First Thing Today | December 23, 2021

Good morning!

Light pre-holiday trade overnight... Grain and soy futures posted light, two-sided trade overnight. As of 6:30 a.m. CT, corn is trading fractionally higher, soybeans are 2 to 3 cents lower, SRW wheat is 3 to 5 cents lower, HRW wheat is narrowly mixed and spring wheat futures are around 3 cents higher. Front-month crude oil futures are just above unchanged, while the U.S. dollar index is around 100 points higher.

Merry Christmas from Pro Farmer... Grain and livestock markets will observe normal trading hours today. Markets and government offices are closed on Friday for the Christmas holiday, so there will be no Pro Farmer market reports. We’ll resume our normal market commentary on Monday, Dec. 27. May the Christmas spirit fill your hearts.

Weekly Export Sales Report out this morning… For the week ended Dec. 16, traders expect:

Summers issues economic warning... Former Treasury Secretary Lawrence Summers warned of a testing period for the U.S. economy in the coming years, with the risk of recession followed by stagnation. In an interview with the Bloomberg Economics Stephanomics podcast, Summers said the Federal Reserve was late to spot the dangers of inflation and that delayed action to cool prices could potentially tip the economy into a slump. “If I thought we could sustainably run the economy in a red-hot way, that would be a wonderful thing, but the consequence – and this is the excruciating lesson we learned in the 1970s – of an overheating economy is not merely elevated inflation, but constantly rising inflation,” said Summers, a paid contributor to Bloomberg and a professor at Harvard University. “That’s why my fear is that we are already reaching a point where it will be challenging to reduce inflation without giving rise to recession.”

Ukraine grain traders: No need to curb wheat exports... Ukraine has enough wheat to ensure its domestic food needs and there is no need to limit exports, Ukrainian grain traders association UGA said. As we reported in “Evening Report” yesterday, the Ukrainian government will reportedly decide whether to limit milling wheat exports in mid-January. “There are no grounds for possible restrictions on wheat exports,” UGA said, noting the country’s shipments usually slow during the second half of the marketing year. It also said wheat export restrictions could encourage farmers to reduce the area sown to wheat for harvest next year.

Putin held his annual press conference today... Russian President Vladimir Putin made no mention of the threat of military action as he did earlier this week but said the Kremlin will do what it needs to ensure Russia’s security. Talks between the U.S. and Russia are set to begin early in the new year, Foreign Minister Sergei Lavrov said on Wednesday. Putin praised what he described as a “positive” U.S. response to the Kremlin’s demands for legally binding security guarantees to defuse the stand-off over Ukraine. He also lauded Russia’s central bank, saying rate hikes helped avert a Turkey-style crisis. Russia now has 122,000 troops within 120 miles of the Ukraine border, according to Ukraine’s Security and Defense Council. Satellite images show tanks, artillery and air-defense systems have been moved to border regions near Ukraine since November, according to defense-intelligence firm Janes.

Europe’s energy crunch to get worse... Supplies of natural gas are tight and there is growing doubt about reserve fuel stocks. Blackouts are possible, and factories may be ordered to cut their gas use to ensure households can stay warm, reports note. Low volumes of gas from Russia have pushed prices higher, while tensions over Ukraine make it unlikely the giant Nord Stream 2 pipeline from Russia to Germany will open anytime soon and bring relief. Analysts forecast that British consumers, who have been protected by price ceilings, could see their energy bills rise more than 50% when adjustments are announced early next year. European natural gas prices have doubled this month and are roughly 15 times what gas is selling for in the United States. Electrical power prices are also soaring: In Britain, steady power was trading on Tuesday for about 340 pounds (around $450) per megawatt-hour — about three times the average price of electricity over the year.

Granholm pushing oil executives to boost production... Energy Secretary Jennifer Granholm has been pushing oil executives to boost production to help lower gas prices, but the climate-conscious Biden administration is running into an industry little inclined to suddenly do it favors, the Wall Street Journal reports. Those execs “have made few promises about raising output… and explained that it may be months before higher oil prices lead to resurgent U.S. production.” The administration argues that its long-term energy transition plans don’t mean the industry can’t ramp up right now. But oil companies also face business constraints.

Key livestock markets out this afternoon... USDA will release its monthly Cattle on Feed and quarterly Hogs & Pigs reports at 2 p.m. CT – after markets are closed. Traders expect the Cattle on Feed Report to show the Dec. 1 feedlot inventory at 100%, placements at 103.2% and marketings at 104.4% of year-ago levels. The Hogs & Pigs Report is expected to show the Dec. 1 hog inventory down 2.9%, market hog numbers down 3.1% and the breeding herd up 0.1% versus last year.

Northern cash cattle market firms a little... Packers reportedly raised cash cattle bids from earlier in the week in the northern market on Wednesday, signaling the recent drop in cash prices may be nearing an end. But bids in the Southern Plains remained down around $2 from last week. A limited number of cattle have moved this week, suggesting the bulk of trade may wait until after this afternoon’s Cattle on Feed Report. The contra-seasonal rise in beef stocks during November won’t be a major market factor, but it could trigger some corrective selling in cattle futures ahead of the holiday weekend.

Hogs may pull back in pre-holiday trade... Hog futures have rallied sharply the past two days and extended their premiums to the cash index. That could lead to some corrective selling ahead of the three-day Christmas weekend, especially since pork stocks fell far less than average during November.

Overnight demand news... Taiwan purchased 110,000 MT of U.S. milling wheat. Iran bought 300,000 MT of corn, likely to be sourced from Brazil, and 240,000 MT of soymeal, likely to be sourced from Brazil or Argentina. In a separate tender, Iran purchased 240,000 MT of milling wheat from unspecified origins. Algeria is thought to have bought between 200,000 and 250,000 MT of Canadian durum wheat, though some could be Mexican origin

Today’s reports

• 7:30 a.m. Weekly Export Sales — FAS
• 2:00 p.m. Cattle on Feed — NASS
• 2:00 p.m. Hogs and Pigs — NASS
• 2:00 p.m. Livestock Slaughter — NASS
• 2:00 p.m. Peanut Prices — NASS