Good morning!
Grains lower overnight… Corn, soybeans and wheat each favored the downside overnight following Tuesday’s surge higher. As of 6:30 a.m. CT, corn futures are trading around 2 cents lower, soybeans are mostly 6 to 7 cents lower and wheat futures are mostly 6 to 8 cents lower. Front-month crude oil futures are modestly lower and the U.S. dollar index is more than 100 points lower this morning.
Cordonnier cuts Brazilian bean estimate… Dr. Michael Cordonnier lowered his Brazilian soybean estimate 2 MMT to 153.0 MMT, citing variable coverage and amounts of rainfall over the past week. He noted while the forecast is calling for more rain, models have been overly optimistic, so it is important to see if the rains verify. He maintains a neutral to lower bias. For Brazilian corn, Cordonnier left his estimate unchanged at 117.0 MMT, though maintains a lower bias, noting production depends on safrinha acreage and yield. He left his Argentine crop estimates at 50.0 MMT for soybeans and 53.0 MMT for corn.
Argentina expecting near record crop… A report from the Rosario Stock Exchange details that grain production for the 2023-24 cycle is estimated at around 137 million tons, supported by weather recovery after the last three droughts. This projection would result in exports of approximately $35.8 billion. The study indicates that the expected harvest would represent an increase of 65% compared to the previous campaign, which was marked by a significant drought, although it would be slightly below the historical record of 140 million tons reached in 2018-19.
Ukraine is experiencing both successes and setbacks in its ongoing conflict with Russia... In the Black Sea and Crimea, Ukraine has achieved naval successes, including destroying a large landing ship and shooting down two Russian jets, putting Russia on the defensive. However, its ground campaign is facing challenges, with Russia launching attacks on eastern battlefields after stopping Ukraine’s counteroffensive. Ukrainian officials have admitted that they have essentially retreated from the eastern city of Marinka following a prolonged battle to defend it. Ukraine’s government recently introduced a bill to lower the draft age from 27 to 25, noting additional soldiers may be necessary in the face of ongoing hostilities.
Israeli military focuses on southern Gaza as conflict expected to continue… In the southern region of Gaza, Israel is intensifying its military efforts, and its military chief of staff, Lt. Gen. Herzi Halevi, expects the conflict to continue for several more months. Over 1.7 million displaced Gazans are seeking shelter in the south, with many sleeping in makeshift accommodations along roads and in open areas, further increasing humanitarian concerns. There is a shortage of food and water in these areas. The Israeli military has claimed to have killed numerous terrorists and Hamas commanders, with some surrendering and hundreds being taken as prisoners. They have also targeted and destroyed underground infrastructure and confiscated large quantities of weapons.
Shippers gradually resuming use of Red Sea for cargo… U.S. led efforts to enhance security against attacks on vessels are giving transporters confidence to increase the number of vessels sent into the Red Sea following a string of attacks on civilian ships. France’s CMA CGM has increased the number of ships traveling through the Suez Canal. Germany’s Hapag-Lloyd is expected to decide on whether to return to using the Red Sea on Dec. 27. Maersk has also announced its preparations to resume shipments in the Red Sea and Gulf of Aden.
U.S. holiday sales increase though breeds uncertainty… The holiday sales in the U.S. saw a 3.1% increase compared to the same period in the previous year. This growth is considered solid but not exceptionally strong, indicating a somewhat uncertain economic outlook. The data, which comes from Mastercard SpendingPulse, highlights that spending in categories like apparel and restaurants performed well during the period from Nov. 1 to Dec. 24. On the other hand, categories like electronics and jewelry saw a decline in sales. This mixed performance suggests that consumers may have been selective in their holiday spending, with some sectors thriving while others faced challenges.
Biden administration faces decision on $10 billion gas facility amid climate and economic debates… The Biden administration faces a significant decision regarding a $10 billion natural gas facility known as CP2. Opponents argue that the project would result in decades of additional greenhouse gas emissions. On the other hand, supporters contend that the export terminal would benefit the U.S. economy and assist Europe in reducing its dependence on Russian gas imports. The Energy Department is expected to make a subjective determination regarding whether the export terminal is in the “public interest.” This decision could have substantial implications for the natural gas industry in the United States.
E.U. preparing aid package for Ukraine… Bloc leaders failed to agree to a €50 billion ($54.5 billion) four-year package for the war-torn country earlier this month and are now attempting to pass a plan worth up to €20 billion ($22.1 billion). The U.S. is set to send aid this month, though Congress will need to act to send additional aid, which has been a contentious point over the last few months.
Third-party candidates have potential for significant impact in 2024 election… Even though their chances of winning the presidency are low, many American voters are dissatisfied with the current options available to them. This uncertainty is a source of concern for both major political parties, particularly the Democrats. There are worries that third-party candidates could disrupt the election, similar to how Green Party candidates were seen to have influenced the outcome in 2016 and 2000. However, insiders acknowledge that predicting the outcome in a race with five or six candidates may be extremely difficult.
Majority of Russian oil to China/India… Following the invasion of Ukraine in February 2022, the sanctions the West put against Moscow forced the country to divert oil flows to Europe. Deputy Prime Minister Alexander Novak noted that 90% of Russian oil exports have been shipped to China and India. India did not import much oil from Russia before the war, though now accounts for about 40% of their total exports.
Cattle futures helped by rise in cash cattle average… Last week’s cash cattle average rose $1.80 from the prior week to $170.51, helping spur gains in cattle futures. Packers bought a substantial amount of cattle last week, indicating they were likely short bought, though trade has yet to take place this week.
Seasonal weakness weighs on hogs… The CME lean hog index dropped to a fresh seasonal low today, dropping 66 cents to $65.59 (as of Dec. 22). February futures still maintain a $3.71 premium to the index, though that dropped sharply with Tuesday’s sell off in futures.
Overnight demand news... Jordan tendered to buy up to 120,000 MT of milling wheat after a recent tender went unfulfilled.
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
· 2:00 p.m. Broiler Hatchery — NASS
· 2:00 p.m. Peanut Stocks and Processing — NASS