First Thing Today | April 6, 2022
Grain, soy markets decline overnight... Grain and soy markets faced price pressure overnight. As of 6:30 a.m. CT, corn is trading 3 to 6 cents lower near its session low. Soybeans are 1 to 4 cents lower, winter wheat is mostly 9 to 13 cents lower and spring wheat is 8 to 12 cents lower. Front-month U.S. crude oil futures are near unchanged after earlier pushing above $103 and the U.S. dollar index is near unchanged.
Russia/Ukraine update: Fighting and Russian airstrikes continue in the besieged eastern city of Mariupol, where aid agencies say the humanitarian crisis is worsening as residents have no access to water, power, heating or communication. Meanwhile, The U.S., EU and G7 are coordinating a fresh round of sanctions on Russia, including a U.S. ban on investment in the country and an EU ban on coal imports. Announcements are expected today.
FOMC minutes expected to show monetary policy details... FOMC minutes released this afternoon are expected to shed light how quickly the central bank plans to raise rates and reduce its bond holdings. On Tuesday, Federal Reserve Governor Lael Brainard, who is awaiting confirmation as vice chair, said that the Fed “will continue tightening monetary policy methodically through a series of interest rate increases and by starting to reduce the balance sheet at a rapid pace as soon as our May meeting.” She said that “given the recovery has been stronger and faster,” the balance sheet will shrink much more quickly this time than when the Fed attempted quantitative tightening in 2017 and 2018. There will be “significantly larger caps and a much shorter period to phase in the maximum caps,” she said, adding “it is of paramount importance to get inflation down.” Money-market traders bet on the sharpest Fed tightening in almost three decades, with pricing suggesting 250 basis points of hikes in 2022.
As the Wall Street Journal notes, Brainard’s remarks “were notable not only because she is one of Fed Chairman Jerome Powell’s top lieutenants in shaping the central bank’s monetary-policy agenda but also because she had been one of the most vocal advocates last year warning against prematurely pulling back its stimulus.”
Eurozone PPI increases... Eurozone reported its producer price index (PPI) for February up a shocking 31.4%, year-on-year. Traders expected a 31.5% increase. In January, the producer price index had an annual 30.6% increase. Excluding food and energy, the PPI was up “only” 12.2% from last February. Energy costs surged 87.2% followed by intermediate goods (20.8%), durable consumer goods (7.2%), non-durable consumer goods (6.8%) and capital goods (5.9%). On a monthly basis, producer prices rose 1.1%, after a 5.1% jump in January.
CRP enrollment acres down a net 1.4 million acres... During a call with reporters from Mexico on Tuesday, USDA Secretary Tom Vilsack provided more details regarding the general Conservation Reserve Program (CRP) signup that ended March 11. He said only 1.8 million of the 4 million acres in expiring contracts will be re-enrolled in the program as 52% to 56% of the maturing acres were not offered in the general signup. He also said that new contracts on around 800,000 acres would be offered. That would be a net loss of about 1.4 million total CRP acres, which would mesh with Vilsack stating that there would be a net reduction in CRP of around 1.5 million acres. “We got a few new contracts but nowhere near the number of contracts that did not re-up,” Vilsack said, adding the data proved there was no reason for him to open CRP to emergency cropping. “The market basically responds to signals and farmers make the decision,” he said.
Russia to limit fertilizer exports until spring... Russia plans to continue setting quotas for fertilizer exports during the next winter grain planting, due this autumn, and in spring 2023 planting, an official said on Tuesday. In November, Russia limited exports of nitrogen fertilizers and complex nitrogen-containing fertilizers with quotas for Dec 1-May 31 to help curb any further increase in food prices amid higher gas prices.
"In addition to (availability of) seeds, the key to the success of the sowing campaign is the availability of mineral fertilizers. In the right quantities and at affordable prices," Deputy Prime Minister Viktoria Abramchenko said on social media.
Commodities volatility is here to stay... Wild swings in commodities from wheat to crude oil are here to stay, with global supply chains getting reassessed in the wake of Russia’s invasion of Ukraine, according to Gregory Broussard, global head of financial trading for Cargill Inc.’s risk management unit. An economic ostracization of Russia is likely to persist even if the war ends, prompting reconsideration of how critical supplies like grain, fertilizer and fuel are sourced and produced, Broussard told Bloomberg. Countries will likely start hoarding commodities as a caution. “We will exit this war from the supply side tighter than we entered it,” he said. “When people start throwing sanctions around, they don’t just dissipate overnight. It has implications for routing of raw materials.” Bottom line, according to Broussard: “Everyone is going to look at how they source raw materials, if they can, in fact, produce those raw materials themselves such as not to have to deal with a player like Russia.”
Vilsack: Limited bird flu impact on U.S. poultry exports... USDA Secretary Tom Vilsack said he doesn’t expect major export losses for U.S. poultry producers from a bird flu outbreak that has spread to 24 states. While the outbreak has prompted more than 80 countries to curb imported U.S. products, Vilsack said the restrictions have been limited to poultry raised in affected counties or states. “There has not been an effort to do a nationwide restriction,” he said in a conference call with reporters. “We haven’t seen that, which is a positive indication.”
Ample rain fuels Australian wheat optimism... Plentiful rains that have boosted soil moisture across Australia boost the outlook of a potential bumper crop as planting starts. Many farmers are expected to keep their regular crop rotations. However, USDA forecasts Australia will harvest its second-largest canola crop in 2022-23 as farmers increase acres to take advantage of higher prices. Australian wheat production might be limited as farmers might cut back on fertilizer usage. Australia is also coming off a record crop. USDA predicts the country will export 27.5 MMT of wheat in the 2021-22 year.
Kazakhstan restricts wheat, flour exports... Kazakhstan will limit wheat exports to 1 MMT and wheat flour exports to 300,000 MT until June 15. The limits would take effect within two weeks, according to Agriculture Minister Yerbol Karashukeyev. Exporters will also be required to sell 100,000 MT of wheat and 30,000 MT of flour on the domestic market "at a low price." The country usually exports about 500,000 MTof wheat and 100,000-120,000 MT of flour per month at this time of year.
Tunisia hikes local wheat prices... Tunisia is was raising the purchase price of wheat and barley from local farmers to encourage production and achieve food security. The agriculture ministry said the price for durum was increasing to 130 dinars ($43.59) per 100 kg from 87 dinars ($29.29), soft wheat will fetch 100 dinars ($29.29), per quintal from 67 ($22.56) dinars, and barley will be at 80 dinars (26.93) per quintal. The agriculture ministry said it would work to reduce crop losses during harvest, transport and collection, and reduce fires, to reach self-sufficiency in hard wheat next season. Tunisia will plant an additional 800,000 hectares dedicated to durum wheat and will focus on providing seeds that increase productivity. The country has an average wheat harvest of about 1.5 MMT and consumes around 3.4 MMT per year.
Sunflower group expects more U.S. acres... National Sunflower Association expects U.S. farmers to plant 20% more sunflower acres this year. Last week, USDA estimated sunflower acreage would be up 10% in 2022. The group is fielding calls from first-time sunflower farmers asking for information about planting the crop. The cash market price for new-crop sunflowers is now almost $34 per 100 pounds, surpassing the prior all-time high of $30.50 in 2008. Old crop prices are also nearing the record reached in 2011.
Ohio, Tennessee seek to revive challenge WOTUS rule... Ohio and Tennessee want the Sixth Circuit to reverse a lower court’s decision and allow them to proceed with their challenge to an Obama-era Clean Water Act rule, according to a filing on Tuesday in the appeals court. The states sued to block the “waters of the United States” rule, known as WOTUS, issued in 2015. The rule redefined which waters qualify for federal protections under the CWA.
Alternative jet fuel incentive sought... United Airlines CEO Scott Kirby urged congressional leaders to establish a new tax credit for blenders of low-carbon sustainable aviation fuel, touting it as an important tool to combat climate change and insulate airlines from volatility in oil markets. In a Tuesday letter, Kirby said high costs compared to conventional fossil fuels are a major barrier for the production and use of low-carbon fuel by airlines. “Neither United nor the broader industry can do this on its own,” Kirby said. “Successful development of decarbonization technologies — such as sustainable aviation fuel (SAF) and carbon removal — urgently requires support from policymakers.” Kirby pointed to the Sustainable Skies Act — introduced in the House (HR 3440) by Rep. Brad Schneider (D-Ill.) and the Senate version (S 2263) from Sen. Sherrod Brown (D-Ohio) — as a model for what the company wants.
Africa faces food-security crisis... A quarter of Africa’s population is facing a food-security crisis driven by severe drought, raging wars and a rise in world food prices caused by Russia’s invasion of Ukraine, the International Committee of the Red Cross warned Tuesday. Some 346 million people, from Mauritania in the west to the Horn of Africa in the east, are affected by food insecurity, Dominik Stillhart, the agency’s global operations director, told reporters in Nairobi. Russia and Ukraine were major grain suppliers before the war, and the conflict is causing pain across the developing world, spurring price shocks, constraining imports of basic commodities and causing food shortages, with poorer nations in Africa especially affected.
Wholesale beef trade strengthens... Wholesale beef prices firmed $3.49 for Choice boxes and $1.20 for Select on Tuesday. Just as importantly, movement improved to 123 loads, signaling retailers may be starting to more actively acquire beef for end-of-Lent and spring features. But money flow will be more important to price action in cattle futures than wholesale beef trade.
Cash hog fundamentals weaken... The CME lean hog index is down another 75 cents today, marking the fourth straight daily decline and a $2 drop over that period. But April hogs fell at a sharper clip yesterday, extending the lead contract’s discount to today’s cash index (as of April 2) to nearly $4. Besides the falling cash index, the pork cutout value dropped $2.75 yesterday. Despite weakening cash fundamentals, speculative money flow will remain the key to price action in hog futures.
Overnight demand news... Exporters reported no tenders or sales
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
- 9:30 a.m. Weekly Ethanol Production — EIA
- 10:00 am Livestock and Meat International Trade Data — ERS
- 2:00 pm U.S. Agricultural Trade Data Update — ERS
- 2:00 pm Broiler Hatchery — NASS
