First Thing Today | January 18, 2022

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Good morning!

Corn and beans weaker, wheat firmer to start the week... Soybeans posted double-digit losses overnight coming out of the extended weekend, while corn was slightly lower. Wheat futures posted corrective gains. As of 6:30 a.m. CT, soybeans are trading 12 to 15 cents lower, corn is mostly 3 to 4 cents lower and wheat is mostly 9 to 11 cents higher. Front-month crude oil futures are more than $1 higher and the U.S. dollar index is about 125 points higher this morning.  

South American weather shows at least temporary improvement... Weekend rainfall in Argentina was greatest from northeastern Buenos Aires and Entre Rios to northern Cordoba where 1.00 to 2.00 inches resulted, according to World Weather Inc. It says, “Argentina weather will be highly unsettled during the next ten days, resulting in waves of rain that will soak the ground throughout the nation’s most important grain and oilseed production areas. In Brazil, some needed dryness was seen in central and northern parts of the country, while some rains fell on southern areas. World Weather says, “Brazil’s bottom line looks to be mostly very good in the next 10 days, although there will be some new concern for crops in western Mato Grosso do Sul, western Parana and in a part of Rio Grande do Sul where dryness is expected to prevail along with that in Paraguay.” 

Consultant makes additional cut to Brazilian soybean crop... Weather in Brazil is showing some improvements in both southern and northern areas of the country. But recent rains were irregular in Parana and Rio Grande do Sul and the heavier amounts favored the Atlantic coast while the soybeans are grown mostly in the western regions of those states. As a result, Crop Consultant Dr. Michael Cordonnier cut his Brazilian soybean crop estimate another 1 MMT to 134 MMT. He left his Brazilian corn crop estimate at 112 MMT. Cordonnier lowered his Paraguay soybean crop estimate by 1 MMT to 7 MMT. He left his Argentine soybean and corn crop forecasts at 43 MMT and 51 MMT, respectively.

China imports record amount of corn, wheat in 2021... China imported a record 28.4 MMT of corn in 2021, a 152% surge from the previous year. The country’s wheat imports at 9.8 MMT last year were also a record and up 16.6% from 2020. Chinese buyers stepped up imports or corn and wheat, to fill the domestic gap in corn supply. But China’s appetite for imported grains showed signs of waning in the final months of last year, as a bigger domestic corn crop pushed down domestic prices, while feed demand from the livestock sector weakened on plunging hog margins.

China again sells 100% of the wheat put up for auction... China sold all 501,283 MT of state-owned wheat reserves put up for auction last week. The average selling price was 2,713 yuan (just over $427) per metric ton, up slightly from the previous week.

China cuts rates on MLF loans... The People’s Bank of China (PBOC) on Monday said it was lowering the interest rate on 700 billion yuan ($110.2 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions by 10 basis points. This was the first cut to rates for MLF loans since April 2020 and came after China reported fourth-quarter GDP of 4.0% on Sunday, down from 4.9% growth the previous quarter and the slowest since the second quarter of 2020. China’s central bank will roll out more policy measures to stabilize the economy, vice governor Liu Guoqiang said on Tuesday. Liu said the central bank would widen the use of its policy tools to prevent a “collapse” in credit and noted there was still room to cut banks’ reserve requirement ratios (RRR), although the scope for this had been reduced by cuts in the past.

Outlook for U.S. economic growth waning... The economic outlook in the first quarter and for the year is darkening amid the latest wave of Covid-19, as consumers grapple with high inflation and businesses juggle labor and production disruptions. Forecasters surveyed by the Wall Street Journal this month slashed their expectation for growth in the first quarter by more than a percentage point, to a 3% annual rate from their forecast of 4.2% in the October survey. The combination of higher inflation, supply-chain constraints and the fast-spreading Omicron variant caused economists to trim their forecast for growth to 3.3% for 2022 as a whole from 3.6% in October. Last year, output rose 5.2%, economists estimate.

BOJ shifts view on inflation, keeps rates unchanged... The Bank of Japan (BOJ) shifted its view on inflation risk for the first time since 2014, with price rises in food and energy. However, Japan’s central bank made no change to its monetary stance, opting to keep its negative interest rate, asset purchases and yield curve control policies unchanged. BOJ revised its inflation projection upward from 0.9% to 1.1% for the fiscal year starting in April. The central bank, which said that a pick-up in Japan’s economy had become “evident,” also changed its price risk assessment from “skewed to the downside,” an expression that had been used since October 2014, to “generally balanced.”

Big NOPA soy crush figure expected for December... The National Oilseed Processors Association (NOPA) is expected to report soybean crush totaled nearly 185.0 million bu. in December, according to a Reuters poll. If realized, that would be up 3.1% from November and 1.0% from last year – and the second largest monthly crush on record. Soyoil stocks at the end of December are expected to rise to 1.892 billion lbs., which would be up 3.3% from November and 11.4% higher than a year earlier.

The week ahead in Washington... Senate Majority Leader Chuck Schumer (D-N.Y.) told lawmakers the Senate would forgo a planned recess and remain in session this week to debate and vote on two partisan election bills and a major rule change to modify the long-standing filibuster, which centrist Sens. Kyrsten Sinema (D-Ariz.) and Joe Manchin (D-W.Va.) have said they do not support. President Joe Biden is expected to soon send lawmakers a Covid-19 supplemental budget request to fund more booster doses, antiviral pills, masks and tests. Democrats may add on targeted Covid aid for some, including restaurants, bars and other businesses continuing to be impacted by the pandemic. Biden will hold a news conference on Wednesday to mark the end of his first year in office. USDA Secretary Tom Vilsack will testify before the House Agriculture Committee on Thursday on the state of the rural economy. On Tuesday, the Supreme Court will announce the final batch of cases it will take up for the term. The court held a conference on Friday to vote on which petitions to pick up, and there are several that will be notable if they're chosen, especially the Prop 12 petition from the National Pork Producers Council and Farm Bureau. The key ag data this week will be Friday’s Cattle on Feed Report.

China’s pork production jumps 29% in 2021... China's 2021 pork output reached 53.0 MMT last year, just below the 53.4 MMT produced in 2017, prior to the African swine fever (ASF) outbreak that decimated the country’s hog herd. China slaughtered 671.3 million hogs in 2021, up 27% from a year earlier. The country’s hog herd totaled 449.2 million head at the end of December, up from 437.6 million head at the end of the previous quarter.

USDA reports HPAI in wild bird in South Carolina... USDA’s Animal and Plant Health Inspection Service (APHIS) announced Jan. 14 it confirmed highly pathogenic Eurasian H5 avian influenza (HPAI) in a wild American wigeon in Colleton County, South Carolina. There has not been a case of Eurasian H5 HPAI since 2016 in a wild bird in the U.S. There was a case of HPAI (H7N3) in one commercial meat turkey flock in 2020 due to a North American lineage virus, APHIS said. The agency is determining the exact strain of the virus and expects results in the next few days. Eurasian H5 is considered low risk for humans, but dangerous for the poultry industry. "So far we have no indication that HPAI has jumped from wild migratory birds to poultry and we'd very much like to keep it that way," said Michael Neault, South Carolina's state veterinarian. The find in a wild bird had not generated any trade actions from global customers for U.S. poultry as of late Friday afternoon.

Hong Kong reports ASF finding... Hong Kong reported an ASF discovery in a wild boar in the northern part of the territory, the World Organization for Animal Health (OIE) said on Monday. No domestic pig farms had been found affected by this case, it said.

Watching for a rebound in cash cattle... Wholesale beef prices continued to firm with gains of $3.55 in Choice and $3.08 in Select on Monday. While firming boxed beef prices are increasing packer margins, the key determinant on whether packers raise cash cattle prices this week likely lies with slaughter levels, which were reduced the past couple weeks by worker absenteeism due to Covid.

Solid start for wholesale pork trade... The pork cutout value firmed $2.87 on Monday, while movement was a solid 305.87 loads. The question on wholesale pork trade is whether the cutout value can find enough retailer buying to sustain prices above the $90.00 level. Recent moves above that level have slowed retailer buying, resulting in packers lowering prices.

Weekend demand news... Turkey purchased at least 175,000 MT of milling wheat from unspecified origins; purchases are ongoing. Japan is seeking 72,351 MT of U.S. and Canadian milling wheat in its weekly tender.

Today’s reports

 

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