First Thing Today | December 14, 2021

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Good morning!

Quiet overnight session... Corn, soybean and wheat futures are mildly weaker this morning as a quietly traded overnight session winds down. As of 6:30 a.m. CT, corn is trading around a penny lower, while soybeans and wheat are 1 to 3 cents lower. Front-month crude oil futures are around 25 cents higher and the U.S. dollar index is about 150 points lower this morning.

Consultant lowers Brazilian corn crop estimate, Paraguay soybean crop... Dry weather in southern Brazil continues to take a toll on the country’s first corn crop as it pollinates and fills. Rio Grande do Sul has been impacted most, but yield losses are also expected in Parana, Santa Catarina and Sao Paulo. As a result, Crop Consultant Dr. Michael Cordonnier cut his Brazilian corn crop forecast by 1 MMT to 116 MMT. He left his Brazilian soybean crop estimate at 144 MMT, noting the crop in southern Brazil “could still recuperate” with timely rains. Cordonnier left his Argentine crop estimates unchanged at 50 MMT for soybeans and 53 MMT for corn after weekend rains were more widespread than expected across the country. However, he lowered his estimate for Paraguay’s soybean crop by 1 MMT to 9.5 MMT amid the hot and dry conditions.

Biden, Manchin talk Monday, will confer again later this week... Sen. Joe Manchin (D-W.Va.) indicated yesterday that a significant amount of work remains to be done to earn his support for President Joe Biden's social spending and climate change bill dubbed Build Back Better (BBB). A lot still has to be done to meet Senate Majority Leader Chuck Schumer’s (D-N.Y.) deadline of completing a BBB deal before Christmas. Manchin spoke with Biden on Monday afternoon as the president tried to secure his support for the plan. But the senator is raising serious concerns, citing issues with the proposal's reliance on temporary programs and renewing concerns over inflation. As usual, Manchin’s remarks before and after his conversation with Biden gave something to all sides.

EPA publishes comment request on proposal to deny pending small refiner exemptions... EPA today published in the Federal Register a document seeking public comment on its proposal to deny all undecided/pending small refinery exemption (SRE) petitions under the Renewable Fuel Standard (RFS). The agency said its “thorough analysis” of the situation prompted the proposed decision, stating that even though SREs were allowed under the RFS, all refiners regardless of size “face the same costs to acquire RINs (Renewable Identification Numbers) regardless of whether the RINs are created through the act of blending renewable fuels or purchased on the open market.” Under the RFS, small refiners can petition EPA for an exemption from their RFS obligations if compliance would cause disproportionate economic harm (DEH). Besides the denial, EPA said it wants public comment on its proposed change in the approach to SRE eligibility based on the original statutory exemption and its findings on RIN cost passthrough. Comments on the proposed action are due Feb. 7. While EPA proposed to deny all pending/undecided SREs — 65 as of Nov. 18 covering the 2016 through 2021 compliance years — in its proposed RFS levels for 2020, 2021 and 2022, the agency repeatedly noted it was not clear whether there would be SREs granted or not.

Administration action on EV charging stations ramping up... A joint office will be established between the Department of Energy (DOE) and Department of Transportation (DOT) under an agreement to be signed today as the Biden administration pushes ahead to establish a national electric vehicle (EV) charging network under the $7.5 billion in funding included in the Bipartisan Infrastructure Package (BIP). A new Advisory Committee on Electric Vehicles will be set up in the first quarter of 2022. BIP included $5 billion in formula funding for states to help deploy a national charger network and $2.5 billion for communities and corridors in a competitive grant program for chargers. Guidance for states and cities is expected to come Feb. 11 for deploying EV charging stations with DOT expected to set standards for EV chargers on a national network by May 13. The effort is aimed at establishing a network of 500,000 EV chargers. There is also $3 billion in grants under BIP for battery minerals and refined minerals aimed at accelerating a North American battery supply chain and $3 billion in competitive grants aimed at building, retooling or expanding the manufacture of batteries and battery components and recycling facilities.

Trudeau insists there are a ‘number’ of solutions on EV tax credit issue... Canadian Prime Minister Justin Trudeau Monday indicated there are a “number of solutions” that Canada has suggested to the U.S. to rectify a brewing dispute over an electric vehicle (EV) tax credit in the Build Back Better (BBB) package. Trudeau said the government is “working very hard” with the U.S. to get officials to understand that the potential tax credit for EVs made in the U.S. by union workers is not good for either country. “There are a number of solutions we've put forward,” he stated. “One of them would be to align our incentives in Canada and in the United States to make sure that there was no slippage or no unfair advantages on one side or the other. We are happy to do that.” The less combative tone from Trudeau came after two top Canadian officials warned U.S. Senate leaders in a letter December 10 that Canada would pursue a case via the U.S.-Mexico-Canada Agreement (USMCA) if the provision were to become law and could impose retaliatory action on dairy and intellectual property protections.

Egypt, Russia could form joint grains trading company in Egypt... Egypt and Russia have discussed establishing a joint grains trading company in Egypt, according to Egyptian supply minister Ali Moselhy. The two countries also discussed the establishment of a logistic-free zone to store wheat in Egypt with an initial capacity of 1 MMT per year.

Russia blocks climate change as a threat to global peace... Russia wielded its veto power on the U.N.’s Security Council to thwart a resolution that would have identified climate change as a threat to global peace. India joined Russia in voting it down, against 12 countries who voted in favor; China abstained. Russian and Indian ambassadors argued that climate change should not be conflated with matters of war and peace.

China’s cotton production shrinks 3%... China's 2021 cotton output fell 3% to 5.73 MMT (26.32 million bales), the country’s National Bureau of Statistics (NBS) said. USDA forecasts China’s cotton crop at 26.75 million bales. NBS says planted acreage fell by 4.4% to 3.03 million hectares while yields increased slightly from last year.

Little change in CFAP 1, 2 payments... Payments under the Coronavirus Food Assistance Program 2 (CFAP 2) effort totaled $19.04 billion as of Dec. 12, including $14.22 billion in original CFAP 2 payments and $4.82 billion in top-up payments, little changed from the prior week. CFAP 1 payments are now at $11.75 billion as of Dec. 12, down slightly from the prior week’s total, as the level of original CFAP 1 payouts was trimmed to $10.56 billion from $10.58 billion the prior week, with top-up payments steady at $1.19 billion.

No pay cap on SMHPP... As we reported in “Evening Report” on Monday, USDA announced the Spot Market Hog Pandemic Program (SMHPP) to provide help to hog producers who sold animals through a negotiated sale from April 16, 2020, through Sept. 1, 2020. There will be a $54 payment per head up to 10,000 head of hogs, but importantly, there is no payment cap on the SMHPP aid.

Choice beef still sputtering... Select boxed beef prices firmed $1.40 on Monday, but Choice boxes fell another $1.32 to $263.22, the lowest price since early April. Sluggish retailer demand is expected to continue through the holidays, as they are facing resistance from consumers to record retail prices. Cash cattle prices are also expected to soften through year-end amid lighter packer demand.  

Cash hog market firms again... The average national direct cash hog price firmed 86 cents on Monday and the CME lean hog index is up another 60 cents today. That marks the seventh time in the past nine days the cash index has risen, providing further indications a seasonal low has likely been posted. February lean hog futures, which take over lead-month status later today, ended Monday at an $8.57 premium to today’s cash index quote.

Overnight demand news... Japan is seeking 228,783 MT of U.S. and Canadian wheat in its weekly tender. The Philippines tendered to purchase 120,000 MT of feed wheat from the U.S., Australia, Canada, Europe or the Black Sea region. Iran tendered to buy around 180,000 MT of milling wheat.

Today’s reports

 

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