First Thing Today | December 8, 2021
Soybeans, soyoil lead overnight price pressure... Soybean and soyoil futures faced active followthrough selling overnight, which pulled the rest of the grain and soy markets lower. As of 6:30 a.m. CT, soybeans are trading 8 to 11 cents lower, soyoil is up to 160 points lower, soymeal is as much as $2 lower, corn is 1 to 2 cents lower, winter wheat futures are 6 to 7 cents lower and spring wheat is 1 to 2 cents lower. Front-month crude oil futures are near steady, while the U.S. dollar index is just below unchanged.
Ag groups react to EPA’s RFS announcement... The Renewable Fuels Association labeled the biofuels blending proposals from EPA “a modest step in the right direction for the nation’s ethanol producers and farmers,” aside from “an unprecedented proposal to retroactively reduce already-finalized 2020” levels. Growth Energy called the proposals “a mixed bag” for the biofuels industry. Growth Energy CEO Emily Skor said, “EPA’s projection of strong biofuel blending requirements in 2022, commitment to halt illegal refinery exemptions, and long-awaited progress toward complying with a 2017 court order on lost gallons represent a welcome step forward. These forward-looking plans underscore the critical role biofuels play in mitigating climate change and lowering prices at the pump. However, we are extremely disappointed EPA has proposed rolling back requirements for 2020 and lowering volumes for 2021.” National Corn Growers Association President Chris Edgington said, “Because low-carbon ethanol replaces high-carbon gasoline and cuts emissions from vehicles, the proposed volumes for 2022 would help the Biden administration meet emission reduction commitments and lower fuel prices. Denying pending refinery exemption petitions and restoring gallons improperly waived in the past are important steps toward restoring RFS integrity. These actions help move renewable fuels forward. However, reopening 2020 volumes is unprecedented and rewards the use of more oil at the expense of the environment. We strongly urge EPA to move forward with finalizing the strong 2022 volumes while correcting course on the proposed retroactive cuts.” American Soybean Association President Kevin Scott said, “We are appreciative that EPA has released its decision on these numbers that are critical to implementation of the Renewable Fuel Standard (RFS), but of course we would have liked to have seen higher retroactive numbers for 2020 and 2021. And, we would like to have the 2023 volume announcement that was due the end of November. We are heartened, however, by the 2022 RVO and hope 2023 remains on that upward trajectory.”
SREs remain a source of uncertainty... EPA said it was proposing to reject more than 60 pending small refinery exemptions (SREs), but the agency made clear this was not yet a final decision and opted to seek comments. “We continue to consider the impact of these decisions on our SRE policy, and it is still unclear at this time whether we will be granting SREs for 2020, 2021, or 2022, and, if so, to what degree,” EPA said. “Thus, we are proposing a range of exempted volumes of gasoline and diesel as a result of SREs in the calculation of the applicable percentage standards, ranging from zero to 8.19 billion gallons.” EPA data shows 65 pending SREs — 29 for the 2019 compliance year, 28 for the 2020 compliance year, three for the 2018 compliance year and one each for the 2016 and 2017 compliance years. There are also three pending SREs for the 2021 compliance year. A footnote in the RFS document for 2020, 2021 and 2022 also stated, “We are not adjudicating any SREs in this action, and this action does not prejudge any SRE petition.” The proposal to reject SREs is subject to a separate rulemaking. “This proposed decision is not a final Agency action,” EPA said. “The Agency is issuing a public proposal, and is requesting comment, to inform its final action, recognizing the importance of these decisions and the need for a fully open and transparent process.” But the decision will not linger as EPA is proposing a 30-day comment period once the notice is published in the Federal Register.
Comments sought on food versus fuel... In its discussion on advanced biofuels, EPA said there are factors that would argue for lower volumes of advanced biofuels. “Increased demand for soybean oil could lead to diversion of feedstocks from food and other current uses in addition to further incentivizing increased soybean crushing and soybean production,” the agency said. “Increased soybean production in the U.S. and abroad in turn could result in greater conversion of wetlands, adverse impacts on ecosystems and wildlife habitat, adverse impacts [and] negative impacts on water quality and supply, and increased prices for agricultural commodities and food prices.” Given that situation, EPA said it is requesting comments on “the impacts of advanced biofuel production on the statutory factors, including impacts on wetlands, ecosystems, and wildlife habitat.”
Biden warns Putin of sanctions if Russia invades Ukraine... President Joe Biden warned Russian President Vladimir Putin in a video meeting on Tuesday the West would impose "strong economic and other measures" on Russia if it invades Ukraine, including disruption of the Nord Stream 2 gas pipeline to Europe, and that the U.S. and European allies would provide additional defensive capabilities to Ukraine. Putin responded to the warning with a demand for reliable, legally binding guarantees against NATO expansion eastward and complained about NATO attempts to “develop Ukrainian territory,” the Kremlin said. No breakthroughs were reported but both sides agreed to continue communications.
House clears measure that sets stage for Senate to approve hike in debt limit... The package is part of a deal brokered between Senate Majority Leader Chuck Schumer (D-N.Y.) and Senate Minority Leader Mitch McConnell (R-Ky.) that would use a bill previously passed by both the House and Senate with amendment as the legislative vehicle. The measure would also include a prevention of PAYGO cuts to Medicare, farm programs and several others, a move aimed at getting the needed support of 10 Republicans for the procedural motion that would pave the way for a simple majority vote on the package. The plan would increase the debt limit by a yet-to-be-determined amount and would have to be acted on before Jan. 16. There would be only 10 hours of debate on the plan and no amendments. McConnell told reporters after briefing his caucus that the GOP stance Democrats would have to increase the debt limit on their own has not changed. “The red line is intact,” he said. “The red line is that you have a simple-majority, party-line vote on the debt ceiling. That's exactly where we will end up.”
Manchin still not on board with BBB... Centrist Sen. Joe Manchin (D-W.Va.) Tuesday said he would not yet back the social spending/Build Back Better (BBB) package out of concerns over inflation and the length of some of the programs proposed in the package. Manchin said, “We’ve gotta make sure we get this right. We just can’t continue to flood the market, as we’ve done.” Manchin and Sen. Kyrsten Sinema (D-Ariz.) remain keys in the BBB outcome in the Senate and Manchin has already succeeded in getting the package dramatically pared down from the initial $3.5 trillion spending levels. Given that the measure would make changes to the tax code, social spending and climate change, Manchin simply said, “We get any one of those wrong and we’re in trouble.”
France cuts wheat export forecast... FranceAgriMer lowered its 2021-22 French wheat export forecast for outside the European Union to 9.2 MMT, down 200,000 MT from last month. At that level, French wheat exports would still be up 24% from the previous year. The French farm office kept its wheat export forecast within the 27-member bloc at 7.8 MMT. Along with the cut to exports, a bigger crop pushed FranceAgriMer’s 2021-22 French wheat ending stocks forecast up 300,000 MT to 3.5 MMT.
ECB official: Euro zone inflation will take longer to ease... Euro zone inflation will take longer to fall back to target than earlier thought but so far there is no evidence that high prices are becoming embedded in wages, European Central Bank (ECB) Vice President Luis de Guindos said. While the ECB has maintained that inflation is temporary and will come back under the 2% target on its own, a growing number of policymakers are voicing their concern that a less benign outcome is also possible. “But wage growth is expected to be higher in 2022 than in 2021,” he said. “And we have to... stay vigilant with respect to the evolution of wages and the wage bargaining process.”
Steady cash cattle trade expected... After two months of raising cash cattle bids, packers aren’t expected to be as aggressive and showlist numbers are up from last week, so feedlots don’t have as much bargaining power. Cash sources expect this week’s cash trade to eventually take place at about steady prices with last week’s average of $140.44, though trade isn’t expected until late in the week.
Traders removed more premium from hog futures... February lean hog futures have declined for three straight days, with sharp losses the past two days. Traders are removing premium from the market, seemingly suggesting they may not be convinced a seasonal low is close for the cash index. But the CME lean hog index is up another 16 cents today and has risen four of the past five, signaling the extended price slide may at least be pausing.
Overnight demand news... South Korea purchased 100,000 MT of milling wheat – 50,000 MT each from the U.S. and Australia. Japan tendered to buy 80,000 MT of feed wheat and 100,000 MT of feed barley.
Today’s reports
- 9:30 a.m. Weekly Ethanol Production — EIA
- 10:00 a.m. Livestock and Meat International Trade Data — ERS
- 2:00 p.m. U.S. Agricultural Trade Data Update — ERS
- 2:00 p.m. Broiler Hatchery — NASS
