First Thing Today | March 31, 2022

Good morning!

Quiet overnight trade ahead of USDA reports... Corn, soybean and wheat futures held in narrow ranges in quiet, two-sided trade overnight. As of 6:30 a.m. CT, old-crop corn futures are narrowly mixed while new-crop corn is around 4 cents higher, soybeans are trading fractionally on either side of unchanged, SRW wheat futures are 1 to 2 cents higher, HRW is fractionally mixed and spring wheat is 6 to 7 cents higher. Front-month crude oil futures are down around $6 and the U.S. dollar index is up nearly 400 points this morning.

Key acreage, grain stocks data out later this morning... USDA will release its Prospective Plantings and Grain Stocks Reports at 11 a.m. CT. March planting intentions received much of the pre-report hype, but March 1 grain stocks could end up being the data that moves markets. Based on the average pre-report estimates from a Reuters survey, corn acres are expected to decline about 1.4 million acres to 92.0 million acres and soybean area is likely to expand by about 1.5 million acres to 88.7 million acres. But the range of estimates is wide for both. Traders also expect all wheat acres to rise to nearly 47.8 million acres, including 34.4 million acres of winter wheat, 11.8 million acres of other spring wheat and 1.7 million acres of durum. Cotton seedings are expected to decline modestly from last year to 12.0 million acres. Traders expect March 1 stocks at 7.877 billion bu. for corn, 1.902 billion bu. for soybeans and 1.045 billion bu. for wheat, but the range of estimates is wide for all three.

Weekly Export Sales Report out this morning… For the week ended March 24, traders expect:

Reuters: Biden administration looking at lifting summer E15 restrictions... The Biden administration is considering temporarily removing restrictions on summer sales of E15 gasoline as a way to lower fuel costs for U.S. consumers, three sources familiar with the matter told Reuters. EPA said it could not comment on whether it was considering the move, but said it was “considering a range of options across the administration to help mitigate impacts from Russia’s actions on American consumers.” The Trump administration had put forth rules to allow year-round E15 sales, but it was struck down in court. The ethanol industry has fought to lift summertime restrictions on sales of the higher-ethanol fuel, though it’s unlikely a removal of restrictions would have much impact on ethanol demand or fuel prices.

Biden preparing another oil release from SPR... President Joe Biden is expected to deliver remarks today that could total 180 million barrels of oil being released from the Strategic Petroleum Reserve (SPR), Bloomberg reported. The administration previously released 50 million barrels from the SPR in November 2021 and another 30 million barrels earlier this month after Russia’s invasion of Ukraine. But the releases have not had a significant downward impact on gasoline prices.

Drought-hit California wants to pay farmers to cut crop plantings... California, impacted again by a major drought, proposed a $2.9 billion plan to pay farmers to reduce some of their plantings to better manage water resources. The voluntary agreement negotiated between government officials and some of the state’s major water agencies is also aimed at protecting salmon and other wildlife and ecosystems. The agreement could leave as much as 35,000 acres of rice unplanted in the northern Central Valley growing region. “Every crop in that region from rice and tomatoes and grapes to irrigated pasture for livestock and tree nuts like almonds, pistachios and walnuts are going to be affected by this,” said Mike Wade, executive director of the California Farm Water Coalition in Sacramento. Rice is more flexible than some other crops for fallowing because it’s not required to be irrigated every year, said Wade. California produces all of America’s domestically grown sushi rice, he said.

France will allow farmers to cultivate fallow land... French farmers can plant spring crops including proteins, oilseeds and grains, or use the area for grazing on land they had declared fallow for the 2022 growing season, according to the country’s ag ministry. Fallow land represents about 741,000 acres in France, about 1% of total agricultural area. The objective is to aid European food and feed supplies, as well as global reserves, particularly for grain import-dependent countries in Mediterranean and Africa.

Ukraine has ample grain stocks to export, but they are mostly blocked... Ukraine has 13 MMT of corn and 3.8 MMT of wheat to export, according to the country’s deputy ag minister. But the country can’t move nearly that volume because ports are shuttered or blocked by the Russian invasion. As we’ve reported, Ukraine is shipping some grains by rail and truck, but that represents a small fraction of its normal export activity from seaports. As we reported in “Evening Report” on Wednesday, Ukraine is discussing shipping its agricultural exports from the Romanian Black Sea port of Constanta.  

Cofco wins concession for large grains terminal in Brazil port... Cofco International Brazil SA, a subsidiary of China’s Cofco International, won a 25-year concession for a new agricultural solid bulk terminal in Brazil’s Santos Port. The company paid R$10 million ($2.1 million) for the grant and will invest R$764 million in the project, Santos Port Authority said in a statement. Cofco must also pay R$3.7 million monthly and R$5.63 per metric ton moved, which can total to R$100 million per year in revenue for the port. The terminal will expand Cofco’s own port capacity in Brazil to 14 MMT per year and “support company plans to increase exports from the country,” Cofco said. Cofco currently operates two port terminals for grain and oilseeds, one processing plant and 19 storage facilities scattered around the country, with some connected by railroad with Santos. The terminal will be operational in 2026 and will run for 25 years, with potential extension to 70 years, according to Cofco.

China pumps more money into winter wheat crop... China has allocated another 2 billion yuan ($315 million) to facilitate the growth of its winter wheat crop, the country’s finance ministry said. China has allocated 5 billion yuan in total from its central finance system to stabilize winter wheat output this crop year. The ministry says the money will be used to help make the crop stronger in 11 main production provinces, without providing any specifics.

China’s manufacturing sector contracts in March... China’s official purchasing managers index (PMI) fell to 49.5 in March 2022 from 50.2 in the prior month. This was the first contraction in factory activity since last October, reflecting the impact of widespread Covid-19 outbreaks in key cities, including Shanghai and Shenzen. The non-manufacturing PMI fell to 48.4, a seven-month low. Beijing will roll out policies to stabilize the economy as soon as possible, state media reported, as downward pressure increased. The Caixin/Markit manufacturing PMI will be released tonight and is also expected to show contraction in China’s smaller, privately owned factories.

Bird flu continues to spread, threatening U.S. chicken exports... Highly pathogenic avian influenza (HPAI) was discovered at a commercial poultry farm in Johnston County, North Carolina, and in backyard flocks in Massachusetts, North Dakota, Ohio and Wyoming, USDA said. Since mid-January, HPAI has been found in 23 states in flocks totaling nearly 17 million birds. Countries have been temporarily banning imports from U.S. states where bird flu is present as a result, according to USDA. Top buyers such as Mexico, China and Cuba could bring in less poultry following the discovery in North Carolina, a major producer of chicken and turkeys, said Jim Sumner, president of the USA Poultry & Egg Export Council. Under the Organization for Animal Health (OIE), member countries are called on to not impose bans on international trade of poultry commodities in response to notifications in non-poultry or backyard flocks. However, some have opted to make such restrictions.

Bullish H&P Report... USDA’s Hogs & Pigs Report Wednesday afternoon showed herd contraction was greater than expected and producers are indicating no signs they will expand anytime soon. USDA estimated the U.S. hog herd at 72.2 million head as of March 1, down 1.7 million head (2.3%) from year-ago and 837,000 head less than the average pre-report estimate implied. The market hog inventory declined 2.4% and the breeding herd dropped 1.9%. That was the smallest March hog herd and market hog inventory since 2018. The breeding herd was the smallest since 2017. The report data should trigger a strong bullish price response this morning.

Light cash cattle trade at steady prices... Some feedlots in the Southern Plains moved cattle at $138 prices on Wednesday, which was steady with last week’s trade in the region. But most feedlots passed on those prices in hopes of higher bids. Cash trade hadn’t started in the northern dressed market, with most feedlots looking for at least $1 higher bids.

Overnight demand news... Algeria purchased around 600,000 MT of optional origin milling wheat. Saudi Arabia tendered to buy 355,000 MT of optional origin wheat.

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

• 7:30 a.m. Weekly Export Sales — FAS
• 11:00 a.m. Grain Stocks — NASS
• 11:00 a.m. Prospective Plantings — NASS
• 11:00 a.m. Rice Stocks — NASS
• 2:00 p.m. Rice Yearbook — ERS
• 2:00 p.m. Agricultural Prices — NASS