First Thing Today | February 23, 2022
Soy complex finds followthrough buying, wheat and corn pull back... Soybean futures posted contract highs overnight, with soymeal and soyoil also firmer, while the wheat and corn markets faced light profit-taking after Tuesday’s rallies. As of 6:30 a.m. CT, soybeans are trading 6 to 11 cents higher, corn is fractionally to 4 cents lower, SRW wheat is 2 to 4 cents lower, HRW wheat is 5 to 7 cents lower and spring wheat is mostly 1 to 2 cents lower. Front-month crude oil futures are around 50 cents lower and the U.S. dollar index is down about 100 points this morning.
Russia/Ukraine update... The U.S. and Europe placed economic sanctions on Russia for what President Joe Biden denounced as the beginning of an “invasion of Ukraine,” unveiling a set of coordinated punishments. Japan, Taiwan and Singapore issued a joint statement saying they would limit technology exports to Russia to pressure Russian President Vladimir Putin with damaging restrictions on his ambitions to compete in high-tech industries. In a video statement, Putin reacted to Tuesday’s developments, saying Russia is open to “direct and honest dialogue” and “diplomatic solutions.” Meanwhile, the Ukraine security council approved plans for a state of national emergency and the government urged Ukrainian citizens to leave Russia “immediately,” reported AFP.
Scope, impact of U.S. sanctions questioned... The U.S. sanctions against Russia were limited in scope and fell short of the more sweeping economic warfare that some — including members of Congress and other supporters of Ukraine — have repeatedly demanded in recent weeks. White House officials spent Tuesday afternoon trying to defend the measured approach, as questions swirled over whether their response would be enough to deter the Kremlin from mounting a bigger assault. Putin previously worked to inoculate Russia’s economy against the likely sanctions that will result from a prolonged invasion by building its currency reserves and establishing deeper economic ties with China. Many analysts wonder whether even the most serious of financial sanctions will be enough to dissuade Putin from reconquering most of the former Soviet republic.
HRW crop continues to erode... Individual state crop condition ratings showed further deterioration of the HRW wheat crop during February. The “good” to “excellent” ratings for HRW wheat dropped to 26% for Kansas (down four points from the end of January), 9% for Oklahoma (down seven points) and 24% for South Dakota (down seven points). Nebraska’s “good” to “excellent” rating was unchanged at 36%. The “good” to “excellent” ratings improved to 10% in Texas (up three points), 21% in Montana (up seven points) and 21% in Colorado (up one point). When the individual state crop ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500 point scale, with 500 being perfect), the HRW crop plunged to a rating of 259.0, down 11.4 points from the end of January and 65.4 points below the end of November. At the current level, the CCI rating would be 71.3 points below the five-year average for the beginning of April when USDA starts releasing weekly national crop condition ratings.
Another call for more Chinese soybean, oilseed plantings... China will plant soybeans everywhere possible this year, the country’s ag minister said, as it seeks to reduce its dependence on imports. "We will make great efforts... to expand the production of soybeans and oilseeds, Ag Minister Tang Renjian, said. “Each extra mu planted counts, and every jin harvested counts,” he noted, using Chinese measures for land area and weight. “A bottle of oil should contain as much Chinese oil as possible,” he said. Tang’s comments are the latest in a string from Chinese officials saying the country needs to ramp up domestic production of soybeans and other oilseeds.
French finance minister notes rising wheat prices... French Finance Minister Bruno Le Maire told BFM TV and RMC Radio on Wednesday he was closely monitoring rising wheat prices, which could add to inflationary pressures affecting many consumers in France. His comments came after Euronext wheat prices surged to near a four-week high on Tuesday amid concerns with the Russia/Ukraine situation.
Euro zone consumer inflation rises a record 5.1% in January... Euro zone consumer price inflation rose 0.3% from December and was up a record 5.1% from year-ago. The numbers were in line with market expectations, but they continue to reflect price pressures on Europeans. Consumer inflation minus volatile energy, food, alcohol and tobacco prices declined 0.9% from the previous month but was up 2.3% from last year.
DOT awards port-related funding... The U.S. Transportation Department (DOT) is awarding $450 million in grants for port-related projects to bolster capacity and improve the movement of goods as the U.S. economy continues to be affected by congested supply chains, senior Biden administration officials say. “We’re proud to announce this funding to help ports improve their infrastructure — to get goods moving more efficiently and help keep costs under control for American families,” U.S. Transportation Secretary Pete Buttigieg said in a statement. This is the largest ever investment in the Port Infrastructure Development Program, nearly double last year’s investment, the officials said.
Biden: California essential to critical minerals supply chain... President Biden wants California to help secure a permanent pipeline of critical materials essential to the tech industry that can boost the nation’s green energy production and its competitiveness. Speaking Tuesday at a virtual roundtable with Gov. Gavin Newsom, the president touted investments around the country, highlighting several in California, including a new $35-million contract that the Department of Defense has awarded a Las Vegas company to separate and process heavy rare earth elements at its facility in Mountain Pass, California. The goal of the contract with MP Materials will be to establish a permanent end-to-end domestic supply chain for the magnets used in electric vehicle motors, electronics and wind turbines. Nearly 100% of the nation’s critical minerals are imported from foreign sources, including materials such as lithium and graphite, “which are badly needed for so many American products,” Biden told the group of industry and community leaders. “China controls most of the global market of these minerals, and the fact is that we can’t build a future that’s made in America if we ourselves are dependent on China for the materials, the power, the products,” he said.
CFAP payments little changed in most recent week... Payments under the Coronavirus Food Assistance Program 1 (CFAP 1) changed little as of Feb. 21, with total CFAP 1 payouts at $11.77 billion, including original CFAP 1 payments of $10.58 billion and top-up payments of $1.18 billion. CFAP 2 payments also changed little, with total payouts at $19.08 billion, including original CFAP 2 payments of $14.25 billion ($14.25 billion prior) and top-up payments of $4.83 billion.
Pork stocks data adds to bullish tone... USDA’s Cold Storage Report showed a smaller-than-normal build in frozen pork stocks during January. Frozen pork inventories at 428.5 million lbs. rose 32.0 million lbs. (8.1%) from December, far less than the five-year average gain of 56.7 million lbs. during January. Pork stocks were 29.0 million lbs. (6.3%) under year-ago and 121.7 million lbs. (22.1%) less than the five-year average. Beef stocks totaled 526.4 million lbs., up 19.3 million lbs. (3.8%) versus December, whereas the five-year average was a 2-million-lb. decline during the month. Beef stocks were 7.1 million lbs. (1.4%) above January 2021 inventories but 14.9 million lbs. (2.9%) under the five-year average.
Higher cash cattle prices expected... Cash sources anticipate stronger packer competition for cash cattle this week, which should push the market solidly higher after the average price rose $1.88 last week. But with USDA’s Cattle on Feed Report scheduled for Friday afternoon, cash negotiations could be extended deep into the week unless packers are aggressive with bids ahead of that data.
Hog traders remain extremely bullish... Hog futures surged Monday, extending their overbought stature. Bullish attitudes are being driven by a “perfect storm” of firming cash fundamentals, strong technicals and active money flow into the long side of the market. While the market is due to a corrective pullback, a major market top isn’t likely until attitudes shift.
Overnight demand news... Exporters reported no tenders or sales.
Today’s reports
- 2:00 p.m. Broiler Hatchery — NASS
- 2:00 p.m. Milk Production — NASS
