First Thing Today | March 16, 2022

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Good morning!

Wheat pulls corn lower, soybeans rebound... Wheat futures traded sharply lower overnight, which pulled the corn market lower. Soybeans, along with meal and soyoil traded higher. As of 6:30 a.m. CT, wheat futures are trading mostly 18 to 32 cents lower, corn is 3 to 8 cents lower and soybeans are 6 to 12 cents higher. Front-month U.S. crude oil futures are around 50 cents lower and the U.S. dollar index is down around 500 points this morning.

Russia/Ukraine update... Ukrainian President Volodymyr Zelenskyy will address U.S. Congress virtually at 8 a.m. CT today. The Wall Street Journal reported President Joe Biden would announce another $1 billion in security assistance to Ukraine today after Zelenskyy speaks — $200 million in previously appropriated funds that Biden already announced over the weekend, and $800 million in new funds from the $13.6 billion aid package signed into law on Tuesday. The New York Times reports Ukrainian officials plan to present the U.S. with a list of military equipment they need, including armed drones and mobile air-defense systems. Zelenskyy said peace talks which resume today were sounding more “realistic” as Russian shellings continued, with the capital of Kyiv coming under heavier attack. Russia said its forces had taken full control of the southern region of Kherson. The U.S. imposed sanctions on Russian military leaders and people it accused of being connected to human rights violations while slapping fresh measures on Moscow's close ally Belarus President Alexander Lukashenko. President Joe Biden will make his first visit to Europe since the invasion of Ukraine to discuss the crisis with NATO allies next week, the White House said Tuesday.

Japan to revoke Russia’s MFN status... Japan will revoke Russia’s most-favored nation trade status as part of further sanctions against Moscow, Prime Minister Fumio Kishida announced. Tokyo will also ramp up sanctions by expanding the scope of asset freezes against Russian elites and banning imports of certain products from the country. Japan will also coordinate with other Group of Seven nations to prevent Russia from tapping loans from the International Monetary Fund and other global lenders. The moves are in line with an announcement on Friday by the U.S. and its allies to escalate their economic pressure on Russia.

FOMC meeting conclusion today has big implications... The conclusion of the Federal Open Market Committee (FOMC) meeting this afternoon is expected to see the U.S. central bank raise its benchmark rate for the first time since 2018 to subdue inflation that is running at the fastest pace in four decades — increasing the target range for the Fed funds rate by 0.25%, putting it at 0.25% to 0.5%. But the real focus will come with release of updated projections by Fed members, with attention on the number of rate hikes Fed officials now expect will be needed in 2022 and beyond. The Fed may also have something to say about how it intends to trim its balance sheet, which is at $8.9 trillion.

China’s Covid crackdown increases supply-chain concerns... China’s latest Covid-19 crackdown is starting to touch shipping operations amid fears of new disruptions to supply chains. Freight forwarders and Maersk Line say warehouses across the key exporting city of Shenzhen are closed until March 20, the Wall Street Journal reports, and companies are warning that truck movements around major hubs including Shenzhen, Shanghai, Tianjin and Qingdao are likely to slow as drivers are screened for Covid. Shenzhen is requiring freight trucks entering from neighboring hard-hit Hong Kong to change drivers at three designated border checkpoints to curb the spread of Covid-19. Operations at Shenzhen’s big container terminals are moving, but the shutdown of warehouses and stalled truck operations suggest the flow of goods may slow in the coming days. Major manufacturers including Apple supplier Foxconn and Toyota have already idled some factories, shutdowns that will reverberate across global supplies.

China will support capital markets to boost economy... China will keep its capital markets stable, Xinhua news cited Vice Premier Liu He as saying at a meeting of the Financial Stability and Development Committee under the State Council. “All policies that have a significant impact on capital markets should be coordinated with financial management departments in advance to maintain the stability and consistency of policy expectations,” Liu said. Beijing will take measures to boost the economy in the first quarter and monetary policy should embark on initiatives to support the economy, he noted. China also will take forceful and effective measures to prevent and resolve risks in its property sector.

Psaki says year-round E15 an ‘option’ to bring down gasoline prices... The White House is mulling several options to address gasoline prices which surged to a record level recently, with Press Secretary Jen Psaki saying the possibility of allowing year-round sales of E15 fuel is “in the menu of options” being looked at. She said no decisions have been made but ensuring more oil supply on the market is “a big priority and a focus.” Her comments on year-round E15 came in response to a question from reporters on a recent letter by a bipartisan group of senators that urged the White House to allow year-round sales of the higher ethanol blend. A regulation taking that step was vacated by the U.S. Court of Appeals for the DC Circuit, and the U.S. Supreme Court also denied a petition from the biofuel industry to reconsider the lower court ruling.

Growth Energy calls on Granholm to ‘correct the record’ on corn-based ethanol study... Energy Secretary Jennifer Granholm is being challenged to “correct the record” relative to a recently released University of Wisconsin-Madison study on corn-based ethanol that indicated carbon emissions of corn ethanol could be 24% higher than from the equivalent amount of gasoline. Growth Energy CEO Emily Skor made the request in a letter to Granholm as the study authors said it was partly funded by the Department of Energy (DOE). Among other studies pointed to by Skor, the letter noted that DOE’s Greenhouse Gases, Regulated Emissions, and Energy Use in Technologies (GREET) model has “been tracking corn ethanol’s lifecycle analysis impacts since 1996 and has drawn starkly contrasting conclusions” to the Wisconsin study. “In its most recent iteration, GREET shows that corn ethanol has roughly 40% lower carbon emissions than traditional petroleum gasoline,” the letter said. Skor called on Granholm to “make clear” that the University of Wisconsin study is “both inconsistent with and subordinate to the DOE’s GREET model, and that the Department did not specifically fund this study, but instead, provided a grant related to the broader work of dedicated bio-energy crops performed at the University of Wisconsin. Further, we ask the Department to evaluate if this work violated the $115 million award provided by DOE to run from 2017-2022.” Skor also said failing to address “inconsistencies” from other studies could have a negative impact on efforts to decarbonize the transportation sector.

IEA cuts global oil demand outlook amid Russian supply reductions... The International Energy Agency (IEA) cut its world oil demand forecast for 2022, warning that sanctions against Russia over its invasion of Ukraine could spark a global supply “shock.” In its monthly report, IEA said, “Faced with what could turn into the biggest supply crisis in decades, global energy markets are at a crossroads.” The agency said 3 million barrels per day (bpd) of Russian oil and products may not find their way to market beginning in April in the wake of its invasion of Ukraine. IEA lowered its forecast for world oil demand for the final three quarters of 2022 by 1.3 million bpd. For the full year it cut its growth forecast by 950,000 bpd to 2.1 million bpd for an average of 99.7 million bpd. That would mean a third year of demand below pre-pandemic levels which the agency had previously seen recovering in 2022.

Firmer cash cattle expectations... Live cattle futures followed up Monday’s strong gains with more modest advances yesterday. The price strength in futures the first two days this week has traders optimistic about cash cattle ending their recent slide. While packers haven’t established bids yet, feedlots are asking $3 to $4 more fore cash cattle and general expectations are cash prices will eventually rise $1 to $2 from last week’s average price of $138.30.

Hog futures continue to pause... Lean hog futures have been in pause mode since March 7 when the market established a short-term low. A breakout from the consolidation range will set the near-term price trend. An upside breakout would suggest the market has already posted its typical late winter/early spring low. A downside breakout would suggest a deeper pullback is likely before the market embarks on its usual climb to a summertime peak.

Overnight demand news... Iran tendered to buy 60,000 MT each of corn, soymeal and feed barley.

See ‘Policy Updates’ for late-breaking morning news updates... For updates to items in “First Thing Today” or any late-breaking morning news stories, check “Policy Updates” on www.profarmer.com.

Today’s reports

 

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