First Thing Today | March 28, 2022
Heavy price pressure to open the week... Wheat futures led overnight price declines, with corn and soybeans following to the downside. Despite the heavy pressure, wheat and corn futures remained within their recent sideways trading ranges, while soybeans stayed within their choppy to higher range. As of 6:30 a.m. CT, winter wheat futures are trading mostly 34 to 39 cents lower, spring wheat is 22 to 26 cents lower, corn is 6 to 10 cents lower and soybeans are 11 to 15 cents lower. Front-month U.S. crude oil futures are more than $5 lower and the U.S. dollar index is around 300 points higher this morning.
Russia/Ukraine update... Ukraine and Russia were preparing for the first face-to-face peace talks in more than two weeks, with Kyiv insisting it would make no concessions on Ukraine’s territorial integrity as battlefield momentum has shifted in its favor. Ukrainian officials played down the chances of a major breakthrough at the talks, due to be held in Istanbul after Turkish President Tayyip Erdogan spoke to Russia’s Vladimir Putin on Sunday. Russia is trying to split Ukraine in two to create a Moscow-controlled region after failing to take over the whole country, the head of Ukrainian military intelligence said. Ukraine has asked the International Committee of the Red Cross not to open an office in Russia's Rostov-on-Don, saying it would legitimize Moscow’s “humanitarian corridors” and the abduction and forced deportation of Ukrainians.
Fertilizer price index at record as Ukraine war tightens supply... With the Russia/Ukraine war in its fifth week, urea and phosphate keep climbing in New Orleans (NOLA), Brazil, Europe and the Middle East. Tampa ammonia closed at a record $1,625 a metric ton for April, up 43% from March. Potash prices jumped in NOLA and Brazil to almost two times last month’s Chinese annual contract, according to Bloomberg Intelligence. The service notes that Brazilian potash prices topped $1,100 per metric ton in mid-March, up 32% in two weeks. Options for Brazilian buyers outside Russia are few. Belarus and Russia together produce 37% of the world’s supply. Canada is the next best option, but China and India locked in a now-cheap 11-month contract at $590 per metric.
Shanghai on rolling Covid lockdown... Shanghai will lock down half of the city in turns to conduct a mass testing blitz for Covid-19, as authorities race to control a spiraling outbreak. Residents will be barred from leaving their homes, public transport will be suspended and private cars will not be allowed on the roads unless necessary. An analysis of figures shows China’s latest outbreak was preceded by an influx of imported cases from Hong Kong. All over Shanghai, the government’s announcement sparked frenzied scrambles to food markets and grumbling about the disruption to urban life in a city that until recently appeared relatively unaffected by Covid. Any suspension of commercial activity in Shanghai will likely have global ripple effects as the city is one of China’s primary centers for finance, manufacturing and goods trade.
The week ahead in Washington... Russia remains the major focus in Washington. Secretary of State Antony Blinken said the U.S. is not seeking Russian regime change, after President Joe Biden seemingly called for his Russian counterpart Vladimir Putin to be ousted. Biden sends his budget up to Capitol Hill today. The budget will propose the first 20% minimum tax on households worth over $100 million, plus a plan to cut over $1 trillion from spending deficits within 10 years, and to cut projected budget deficits by over $1 trillion in the next decade, according to information released Saturday by the White House budget office. Newly confirmed Office of Management and Budget Director Shalanda Young will brief the House and Senate Budget committees on Tuesday and Wednesday, respectively. The key economic data this week is Friday’s employment data for March. Major agricultural reports this week are Wednesday’s Hogs & Pigs Report and Thursday’s Prospective Plantings and Grain Stocks Reports.
New round of SPR oil release discussed... The U.S. is considering another release of oil from its emergency reserves, according to reports. The specific amount is being discussed among top aides to Biden, but it would likely be more oil than the 30-million-barrel release announced earlier this month. The U.S. and other major economies last week discussed oil supply and the potential for another round of releases, Biden’s top national security aide said, raising the prospect of new government intervention to ease supply strains. Meanwhile, OPEC+ will hold a virtual meeting during which the group is expected to keep current production plans in place even with crude oil prices trading at a 14-year high.
NHTSA to unveil fuel economy rules for cars and light trucks... The National Highway Traffic Safety Administration (NHTSA) is set to finalize new fuel economy standards for cars this week. The U.S. Transportation Department, which oversees NHTSA, said when it first proposed the new standards last year they would increase fuel-efficiency 8% annually for model years 2024-2026, and increase the estimated fleet-wide average by 12 miles per gallon by model year 2026. The agency faces a March 31 deadline to finalize new rules for the 2024 model year.
Demand remains strong for China wheat auctions... China sold 546,015 MT (98.4%) of the state-owned wheat reserves put up for auction. The average sales price was 2,884 yuan ($453) per metric ton, down from 2,958 yuan the previous week. China also sold 9,727 MT (53%) of rice reserves at an average price of 2,644 yuan ($415) per metric ton.
USDA continues to confirm new HPAI finds... USDA’s Animal and Plant Health Inspection Service (APHIS) has confirmed several cases of highly pathogenic avian influenza (HPAI) in both backyard and commercial flocks, including the first finds in Minnesota. Two flocks in Minnesota were confirmed with HPAI — one in a commercial turkey flock in Meeker County and the other in a backyard mixed species flock (non-poultry) in Mower County. There was no information provided on the flock size. Iowa officials said APHIS confirmed a third case of HPAI in Buena Vista County in a commercial turkey flock. The new cases put total confirmed HPAI cases at 62 (USDA data shows 59 as the cases in Minnesota and Buena Vista County, Iowa, have not been added to its confirmed list but are likely to be added soon).
Canada confirms HPAI in Ontario... The Canadian Food Inspection Agency (CFIA) has confirmed H5N1 HPAI in a poultry flock in southern Ontario. CFIA had previously confirmed HPAI finds in both Nova Scotia and Newfoundland and Larador in both backyard and commercial flocks.
Mildly negative Cattle on Feed Report... Last Friday’s Cattle on Feed Report showed a record number of cattle in feedlots as of March 1 and up 1.4% from year-ago, which was slightly greater than anticipated. February placements rose 9.3% and marketings increased 4.9%. The report data was slightly negative compared to pre-report expectations, especially for deferred live cattle futures. But we doubt there will be a lasting impact from report.
Cash hog index the highest since the end of August... The CME lean hog index is up 75 cents today (as of March 24) to $102.25, the highest level since Aug. 31. The surge in April futures last week pushed the front-month contract more than $5 above the cash index, which could limit followthrough buying, though bullish momentum may continue to fuel deferred contracts.
Weekend demand news... Turkey provisionally purchased 300,000 MT of optional origin corn.
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
- 10:00 a.m. Export Inspections — AMS
