmers Union (NFU) where he will announce funding to finance independent meat/poultry processors and alleviate supply chain bottlenecks. He will also signal efforts to increase economic opportunity in rural communities. These are add-ons to previous announcements on these fronts from USDA. USDA has reportedly completed a study of concentration in the meat and seed industries. If Vilsack does not unveil it today at the NFU annual convention, he could later this week at Commodity Classic in Orlando, Florida.

The week ahead in Washington... President Joe Biden on Thursday is expected to present his annual budget to Congress. Biden’s budget will focus on four broad themes: expanding the economy, lowering costs, protecting Social Security and Medicare and reducing the deficit. Republicans, who control the House, say they will not raise the limit until deep cuts are made in federal spending other than reductions in Social Security and Medicare, with conflicting information on possible defense spending cuts. The White House has refused to negotiate the debt limit issue, calling for a “clean” increase with no conditions attached. On the economic front, Fed Chair Jerome Powell will deliver the central bank’s “Semiannual Monetary Policy Report” to the Senate Banking Committee on Tuesday and to the House Financial Services Committee on Wednesday. February employment data will be released Friday. The focus for agriculture this week will be Wednesday’s Supply & Demand Report, which will update domestic usage and ending stocks forecasts, along with updates to global production and carryover.

AFBF: 2022 weather disasters caused over $21 billion in crop losses... The American Farm Bureau Federation (AFBF) says in 2022, 18 weather and climate disasters, each with damages exceeding $1 billion struck the U.S. coast-to-coast. The National Oceanic and Atmospheric Administration reported that 2022 surpassed 2021 as the third-costliest disaster year event in history, with an estimated $165 billion in total economic losses behind only 2017’s $346 billion and 2005’s $244 billion.

Lagarde: ECB must do more to tackle inflation ‘monster’... European Central Bank (ECB) President Christine Lagarde has warned underlying price pressures will remain “sticky in the short term” and signaled further interest rate rises from the European Central Bank (ECB) are very likely as “inflation is a monster that we need to knock on the head.” ECB was not seeking to “break the economy” with rate increases, Lagarde told Spain’s El Correo, as she appealed for banks to reschedule debt repayments for households struggling to cope with soaring borrowing costs on variable-rate mortgages. “We are making progress, but we still have work to do… For the moment, the economy is resilient, employment is robust, and unemployment is the lowest it has ever been,” she said, while urging lenders to consider the “reputational side” of giving big pay rises to executives.

China again sells all wheat put up for auction... China sold all 141,700 MT of state-owned wheat reserves put up for auction at an average price of 2,797 yuan ($403) per metric ton. The average price was down from 2,848 yuan per metric ton the previous week.

India considers raising palm oil import tax... India is considering raising its import duty on palm oil to help support local farmers reeling from a crash in domestic rapeseed prices, government and industry officials said. The increase in the tax on palm oil could lift local prices, making it a little less competitive than rival soyoil and sunflower oil. “Rapeseed supplies from the new season are putting pressure on prices, which have fallen below MSP (minimum support price),” a source told Reuters, referring to the government-set rate which acts like a benchmark for the domestic market. If commodity prices fall below MSPs, the government usually tries to help prop up rates to protect farmers.

Cash cattle hopes remain bullish... Cash cattle prices firmed again last week. Traders come into the week anticipating the cash market will continue to strengthen amid tightening market-ready supplies and profitable margins, which are being supported by firming wholesale beef prices. That gives packers incentive to continue to actively compete for cattle. But traders are likely to remain cautious buyers early this week as active cash cattle trade isn’t expected until late in the week.

Pork movement slows... Packers moved only 210.9 loads of pork on Friday, despite a 16-cent decline in the cutout value. The Choice beef/pork cutout ratio at nearly 3.4 continues to signal pork is competitively priced compared to beef, but packers have struggled to push the cutout above the mid-$80 range and maintain strong retailer buyer interest.

Weekend demand news... Exporters reported no tenders or sales.

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