First Thing Today | December 27, 2021

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Good morning!

Grains, soybeans extend rallies... Corn, soybean and wheat futures extended their recent rallies overnight as traders returned from the extended Christmas holiday weekend. As of 6:30 a.m. CT, corn futures are trading 5 to 6 cents higher, soybeans are mostly 10 to 12 cents higher, winter wheat futures are 6 to 9 cents higher and spring wheat is 2 to 4 cents higher. Front-month crude oil futures are around $1 lower and the U.S. dollar index is around 225 points lower this morning.

South American dryness concerns persist... Southern Brazil and Argentina were dry over the Christmas weekend, with the dryness expected to continue through Tuesday. Southern Brazil will see rain Wednesday into Thursday and again early next week to slow the decline in crop and field conditions, according to World Weather Inc., but no reversal in the trend of deteriorating crop conditions is expected. It says Argentina’s west will start getting rain again late this week and during the weekend with showers occurring periodically next week. Eastern Argentina will not see much rain until late this week and then get some relief into early next week, but the below-average rainfall bias will remain in place, despite the showers and thunderstorms.

Russia plans security talks with U.S. before NATO meeting... Russia will start talks first with the U.S. on its demands for guarantees of an end to NATO’s eastward expansion before a proposed Jan. 12 meeting between the military alliance and Moscow, Foreign Minister Sergei Lavrov said. “We will hold the main round of negotiations with the U.S. which will take place immediately after the end of the New Year holidays,” Lavrov said in a YouTube interview Monday with the Soloviev Live channel. Russia begins the year with a public holiday and Jan. 10 is the first working day. Russia’s top diplomat said his country isn’t presenting the U.S. with any “ultimatums,” but also won’t accept “endless” talks on its demands for legally binding pledges that the North Atlantic Treaty Organization (NATO) will halt further expansion and withdraw forces to the positions they held in 1997.

Focus remains on Fed’s timing of initial rate rise... Economic data continues to indicate an expanding U.S. economy with higher prices being felt by businesses and consumers alike. The inflation situation led the Fed to speed up its tapering of bond purchases, which will now wrap up in March. And some Fed officials have signaled that if the economy continues to unfold as they currently expect, that could mean the first increase in the target range for the Fed funds rate would come soon after. The next Federal Open Market Committee (FOMC) meeting after March is May 3-4. With the calendar flipping to 2022 that also means a new batch of voters on the FOMC. St. Louis Fed President James Bullard, Kansas City Fed President Esther George, Cleveland Fed President Loretta Mester and interim Boston Fed President Kenneth Montgomery will replace Richmond Fed President Thomas Barkin, Atlanta Fed President Raphael Bostic, San Francisco Fed President Mary Daly and Chicago Fed President Charles Evans as voters for 2022, putting them in position along with Fed governors of deciding when to boost interest rates. This will keep more attention on the remarks from the new voters ahead of each meeting.

China reiterates ensuring grain security and agricultural product supply... Chinese President Xi Jinping urged farmland protection and expanding soybean and oil crops planting. “The food of the Chinese people must be made by and remain in the hands of the Chinese,” he was quoted as saying. He also called for continued efforts in rural poverty relief and rural revitalization. China aims to stabilize corn production and expand soybean output in the new year to ensure grain security, according to the country’s ag minister. “Safeguarding supply security of grains, and important agricultural and sideline products is always our top task and main priority,” minister of ag said in an interview with state-run People’s Daily. “Agricultural and rural affairs departments must devote every effort to grain production, with the attitude of conducting a desperate fight, and with extraordinary and super strength.” The ag minister called for abandoned land to be cultivated while maximizing the potential of intercropping to ensure stable grains acreage in 2022.

Xinjiang Communist Party boss and U.S. sanctions target Chen Quanguo to leave post... State news agency Xinhua reports Chen Quanguo will be moving on to another role and replaced by Guangdong governor Ma Xingrui. Chen has been accused by the West of being behind widespread human rights abuses against Uygurs, but is tipped for further promotion. The changes are part of a wider reshuffle ahead of next year’s party congress, where a new Politburo Standing Committee — the country’s top leadership body – will be unveiled. China has denied U.S. accusations of carrying out “genocide” or using forced labor in Xinjiang.

China will use fiscal policies to promote economic growth... China will roll out fiscal policies proactively next year to stabilize economic growth, the country’s finance ministry said on Monday. Beijing will launch another round of tax and fee cuts to support businesses and help them make infrastructure investments “appropriately” ahead of time. Fiscal expenditures will be kept up to bolster growth and the central government will step up transfers to local governments to support necessary spending, the finance ministry said. China will also take steps to curb increases in local government hidden debt in 2022, as well as to maintain “overall social stability” ahead of the 20th congress of the ruling Communist Party next year.

China planning to tighten restrictions for Chinese companies going public in international markets... Under a new system proposed by the China Securities Regulatory Commission, a company would have to register with the agency first, and then meet a set of government requirements. China has actively tried to discourage companies from trading in overseas markets out of concern for national security, but the government has stopped short of banning the practice altogether.

Trudeau: China ‘playing’ Western states against each other... Canadian Prime Minister Justin Trudeau said China has been “playing” Western states against each other and that democracies should present a “united front” in response. “There’s been a bit of competition amongst friends because we’re capitalist democracies trying to do well, especially given the extraordinary economic opportunity of the rise in the Chinese middle class,” Trudeau said in an interview with Global News that aired on Saturday.

The week ahead in Washington... Lawmakers remain on their holiday recess, but negotiations continue in the Senate regarding a scaled back Build Back Better (BBB) measure. Centrist Sen. Joe Manchin (D-W.Va.) has reportedly given enough information to White House officials and key lawmakers as to what it will take to get his approval. That will likely mean significant changes that may have House progressives balking at the changes needed. Sen. Ben Cardin (D-Md.) said Sunday he’s not convinced Democrats’ BBB legislation is dead.

Russia’s wheat export tax rises again... Russia’s wheat export tax for Dec. 29 to Jan. 11 will be $94.90 per metric ton, up from $94.00 a MT currently. The wheat export tax has surged 239% from the beginning of June when it first started using the sliding scale. Russian wheat with 12.5% protein loading from Black Sea ports for shipment in January was quoted at $330 a MT free on board (FOB) at the end of last week, up $1 from the previous week, IKAR said.

Neutral Cattle on Feed Report... The number of cattle in large feedlots was down 0.4% from year-ago as of Dec. 1, down fractionally from the average pre-report trade estimate. Both placements and marketings in November slightly topped expectations. The report data should have little to no impact on prices, as focus will remain on cash cattle prospects.

Bullish H&P Report... Last Thursday’s Hogs & Pigs Report showed the U.S. hog herd 4% smaller than year-ago, which was greater contraction than traders expected. In fact, nearly all categories came in on the bullish side of the average pre-report estimates. That should support lean hog futures coming out of the extended holiday weekend.

Weekend demand news... Exporters reported no tenders or sales over the holiday weekend.

Today’s reports

 

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