First Thing Today | December 28, 2021

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Good morning!

Soybeans extend rally... March soybean futures reached the highest level overnight since mid-July, as the strong rally was extended. Corn followed soybeans higher, though gains were limited. Wheat futures extended Monday’s price pullback overnight. As of 6:30 a.m. CT, soybeans are trading 7 to 9 cents higher, corn is fractionally to a penny higher and wheat futures are mostly 4 to 7 cents lower. Front-month crude oil futures are up around $1.25, while the U.S. dollar index is just below unchanged.

Consultant broadly cuts South American crop estimates... Hot and dry conditions have eroded yield potential in southern Brazil, Argentina and Paraguay, while rains have been too abundant in some areas of central and northeastern Brazil. As a result, Crop Consultant Dr. Michael Cordonnier broadly cut his South American crop estimates again this week. He now forecasts Brazilian production at 140 MMT for soybeans (down 2 MMT) and 114 MMT for corn (down 1 MMT). In Argentina, he forecasts the soybean crop at 48 MMT (down 1 MMT) and corn production at 52 MMT (down 1 MMT). He cut his Paraguay soybean crop forecast by 500,000 MT to 8 MMT.

Dry weather impact winter wheat in central Ukraine... Ukrainian farmers were able to plant only 6.2 million hectares or 94% of the expected area to winter wheat due to dryness in central portions of the country. Some of the planted area will have to be replanted as seeds did not sprout. Despite the dryness, consultancy APK-Inform says the winter wheat crop is in mostly satisfactory condition.

Russia 'not bluffing' on NATO rollback, warns of ‘large-scale conflict in Europe’... Russia will not drop a demand that NATO “be rolled back” to its 1997 boundaries, according to a senior Russian envoy, a requirement backed by the threat of “a large-scale conflict in Europe” arising out of Ukraine. “We are not bluffing,” Russian Deputy Foreign Minister Sergei Ryabkov said Monday, per state-run TASS news agency. “These are our real proposals. The West’s awareness of this needs to be facilitated, and we are going to make every effort to achieve it.”

Japan, China agree to joint defense hotline... Defense ministers of Japan and China have agreed to set up a joint defense hotline by the end of 2022, even as the two East Asian powers remain at odds over territorial disputes and military posturing. Tokyo is showing increasing concern over the situation in Taiwan, the self-governed island that China claims as its own. Japan and China also have a long-standing dispute over an uninhabited Japanese-controlled island chain in the East China Sea – known as the Senkakus in Japan and Diaoyus in China. Over the last few years, Japan has bolstered its air and sea defenses in response to China’s displays of military aggression in the South China Sea and beyond.

China to approve domestic GMO corn varieties, but commercial planting unclear... China is expected to approve three new corn GMO varieties that have been developed by domestic companies, the country’s ag ministry said, but it is not yet clear the varieties will be cleared for commercialization at this time. The ministry said a comment period will be open until Jan. 17 on the three corn varieties and seven GMO cotton products. Approval of GMO crops for import remains one of the tension points between the U.S. and China as the country had committed to addressing its regulatory process on that front under the Phase 1agreement without any changes having been adopted as of yet.

CFAP 2 payouts again edge higher... Payments under the Coronavirus Food Assistance Program 2 (CFAP 2) now total $19.06 billion as of Dec. 26, up slightly from $19.04 billion the prior week. Original CFAP 2 payments are at $14.24 billion while the top-up payments stand at $4.82 billion, both essentially unchanged from the prior week. Acreage-based payments are at $11.12 billion, with $3.45 billion for livestock, $2.93 billion for sales commodities, $1.21 billion for dairy, $278.22 billion for contract producers and $68.17 million for eggs/broilers. Payments under CFAP 1 are at $11.74 billion, including $10.56 billion for original CFAP 1 payouts and $1.19 billion in top-up payments, basically steady with the prior week. Those include $6.23 billion for livestock, $2.66 billion for non-specialty crops, $1.81 billion for dairy and $924.28 million for specialty crops.

Biden signed $768 billion defense-spending bill into law... It had passed Congress with bipartisan support earlier this month after Republicans managed to add $24 billion to the amount President Joe Biden originally requested. The money will be distributed broadly across America’s military and includes a 2.7% pay raise for armed-forces personnel.

Strong post-Christmas beef trade... Wholesale beef prices firmed $1.65 for Choice boxes and $2.23 for Select on Monday, while movement was solid at 116 loads. It’s difficult to put too much stock in one day of trade after a holiday, but if packers continue to push prices higher and find solid retailer demand it would suggest they are restocking for beef features in early 2022.

CME lean hog index softens again... The CME lean hog index is down 50 cents today, the third consecutive decline after a string of mostly higher prices over about a two-week window. The recent losses may raise enough questions about whether the cash index has put in a seasonal low to entice a corrective pullback in lean hog futures after recent strong gains.

Overnight demand news... Exporters reported no tenders or purchases.

Today’s reports

 

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