First Thing Today | February 18, 2022

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Good morning!

Old-crop soybeans testing waters above $16 again... Old-crop soybeans poked above $16 overnight, but key is whether there’s sustained buying above that level – something that hasn’t happened the two previous times. As of 6:30 a.m. CT, soybeans are trading 6 to 8 cents higher, soymeal is around $2 higher, soyoil is narrowly mixed, corn is 1 to 2 cents lower, SRW wheat is 3 to 5 cents lower, HRW wheat is around a penny lower and spring wheat is narrowly mixed. Front-month crude oil futures are down nearly $2 and the U.S. dollar index is just above unchanged this morning.

Presidents Day trading schedule... Grain and livestock markets will observe normal trading hours today. Markets and government offices are closed on Monday, Feb. 21 for Presidents Day, so there will be no Pro Farmer market reports or commentary. Grain markets will resume trade with the overnight session starting at 7:00 p.m. CT on Monday, Feb. 21, while livestock markets will reopen at 8:30 a.m. CT on Tuesday, Feb. 22.

Russia/Ukraine update... The U.S. on Thursday ramped up warnings of a possible Russian attack on Ukraine, with President Joe Biden saying the probability of an invasion is “very high.” Russian officials said no invasion of Ukraine was underway and none was planned. But the Kremlin said in an official response to the Biden administration’s proposed security assurances that the offers were unsatisfactory, and Russia might have to resort to unspecified “military-technical measures.” Moscow has repeatedly denied any intention to invade Ukraine, claiming this week it was withdrawing forces from the borders. But the U.S. remains skeptical and has accused Russia of increasing troops instead of pulling back. “If Russia doesn’t invade Ukraine, then we will be relieved that Russia changed course,’’ Secretary of State Antony Blinken said at the United Nations. As shelling intensified in eastern Ukraine, officials warned Moscow might use false claims of “genocide” against Russians in the region as a pretext for an attack. Meanwhile, Russian-backed separatists claimed they had come under fire from the Ukrainians — the sort of incident Western officials have warned Russia might try to use to justify military action. Russian Foreign Minister Sergei Lavrov agreed to meet Blinken for talks in Europe next week. Russian military exercises are due to end on Sunday, with troop movements after that date seen as a key test of the Kremlin’s intentions.

Senate clears stopgap spending measure... The Senate on Thursday evening finally passed a three-week stopgap government funding bill, 65-27. The continuing resolution runs until March 11 and is designed to give House and Senate appropriators time to finish an omnibus covering fiscal year 2022.

Energy security for Europe... The European Commission is looking at ways to build up strategic inventories of natural gas to better prepare for next winter after limited supplies of the fuel pushed energy prices to records. The action plan due to be presented next month will include a legal requirement for member states to have a minimum level of storage by Sept. 30 of every year.

Carbon pricing in EU... The EU plans to seek more granular reporting on different types of emissions derivatives to boost the transparency of its carbon market, according to a draft plan. Separately, France proposed that member states discuss next week the existing provisions to prevent excessive carbon price growth, as well as potential changes, in talks on overhauling the Emissions Trading System.

U.S. gov’t namechecks some Chinese companies... The Office of the United States Trade Representative (USTR) on Thursday said it had designated for the first time AliExpress, an online marketplace run by Alibaba, and WeChat, Tencent’s ubiquitous mobile app, as “markets that reportedly facilitate substantial trademark counterfeiting.” The annual list includes 77 entities that are alleged to be engaged in “counterfeiting or copyright piracy,” spanning over a dozen countries. In a statement today, Tencent said “we strongly disagree with the decision made by the United States Trade Representative and are committed to working collaboratively to resolve this matter.” The protection of intellectual property “is central to our business,” the company continued, adding that it takes measures to clamp down on violations across its platforms “including education, enforcement and close collaboration with rights holders, government agencies and law enforcement.”

China to strengthen commodity market monitoring amid industrial growth push... The National Development and Reform Commission (NDRC) and other regulators announced 18 measures in a notice involving fiscal, financial, environmental and other policies to prop up China’s industrial sector. NDRC said the authorities would ensure supply and stabilize prices of primary products and key raw materials, including iron ore and fertilizer. They also pledged to reinforce futures and spot market supervision of commodities and strengthen price monitoring. The state planner said it will encourage companies to invest in certain domestic iron ore and copper projects and boost use of scrap metal. Distributed solar power projects in central and eastern regions will also be encouraged. State-owned banks will be encouraged to lend more to manufacturers and back major projects to cut carbon emissions. The country will also speed up construction of new infrastructure projects and increase financial support for traditional trading firms, cross-border e-commerce companies and others.

Possible Iran deal... In the draft seen by Reuters, which is still subject to negotiation, Iran will agree to stop uranium enrichment above the 5% level and release certain Western prisoners held in the country, while $7 billion in Iranian funds held in South Korean banks would become unfrozen. Those initial steps would pave the way for further sanctions, particularly on Iran’s oil sector, to be lifted. The overall deal is expected to fall short of a U.S. guarantee to never leave the deal, with a provision agreed that Iran would instead be allowed enrich uranium up to 60% purity in the event of a U.S. pullout.

Russian wheat export tax declines again... Russia’s wheat export tax for Feb. 23-March 1 will be $91.00 per metric ton, based on an indicative price of $330.10 per metric ton. The wheat export tax has dropped six straight weeks and is down from the peak rate of $98.20 per MT in mid-January, but is still 224% higher than the initial rate of $28.10 per MT at the beginning of June when Russia started using the sliding scale.

French wheat crop ratings remain high... France’s ag ministry rates 95% of the country’s soft wheat crop as being in good/excellent condition, unchanged from the previous week and above 86% last year, though down slightly from 99% before winter. The country’s winter barley and durum crops are also rated highly at 94% and 89% good/excellent, respectively.

Still some cattle to clean up... Cash sources signal packers have most of their near-term needs covered and are now buying cattle for a couple weeks out. That has caused some feedlots to pause on sales, despite roughly $2 higher cash prices. Feedlots must decide whether to pull the trigger on the higher prices for later delivery or hold back some supplies in hopes of higher prices next week.

Hogs could face pre-holiday corrective trade... Lean hog futures raced to contract highs Thursday behind firming cash fundamentals and bullish attitudes. While the cash hog index continues its steady climb and the pork cutout value surged $10 on Thursday, hog futures are overbought and hold sizable premiums to the cash market. That could prompt some profit-taking ahead of the three-day weekend.

Overnight demand news... Taiwan purchased 54,920 MT of U.S milling wheat.

Today’s reports

 

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