First Thing Today | February 8, 2022
Corrective trade overnight... Grain and soybean futures pulled back from Monday’s gains in corrective trade overnight on profit-taking and pressure from outside markets. As of 6:30 a.m. CT, corn futures are 2 to 5 cents lower, soybeans are 9 to 11 cents lower, winter wheat futures are mostly 10 to 12 cents lower and spring wheat is 6 to 10 cents lower. Front-month crude oil futures are around $1.75 lower and the U.S. dollar index is around 150 points higher this morning.
Consultant cuts Paraguay soybean crop, other estimates unchanged... Weekend rains across areas of Paraguay came too late to help the drought-damaged soybean crop. As a result, Crop Consultant Dr. Michael Cordonnier cut his Paraguay soybean crop estimate by another 1 MMT to 5 MMT – less than half of what the country was originally expected to produce. Cordonnier kept his Brazilian and Argentine soybean and corn crop estimates unchanged this week, but he has a lower bias toward both crops in both countries. He forecasts Brazilian production at 130 MMT for soybeans and 112 MMT for corn. In Argentina, he estimates production at 42 MMT for soybeans and 51 MMT for corn.
Russia/Ukraine update... The Financial Times reports, “French officials said Vladimir Putin had moved towards de-escalating the Ukraine crisis by promising not to undertake any new ‘military initiatives’ and agreeing to withdraw thousands of Russian troops from Belarus after the completion of planned exercises. If the agreement — brokered during talks with his French counterpart Emmanuel Macron on Monday — is confirmed by Putin, it could ease tensions in the region after Russia amassed more than 100,000 troops on Ukraine’s borders. Kremlin spokesperson Dmitry Peskov told the Financial Times Putin and Macron were ‘prepared to continue dialogue’ on the French proposals but that the discussions had yet to fully assuage Moscow’s concerns.” Macron has flown to Kyiv to meet with Ukrainian officials.
Biden vows to stop natural gas pipeline to Europe if Russia invades Ukraine... President Joe Biden vowed Monday that a major European energy pipeline would be abandoned if Russia sends forces into Ukraine, but he provided no details on how that would occur. Biden issued the threat after talks with German Chancellor Olaf Scholz, who’s recently formed government has pledged to take part in Western retaliation should Russia seize more Ukrainian territory, as it did in the 2014 annexation of Crimea. But Germany has stopped short of explicitly promising to halt the $11 billion Nord Stream 2 project, which would bring Russian gas to European consumers. On Monday, Scholz said only that his country was “absolutely united” with the U.S. and other NATO allies, “and we will not be taking different steps.”
U.S. ‘losing patience’ with China on trade commitments... U.S. officials reiterated their stance that China has resisted urgings to live up to terms of the Phase 1 trade deal in remarks to Politico. The White House is reportedly “losing patience” with China and noted the U.S. is not interested “in talks for the sake of talking; we seek concrete action.” The officials also noted they “inherited” the deal from the Trump administration and cited “limitations” in the deal. U.S. trade officials made similar comments to Reuters earlier this week. The China focus will be heightened today with the release of International Trade in Goods and Services data that is expected to show a record trade deficit for the U.S. and indicate how far China has fallen behind on its purchase commitments under Phase 1 relative to energy, agricultural and manufactured goods and services. Much of the attention has been on the purchase commitments made by China but there are also other components that have not yet been implemented, including seven commitments on ag trade details relative to biotech crops and more. The U.S. officials also indicated that framework of the deal provided little leverage to enforce the purchase commitments. China’s foreign ministry said the two sides needed to work together to resolve issues.
Rising prices are a top concern for small businesses... In a National Federation of Independent Business survey, 22% of owners said inflation was their single most important business problem in January, matching the highest level since 1981. The share of owners raising prices rose to 61%, the highest figure since 1974. “In addition to inflation issues, owners are also raising compensation at record high rates to attract qualified employees to their open positions,” said NFIB Chief Economist Bill Dunkelberg.
Canadian grain stocks will remind of tight supplies... Statistics Canada will release its estimates of Canadian grain stocks at 7:30 a.m. CT. Based on a Reuters survey, traders expect Canadian all wheat stocks to be estimated at 17.3 MMT as of Dec. 31, down sharply from 25.0 MMT the previous year. Canola stocks are expected to total 7.5 MMT, down from 13.3 MMT on Dec. 31, 2020.
Vilsack announced program to fund demonstration projects using climate-smart practices... USDA Secretary Tom Vilsack announced Monday the agency will provide $1 billion in funding for the Partnerships for Climate-Smart Commodities (PCSC) program via the Commodity Credit Corporation (CCC). But not all lawmakers were happy with the funding mechanism. One of them is Sen. Roger Marshall (R-Kan.), who sent a letter to Vilsack questioning the department’s authority to create the program using money from CCC. “It seems USDA is crafting its own farm bill by using the CCC to create its own programs and priorities that haven’t been established by Congress and to fund projects only USDA deems worthy,” Marshall said. Vilsack stressed that using CCC authority for this effort will not jeopardize the primary role of the CCC in terms of funding U.S. farm program and conservation program payments. We’ll have details and analysis of PCSC in “Evening Report.”
USDA official expected to be in hotseat on climate before House Ag subcommittee... The House Agriculture General Farm Commodities and Risk Management Subcommittee holds a hearing tabbed as looking at U.S. farm policy, with USDA Undersecretary for Farm Production and Conservation Robert Bonnie scheduled as the lone witness. Bonnie is a key architect of USDA’s climate-related activities, and the announcement of climate-smart commodities pilot projects Monday will provide lawmakers with lots of fodder to question Bonnie. Republicans focused on climate issues during an exam of conservation programs relative to the next farm bill and that is fully expected in this session. What appears to be emerging on the House side are very different views of the direction for U.S. farm policy and a more-divided panel than has historically been the case. That may provide an even bigger challenge than the policy issues they face. Odds are rising for a one- or two-year extension of the current farm bill.
PCCP clears OMB... The Office of Management and Budget (OMB) finished its review of USDA’s final rule for the Pandemic Cover Crop Program (PCCP). The review didn’t take long after USDA forwarded it Jan. 26. In finalizing details of the effort for the 2021 crop year, RMA said it would notify producers “through an announcement if the program is continued in future years.” RMA has encouraged farmers to report their cover crop acreage to the Farm Service Agency (FSA) when they file annual acreage reports in the event the effort is continued.
DMC enrollments extended... Enrollment for Supplemental Dairy Margin Coverage (SMDC) and the Dairy Margin Coverage (DMC) registration and coverage election deadline has been extended to Feb. 25 from the prior deadline of Feb. 18.
Falklands kerfuffle is back and China is involved this time... China has stepped up pressure on Britain over the Falklands, insisting London respond to Argentina’s latest demand that it relinquish control of the islands, known as Las Malvinas in Spanish. The Chinese embassy in Britain reiterated Beijing’s stance, a day after a furious response from London to a joint statement from President Xi Jinping and his Argentinian counterpart Alberto Fernandez which called for Argentina to be given “the full exercise of sovereignty” over the islands. British Foreign Secretary Liz Truss said, “We completely reject any questions over sovereignty of the Falklands.” A statement from the embassy said China’s position on the issue of the Malvinas Islands had been consistent. “We firmly support Argentina’s legitimate claim to full sovereignty over the Malvinas Islands. China has always advocated that territorial disputes between countries should be resolved through peaceful negotiations in accordance with the purposes and principles of the U.N. Charter,” it said.
Beef margins tighten, but still in the black... Wholesale beef prices continue to slide, while the cash cattle market firmed $2.81 last week. As a result, packer cutting margins have tightened, though they remain solidly in the black. If retailer demand for beef doesn’t perk up soon, however, packers will be reluctant to raise cash cattle prices.
February hogs’ premium not so big any more... The CME lean hog index is up $1.57 to $85.87, just $1.83 below where February lean hog futures closed on Monday. The cash market is gaining on the lead contract, which could prompt additional buyer interest. But deferred hog futures are overbought technically and could face some near-term corrective selling.
Overnight demand news... Turkey purchased about 275,000 MT of corn from unspecified origins. Taiwan tendered to buy up to 65,000 MT of corn from the U.S., Brazil, Argentina or South Africa.
Today’s reports
- No reports scheduled
