First Thing Today | December 15, 2021

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Good morning!

Wheat and corn lower, soybeans slightly firmer this morning... Selling in the wheat market overnight pulled corn lower, while soybeans were supported by strength in soymeal. As of 6:30 a.m. CT, winter wheat futures are 7 to 8 cents lower, spring wheat is mostly 4 to 5 cents lower and corn is fractionally to a penny lower. Soybeans are 2 to 4 cents higher on support from $3 to $4 gains in soymeal, while soyoil is around 60 points lower. Front-month crude oil futures are around $1 lower and the U.S. dollar index is nearly 100 points lower this morning.

Markets await Fed’s decision on tapering, guidance on interest rates... At the conclusion of the two-day Federal Open Market Committee meeting this afternoon, the Fed is expected to announce an accelerated pace for tapering its monthly asset purchases that began late last month. Economists and investors will also monitor Fed Chair Jerome Powell’s comments and the so-called dot plot projecting the future path of interest rate increases to combat surging inflation, which is also expected to be pulled forward.

Senate, House Democrats approve lifting the debt limit by $2.5 trillion... The largest increase in the federal government’s borrowing authority in recent history passed on a party-line vote in the Senate and a near party-line vote in the House. One Senate Republican, Sen. Cynthia Lummis of Wyoming, was absent, and the rest of the Republican conference opposed the measure. In the House, the bill drew only one Republican vote, from Illinois Rep. Adam Kinzinger. The largest previous debt limit increase was in 2011 as part of the Budget Control Act, when Congress lifted the cap by $2.1 trillion. This would be a smaller percentage boost than the 2011 law or a 2010 measure that raised the limit by $1.9 trillion, each of which lifted the borrowing cap by roughly 15%. This new debt limit is aimed at allowing the U.S. government to borrow money through the 2022 midterm elections and into early 2023.

Record NOPA crush expected for November... The National Oilseed Processors Association (NOPA) is expected to report 181.6 million bu. of soybeans were crushed in November, according to a Reuters survey. If realized, that would be a record for the month and the fifth largest monthly crush total ever. Soyoil stocks at the end of November are expected to come in at 1.903 billion lbs., which would be the fifth consecutive monthly increase and the largest level since April 2020.

Russia could reduce wheat export quota... Russia is considering reducing its looming wheat export quota slightly from a previously planned 9 MMT, four sources familiar with discussions told Reuters. Russia has said that it would set grain and wheat export quotas for Feb. 15 to June 30 to secure domestic supply in the face of high food inflation.

Another ethanol legislative proposal that will not likely clear Congress... EPA would be prohibited from reducing the U.S. biofuel-blending mandate once annual rules are final under bipartisan legislation by Sens. Amy Klobuchar (D-Minn.) and Chuck Grassley (R-Iowa). The measure would prevent the Biden administration from retroactively reducing 2020 or future finalized Renewable Volume Obligation levels, Klobuchar said in a statement. The bill is unlikely to pass in the current Congress and follows EPA proposing a cut to biofuel-blending quotas retroactively for 2020.

Xi, Putin hold video conference... Chinese President Xi Jinping told Russian President Vladimir Putin that relations between the two countries were not an alliance but at a better level than that, Kremlin foreign policy aide Yuri Ushakov said. “He wanted to emphasize the special nature of the existing relations, said that although they are not allied, their effectiveness even exceeds this level,” Ushakov said. “Such a figurative expression very accurately reflects the essence of what is happening now in relations between our two countries.” Xi told Putin, “You have firmly supported China in defending its core interests and opposed attempts to divide China and Russia, I highly commend this,” adding that he’s willing to roll out new plans for cooperation in various areas. Putin and Xi discussed grain sales in some detail, and also gas market, with talks expected to continue on these issues.

China factory activity rises, but retail sales disappoint... China’s factory production rose 3.8% in November from a year earlier, beating expectations for a 3.6% rise and accelerating from a 3.5% increase in October. Retail sales, however, rose 3.9% in November from a year earlier, below the 4.6% growth expected and October's 4.9% rise.

Iowa farmland prices explode 29% higher to a record... The average value of an acre of Iowa farmland skyrocketed 29% in 2021 to $9,751, according to Iowa State University’s (ISU) annual survey. The nominal value of an acre of farmland is now higher than at any point since ISU began surveying land prices in 1941 – 12% higher than the previous peak in 2013. But the current value in inflation-adjusted terms is still lower than those for 2012 and 2013. ISU associate professor of economics Wendong Zhang said, “The increase this year is in part due to much stronger commodity prices thanks to higher exports, stronger than expected crop yields, and strong ad hoc Covid-19 related government payments.” Zhang also noted, “Inflation is driving some investors to consider farmland as an alternative investment asset.” For more, click here.

China to levy higher tariffs on pork imports in 2022... China will raise import tariffs on most pork products next year, the finance ministry said amid the sharp increase in domestic production. Tariffs for most favored nations, including the U.S., will return to 12% on Jan. 1, from 8% currently, according to a ministry statement. China lowered its tariffs on frozen pork in 2020 from 12% to 8% as the country faced soaring domestic meat prices.

China clears some beef imports from Brazil... China's customs administration said it will allow imports of some beef products from Brazil to resume, lifting a ban imposed early in September due to two atypical cases of bovine spongiform encephalopathy in Brazil. Beijing has resumed imports of Brazilian boneless beef products from cattle less than 30 months old.

Light cash cattle trade at lower prices... Cash cattle trade started around $138 in Kansas on Tuesday, down around $2 from last week’s activity. The initial sales were reportedly for delivery after the holidays. Most feedlots passed on the lower prices since it was early in the week, but it seems increasingly likely cash trade will be lower than last week’s $139.69 average price. Meanwhile, wholesale beef prices continued to tumble, with Choice down $2.50 and Select $4.84 lower Tuesday.

Direct cash hogs rise again... The CME lean hog index is down 8 cents today, but the national direct cash hog price firmed $1.95 on Tuesday. The cash hog market showing the bulk of the seasonal pressure has likely passed, and a low might already be in place. February lean hogs, the new lead-month contract, finished yesterday at a $7.975 premium to today’s cash index.

Overnight demand news... Algeria purchased around 690,000 MT of optional origin milling wheat – likely to be sourced from Germany, the Baltic Sea region, the Black Sea region and Argentina. Japan received no offers in its tender to buy 80,000 MT of feed wheat and 100,000 MT of feed barley.

Today’s reports

 

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