First Thing Today | December 29, 2021
Followthrough selling overnight... Corn, soybean and wheat futures are trading near session lows this morning as markets extend Tuesday’s weaker (and low-range) closes. As of 6:30 a.m. CT, corn futures are trading around 3 cents lower, soybeans are mostly 8 to 9 cents lower, winter wheat futures are 5 to 6 cents lower and spring wheat is 2 to 4 cents lower. Front-month crude oil futures are around 40 cents lower and the U.S. dollar index is modestly firmer.
January weather to be much like December in South America... A slow weakening of the La Nina weather pattern is expected in January, but its influence on South American weather will likely continue without much change over the next few weeks, according to World Weather Inc. The weather forecaster says, “concern over below-average precipitation and potential cuts in yield will continue in parts of Argentina, Paraguay, Uruguay and southern Brazil.” World Weather predicts “February will be the first month for possible change [in weather pattern] and the first change is expected to be a northward shift in the heat and dryness.” For more, click here.
Limited relief from heat, dryness in Argentina... “Argentina will see sporadic rainfall of mostly light intensity in the next week to 10 days, offering some temporary relief to recent drying, but crop conditions will further deteriorate in the driest areas, raising the need for immediate rain of significance,” according to World Weather. “Weather patterns will not likely improve much Jan. 5-11 and there is still strong potential that portions of the north and east will continue to receive lighter-than-usual rainfall and experience warm-biased temperatures through the entire month of January. Western Argentina may do better with rainfall in January than eastern Argentina and some of the crops in Cordoba, northwestern Buenos Aires, San Luis and La Pampa as well as Santiago del Estero may still get enough rain to yield favorably,” the weather forecaster says.
U.S., Russia agree to hold security talks on Jan. 10... The talks come amid tensions over Russian forces deployed near Ukraine, and Moscow’s demands that NATO renounce any expansion eastward into the former Soviet bloc. “When we sit down to talk, Russia can put its concerns on the table, and we will put our concerns on the table with Russia’s activities as well,” a spokesman for President Joe Biden’s National Security Council said Tuesday. “There will be areas where we can make progress, and areas where we will disagree.” Deputy Russian Foreign Minister Sergey Ryabkov said he expected the talks to focus on security proposals the Kremlin provided the U.S. earlier this month that would preclude NATO’s expansion eastward and Western military activities near Russia’s periphery. “These items are all integral items of our stance,” Ryabkov told the Interfax news agency. “We cannot do without a serious discussion of those exact themes in the course of the forthcoming contacts.”
First half 2021-22 Ukraine grain exports up sharply from last year... Since July 1, Ukraine has exported 31.6 MMT of grain, up 21.1% from the first half of the 2020-21 marketing year. That total included 15.7 MMT of wheat, 10.3 MMT of corn and 5.2 MMT of barley. The country’s ag ministry previously said it expects to export 24.5 MMT of wheat, 30.9 MMT of corn and 5.2 MMT of barley in 2021-22. Milling wheat exports could be limited to 4 MMT from mid-January through June 30.
Biden administration trade policy: Whatever union workers want... That is the gist of a Wall Street Journal article on the topic. It reveals that Asian allies like Japan and Australia are increasingly frustrated with the lack of interest from Washington in joining regional trade agreements to counter China’s growing influence. The United Kingdom and Japan are still awaiting lifting of Trump-era steel and aluminum tariffs. “At the heart of these conflicts is the sway progressive Democrats and labor unions hold with Biden,” economists and others told the newspaper. About 56% of union households voted for Biden, according to AP Votecast, which conducts voter surveys, compared with 42% voted for Donald Trump. Need more convincing? U.S. Trade Representative Katherine Tai visited the AFL-CIO’s Washington headquarters in June, where she said union workers are “the backbone of our economy and our democracy.” She then said the primary signal of the Biden administration’s trade policy when she told the union workers: “You are the guiding light of trade policy for the Biden/Harris administration.”
Gas prices dropping even as crude oil rises... Global benchmark Brent crude is up more than 14.5% since the beginning of the month, trading near $80 per barrel on Tuesday for the first time since late November. West Texas Intermediate crude is also up nearly 7% over a week ago. National average retail gasoline prices have been in a downward trend since peaking at $3.505 for the week ended Nov. 8, according to the Energy Information Administration (EIA). The week ending Dec. 27 saw the national average fall to $3.375 per gallon, with the agency predicting in early December that prices would drop to $3.01 per gallon in January and average $2.88 per gallon in 2022. But GasBuddy head petroleum analyst Patrick De Haan believes the falling trend has reversed. “With oil back to $76/bbl, it’s becoming more clear that our month-long run with falling #gasprices is likely coming to an end,” De Haan said in a tweet. “Expect a spike soon in the Great Lakes, which could push the national average up a few cents soon. West Coast could see some increases soon too.” Separately, De Haan told CNN that his modeling indicates the national average gas price is likely to rise to $3.41 per gallon for all of 2022, with a peak in May that could go as high as $4 before edging down again.
Russia’s Novak: OPEC+ resisted U.S. calls to boost output to keep guidance clear for market... OPEC+ countries did not heed the urgings of the U.S. to increase oil output as the cartel was seeking to provide markets with clear guidance and not shift from its stated policy, Russian Energy Minister Alexander Novak told the RBC media outlet. “We believe that it would be right for the market to show in the mid-term how we will increase production as demand grows,” Novak said. “The producing companies should understand beforehand which investments they have to plan in order to ensure a production increase.” Novak also said the release of stocks by the U.S. and other countries would have only a short-term impact on crude markets. He indicated global oil demand would rise by around 4 million barrels per day (bpd) in 2022 after rising around 5 million bpd in this year. He also said he expected crude prices between $65 to $80 per barrel in 2022.
Slow start to cash cattle negotiations... A few asking prices have surfaced at roughly $2 above last week’s trade, but packers have yet to establish bids. The slow development of cash negotiations suggests cash trade will be pushed late into the week. But there could be some urgency to accelerate the process today. While markets are open on Friday, packers and feedlots may want to get this week’s cash trade wrapped up by Thursday afternoon.
Pork cutout unable to sustain most of morning price strength... The pork cutout value firmed 56 cents on Tuesday, but prices dropped sharply from the $3.78 gain in morning trade. Hams and bellies swung from strong gains in morning trade to lower for the day, pulling the cutout well off its intra-day high. Movement was strong for a second straight day after the Christmas weekend at 340.94 loads.
Overnight demand news... Egypt tendered to purchase an unspecified amount of wheat from multiple origins; results are expected later today.