First Thing Today | January 27, 2022

Good morning!

Soybeans extend Wednesday’s strong gains... Soybean futures pulled back early in overnight trade but have rebounded to post new contract highs this morning. Overnight price action was light and choppy in corn and wheat. As of 6:30 a.m. CT, soybeans are trading 5 to 9 cents higher, corn 1 to 2 cents lower in most contracts, winter wheat futures are 3 to 5 cents lower and spring wheat is mixed with a slight upside bias. Front-month crude oil futures are trading at fresh seven-plus year highs, while the U.S. dollar index is more than 1,100 points higher.  

Russia/Ukraine update... Russian and Ukrainian negotiators have agreed to continue ceasefire talks as concerns that Russia will invade Ukraine remain elevated. Ukrainian Foreign Minister Dmytro Kuleba said Russia has not assembled sufficient forces to a launch full-scale invasion. Officials also say the latest four-way conversation between representatives from Ukraine, Russia, Germany and France has helped broker some hope for peace. Speaking after yesterday’s meeting, Moscow's chief negotiator said the ceasefire must be observed “unconditionally” but that many other issues in eastern Ukraine remained unresolved. Ukraine’s negotiator said all parties were in support of a permanent ceasefire, adding they are ready to negotiate around the clock to prevent a war. On Wednesday, the Biden administration delivered written proposals to Russia aimed at de-escalating the situation, although on the Kremlin’s key request — that NATO commits not to admitting Ukraine — the U.S. again refused to budge.

Weekly Export Sales Report out this morning… For the week ended Jan. 20, traders expect:

USDA sets CRP general signup, Grassland CRP signup periods... USDA will hold a general signup for the Conservation Reserve Program (CRP) Jan. 31-March 31 and a Grassland CRP signup April 4-May 13. USDA said 4.6 million acres were enrolled in CRP during 2021, with 1.88 million enrolled via a general signup and 2.5 million put in the program via the Grassland CRP effort. At the end of December, there were 22.1 million acres of land in CRP, down slightly from 22.25 million at the end of November. Farmers can also enroll acres into the program via the Continuous CRP effort with 19,385 acres enrolled so far in FY 2022. There were 864,594 acres enrolled via the Continuous CRP effort in FY 2021. There are contracts on 3.98 million acres that are set to expire under CRP as of Sept. 30, including 3.42 million acres enrolled via general signups and 560,000 via Continuous CRP efforts. Perspective: Despite USDA’s declaration it is seeking to get program acreage near the cap of 25.5 million in FY 2022, the program was still well shy of the FY 2021 cap of 25 million acres — there were 20.5 million acres in CRP as the end of September, with contracts on 2.99 million acres maturing as of Sept. 30. It is not clear how USDA intends to move the acreage level substantially higher on CRP given that many of the contracts that expire in the program often are offered for re-enrollment under new contracts. CRP is a major part of the Biden administration’s strategy to use agriculture to reduce greenhouse gas emissions. Future incentives to idle acreage could be part of coming carbon mitigation programs relative to a slimmed down Build Back Better program that could still be passed by Congress.

Trucks are taking over American roads... The rise in truck transportation is fueled by a rise in pandemic online shopping and disruptions to global supply chains. Along the way they’re chewing up pavement, adding to congestion and infuriating residents, who must contend with 18-wheelers and delivery trucks. They’re also causing headaches for state and local governments that face multibillion-dollar bills to finance road upkeep and expansions, the Wall Street Journal reports. And road and bridge construction funded by the roughly $1 trillion infrastructure bill President Biden signed into law last November will mean more construction trucks. It’s also likely that online shopping will keep growing, which means vendors are going to need to beef up their freight capacity.

Wall Street’s summer forecast calls for $100 a barrel oil... Early in the pandemic, oil prices fell to uncharted depths. Analysts now expect oil demand to return to pre-pandemic levels this year and say prices need to rise higher yet to entice U.S. producers to drill more wells.

China will step up support for economy, small firms... Beijing will adopt effective measures to tackle economic challenges and stabilize market expectations, while rolling out more tax and fee cuts and lower financing costs for small firms, Premier Li Keqiang said. China’s industrial firms saw December profits grow 4.2%, down from 9.0% growth in November and the slowest pace in more than a year and a half, pointing to cooling demand amid mounting economic challenges. The data adds to expectations of strong supportive measures from the People’s Bank of China in the coming months.

Russia halts intervention grain sales... Russia’s Interfax news agency reports the country’s ag ministry has halted grain sales from the state intervention fund, without providing any details.

Senate will expedite Supreme Court justice nominee vote... The Senate is expected to have votes to approve new Supreme Court justice to replace Stephen Breyer on an expedited timeline. Senate Majority Leader Chuck Schumer (D-N.Y.) plans to move President Biden’s nominee through the process on a timetable like that used by Republicans to confirm Justice Amy Coney Barrett in 2020. She was confirmed 30 days after then-President Donald Trump made the nomination. Biden is expected to follow through on his promise to nominate the first Black woman to the Supreme Court — and that person will not be current VP Kamala Harris. Among the names floated so far are Ketanji Brown Jackson, a U.S. appeals court judge in Washington; Leondra Kruger, a justice on California’s Supreme Court; Michelle Childs, a U.S. district judge in South Carolina; Leslie Abrams Gardner, a U.S. district judge in Georgia; and civil rights attorney Sherrilyn Ifill. Jackson is considered the most likely choice.

Gaps filled in cattle futures, now what?... Live cattle futures filled Monday’s chart gaps with yesterday’s strong corrective gains. As traders monitor the wholesale beef and cash cattle markets for near-term fundamental direction, clear technical boundaries have been established with resistance at last week’s high and support at Monday’s low. Money flow, outside markets and technicals will likely have as much to do with near-term price action as market fundamentals.

Limited corrective selling in hog futures... April, May and June lean hog futures posted modest corrective losses on Wednesday, though other contracts firmed, including the February contract. The firmer prices and high-range close in the lead contract after earlier losses suggests traders feel the cash market will continue to strengthen and the bigger-than-normal premium to the cash index is justified.

Overnight demand news... Japan purchased 25,431 MT of Australian wheat in its weekly tender.

Today’s reports

• 7:30 a.m. Weekly Export Sales — FAS
• 2:00 p.m. Citrus: World Markets and Trade — FAS