Good morning!
Light, two-sided trade overnight... Corn, soybean and wheat futures traded narrowly on both sides of unchanged in a lightly traded overnight session. As of 6:30 a.m. CT, corn futures are steady to fractionally lower in most contracts, soybeans are mostly 1 to 2 cents lower, winter wheat futures are 1 to 3 cents higher and spring wheat is steady to fractionally lower. Front-month crude oil futures are around 60 cents lower and the U.S. dollar index is more than 200 points higher this morning.
Argentine crop estimates cut again... Crop stress continued in Argentina last week amid hot and dry conditions, while impacts from the recent frost became more apparent. As a result, South American crop consultant Dr. Michael Cordonnier cut his Argentine soybean and corn crop estimates another 1 MMT each to 31 MMT and 40 MMT, respectively. Cordonnier kept his Brazilian crop estimates at 151 MMT for soybeans and 121 MMT for corn.
Cargill optimistic Ukraine grain export deal will be renewed... Cargill said rising grain exports from Ukraine are sparking optimism a deal to keep ships sailing via the Black Sea will be renewed. The increase in Ukraine’s shipments of corn, wheat and barley is helping push down world food costs after they jumped to a record in 2022, giving Cargill Chairman David MacLennan confidence that last year’s landmark export pact that is up renewal March 18 will remain in force. “There is political support from around the world to keep the corridor open,” MacLennan said in an interview with Bloomberg. “As long as that is the case, we will continue to help farmers and help product out of the country.” Total Ukrainian shipments of corn, wheat and barley can reach 4 MMT to 6 MMT per month with the corridor open, compared with just 2 MMT by rail, MacLennan said. Ukraine’s grain exports hit 4.908 MMT in February via all means of transport, government data show. That was just below the nearly 5 MMT shipped in December, the highest since the war began.
Record Chinese soybean imports to start the year... China imported 16.17 MMT of soybeans during the first two months of the year, up 16.1% from the same period last year and the most ever for January and February combined. Importers actively took delivery of soybeans from the U.S. during the first two months of this year amid Brazilian soybean harvest delays.
China’s January-February trade data slumps... China’s exports and imports both declined during the first two months of the year, reflecting weak demand overseas and domestically. China’s exports during January and February combined fell 6.8% from the same period last year. Imports dropped 10.2% during the first two months. That resulted in the trade surplus widening to a record $116.88 billion. Exports to the U.S. decreased 21.8%, while imports from America fell 5%. China’s trade surplus with the U.S. narrowed 30.9% to $41.3 billion.
Powell testimony on monetary policy starts today... Fed Chair Jerome Powell goes before Congress to discuss the Federal Reserve’s Semiannual Monetary Policy Report, appearing today before the Senate Banking Committee. He will appear before the House Financial Services Committee on Wednesday. Most expect Powell to echo fellow central bankers in suggesting interest rates will go higher than policymakers anticipated just weeks ago if economic data continue to come in hot. Says the Sevens Report: “Investors will be looking for any new insight on the pace of future rate hikes (25 or 50 basis point hike this month?) and/or the expected terminal rate (currently priced in near 5.375%). If Powell strikes a hawkish tone, expect volatility in stocks amid a potentially sharp rise in yields.”
Supply chain normalizes... Global supply chains have returned to normal, the Federal Reserve Bank of New York said, almost three years after Covid-19 was declared a pandemic. The February reading in the NY Fed’s Global Supply Chain Pressure Index was -0.26, reaching negative territory for the first time since August 2019. Supply pressures around the world have fallen below normal. Less shipping congestion, an easing of parts shortages and weaker consumer demand have pulled the indicator lower in seven of the past 10 months, and the latest figure reflected more improvement. “There were significant downward contributions by the majority of the factors, with the largest negative contribution from European area delivery times,” the NY Fed said.
China’s meat imports surge to start 2023... China imported 1.3 MMT of meat in January and February combined, up 21.2% from the same period last year. China doesn’t break down meat imports by category in the preliminary data, but much of the strong year-over-year increase was likely driven by pork imports, which began to ramp up in late 2022.
China’s pork production, imports expected to increase this year... USDA’s attaché in Beijing expects pork production and imports, along with beef production to increase this year. China’s pig crop in 2023 is forecast to decline 2% from last year to 700 million head but pork production is estimated at 55.5 MMT, up marginally from last year. The attaché expects China’s pork imports to rise 4% amid increased demand to 2.2 MMT. It expects beef production to increase 3% to 7.4 MMT, while beef imports are forecast to be slightly lower at 3.4 MMT.
Administration advances scrutiny of seed industry competition... The Biden administration is stepping up scrutiny of competition in the seed industry, according to a statement announcing plans for a working group including the Justice Department to improve market fairness. The four largest companies now control 95% of patents and other protected intellectual property for corn seeds, up from 41% controlled by the top four firms in 1990, according to a USDA report.
Stricter standards for ‘Product of USA’ proposed... Meat, poultry or eggs labelled as a U.S. product must come from animals raised and slaughtered within the country under a rule proposed by the Biden administration on Monday. Existing rules for the label permit its use for meat derived from animals that were born and raised abroad and only processed in the United States. The “Product of the USA” label would remain voluntary under USDA’s proposed rule.
Mexico to allow Brazilian beef imports... Mexico announced sanitary requirements for Brazilian beef imports Monday, opening the door to the country’s beef products for the first time as Mexico looks to diversify its food supply amid high inflation. The Brazilian state of Santa Catarina will be able to export fresh, refrigerated or frozen bone-in meat to Mexico, while another 14 states, including key producers such as Goias, Mato Grosso and Mato Grosso do Sul, will be able to export aged and boneless cuts.
Packers bought a lot of cattle last week... Packers purchased 91,000 head of cattle in the negotiated market last week, the second highest tally of the year. That may slow packer interest in cash cattle this week, though cutting margins remain strong, giving them incentive to keep buying cattle. The fact packers have reduced slaughters amid strong margins speaks to the limited number of market-ready cattle that are available.
Cash hog index continues slow and steady climb... The CME lean hog index is up another 20 cents to $78.91 (as of March 3), extending its seasonal climb. While the rally hasn’t been strong on a per-day basis, the index has firmed $6.80 over the past six weeks. During the same span, April lean hog futures have dropped $1.975. After Monday’s sharp losses, the lead contract’s premium to the cash index is down to $4.565.
Overnight demand news... Jordan purchased 60,000 MT of optional origin hard milling wheat. Japan is seeking 80,570 MT of milling wheat in its weekly tender. Tunisia tendered to buy 100,000 MT of optional origin durum 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
- No reports scheduled.