First Thing Today | December 13, 2021

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Good morning!

Price pressure to open the week... Corn, soybean and wheat futures are trading near session lows this morning, led lower by spring wheat contracts. As of 6:30 a.m. CT, corn futures are 3 to 4 cents lower, soybeans are mostly 6 to 9 cents lower and wheat futures are 8 to 11 cents lower. Front-month crude oil futures are around 65 cents lower and the U.S. dollar index is around 200 points higher this morning.

Vilsack provides perspective on EPA’s RFS announcement... While higher mandated biofuels blending volumes are on the table for 2022, EPA proposed retroactively reducing the volumes that oil refineries were required to blend into the nation’s fuel supply for 2020. “It’s hard for me to understand why these policymakers didn’t make any reference to the impact that the pandemic had on transportation… We were all hunkered down. So as a result, less fuel was used,” Vilsack said Friday. “What the EPA has done is, it sent a strong message about the validity of the rule and the validity of the standard by saying this is the real world. This is what really has happened by setting these numbers.” Vilsack also said the agency’s decision to raise 2022 levels to the “highest volume ever” sent a “very strong message about the growth potential of this industry.”

EV charging action plan coming... Vice President Kamala Harris, Energy Secretary Jennifer Granholm and Climate Adviser Gina McCarthy will travel to Maryland today to announce an “electric vehicle charging action plan.” Meanwhile, lithium prices are rising at their fastest pace in years, setting off a race to secure supplies and fueling worries about long-term shortages of a vital ingredient in the rechargeable batteries that power everything from EVs to smartphones. An index of lithium prices from research firm and price provider Benchmark Mineral Intelligence doubled between May and November and is up some 240% for the year. Driving the runup are bets on continued scarcity. Demand is multiplying as auto makers ramp up sales of EVs. Supply, meanwhile, has been constrained by limited investment in new projects. The surge in lithium prices suggests it may take longer for EVs to become cost-competitive with gas-powered cars. There are other reasons, but most involve the role of critical minerals of which the U.S. relies on imports for nearly all clean-energy minerals. An EV requires more minerals (456 lbs.) vs. the average gas-powered car (75 lbs.). Bottom line: The next super supply crunch will be for nickel, lithium, and other must-have minerals.

White House notes ‘cost cutting’ efforts... In a memo released Saturday, White House officials defended the administration’s “swift and decisive action to combat high prices, ease inflationary pressures and make sure America’s families can put food on the table,” citing the investments in small meat processors and federal grants to help farm goods move in and out of the nation’s congested ports.

Yellen instructing financial regulators to reduce risks tied to climate change... The Wall Street Journal reports Treasury Secretary Janet Yellen is leaning on agencies such as the Federal Reserve and the Securities and Exchange Commission to respond to what she says is the urgent threat posed by climate change to the economy and financial assets. That includes a portfolio of mortgages in low-lying coastal areas or an insurance company’s backing of drought-sensitive farm land.

The week ahead in Washington... Focus remains on the Senate in a push to pass the Build Back Better (BBB)/social spending measure. Senate leadership’s timeline for the BBB proposal is just before Christmas, according to Majority Leader Chuck Schumer (D-N.Y.). But as most should know by now, the “official” timekeeper is centrist Sen. Joe Manchin (D-W.Va.), who keeps calling for a “strategic pause” for the vote, delaying it into 2022. Odds are now rising for that possibility. President Joe Biden early this week will meet with Manchin at the White House. On the economic front, the Fed holds its two-day monetary policy meeting Tuesday and Wednesday. It’s widely anticipated the Fed could speed up the end of its bond-buying program and signal that it expects to start hiking interest rates in 2022.

Biden reiterates his stance that BBB will ease inflation... Biden told CNN the U.S. is at the “peak” of the inflation crisis and we’ll see that change “sooner, quicker, more rapidly than most people think.” Said Biden: “Every other aspect of the economy is racing ahead. It’s doing incredibly well. We've never had this kinda growth in 60 years. But inflation is affecting people’s lives. But if you take a look at it, if and when, and God willing we get the Build Back Better proposal… what’s inflation all about for people? They are paying more for things they need than they had to pay before. That’s the bottom line. Now, if they're paying considerably less for childcare, considerably less for health care, considerably less for insulin, considerably less and go down the list, being able to take care of their parents, all of the things that are in the Build Back Better plan. The reason why economists think it is going to in fact diminish the impact on inflation is because it’s reducing costs for ordinary people.”

Signup process open for biofuel producer payments... USDA is accepting applications for the Biofuel Producer Program (BPP) that was announced last week to provide $700 million in payments to biofuel producers. A Federal Register notice of funding availability was published today and indicated the aid will come through USDA’s Rural Business-Cooperative Service under USDA Rural Development. The payments will be based upon the volume of market loss the biofuel producer experienced in calendar year 2020. The producer's volume of market loss will be calculated by comparing the amount of fuel (gallons of eligible biofuel) produced in calendar 2020 to the amount of fuel (gallons of eligible biofuel) produced in calendar year 2019. Payments will be based on a fixed amount per gallon for all eligible producers. USDA may limit the payment fixed amount per gallon, the notice said. Payments will not be issued until the signup period has ended.

U.S. wants to sign a ‘very powerful’ economic framework agreement with Asian nations... The coming accord will focus on areas including coordination on supply chains, export controls and standards for artificial intelligence. The timeline is sometime next year, Commerce Secretary Gina Raimondo said. “It’s a priority for the president,” Raimondo said of deepening U.S. engagement with Asia. “America didn’t show up in that region for four years,” she said, alluding to the Trump administration’s record. Raimondo said that her trip to Asia last month was designed to “assess appetite” for economic dialog, under the condition that President Joe Biden’s team isn’t planning to take up traditional trade talks. She underscored that rejoining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) “as presented” is off the table. The framework will be “flexible,” with some countries perhaps not signing up to all of the elements, Raimondo said. She said the aim is to engage not just developed nations such as Japan, Singapore, Australia and New Zealand but also emerging economies such as Malaysia, Vietnam and Thailand. She said the agreement may not “culminate” in something that would require approval by the U.S. Congress — which is needed for traditional trade agreements.

China to ease energy use restrictions... China will loosen restrictions on energy consumption in order to ensure environmental and climate targets do not erode future economic growth, according to a policy document used after its economic planning meeting last week. The country will move toward capping carbon dioxide emissions from overall energy use to meet its environmental goals, rather than setting energy consumption targets. To help guarantee energy supplies, newly added renewable capacity and “feedstock energy” would now be exempt from any energy consumption cap, without giving details.

USDA publishes rule for supplemental DMC payments as signup starts... Producers can start to enroll in the Dairy Margin Coverage (DMC) program for 2022 as of today and the supplemental DMC payments that were approved as part of Covid aid. The signup effort runs through Feb. 18. The final rule on the supplemental DMC plan was published in today’s Federal Register in a package that covered several different program tweaks. The only portion that is open for public comment is relative to the Oriental Fruit Fly (OFF) Program as authorized in the Consolidated Appropriations Act of 2019. Comments there are due by Feb. 11.

Waiting for a low in wholesale beef prices... Packers pulled back on cash cattle bids last week after two months of strong gains. That caused cattle futures to pause. With holiday slaughter schedules for the two weeks after this, it’s unlikely packers will raise cash cattle bids. If the wholesale beef market can’t find a bottom, funds may more actively liquidate long positions in cattle futures.  

More signs of a low in cash hog market... The CME lean hog index is up 63 cents today. While that’s not a large gain, it’s the biggest advance since the cash market first showed signs of bottoming in late November, giving some further clues the cash index is in the process of marking a seasonal low. The cash index has now gained six out of the past eight days.  

Weekend demand news... Algeria tendered to buy a nominal 50,000 MT of optional origin milling wheat, though it often purchases more than the tendered amount. Jordan tendered to buy 120,000 MT of optional origin milling wheat.

Today’s reports

 

Latest News

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Report Snapshot: USDA shows lighter-than-expected corn acres and stocks

USDA reported corn acres of 90.036 million acres for 2024 and March 1 stocks of 8.347 billion bu., both well below trade estimates. Soybean acres were slightly lower than expectations, while stocks were higher.

Timeline and Issues in Getting Baltimore Port Channel Reopened
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Corn, soybeans and wheat traded in tight ranges overnight, with grains showing relative strength into the break.

Weekly wheat sales exceed expectations, while soybeans miss
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First Thing Today | March 28, 2024
First Thing Today | March 28, 2024

Corn, soybeans and wheat traded in narrow ranges during the overnight session ahead of USDA’s reports later this morning.