First Thing Today | February 2, 2022
Soybeans continue to surge... Soybean futures posted new highs overnight, with the March contract topping $15.60 amid a continued price surge tied to South American crop losses and speculative buying. Corn and wheat modestly followed soybeans higher. As of 6:30 a.m. CT, old-crop soybeans are trading 19 to 24 cents higher, corn is mostly 3 cents higher and wheat is 1 to 4 cents higher. Front-month crude oil futures are near unchanged, while the U.S. dollar index is more than 500 points lower.
Putin suggests openness to diplomacy while blaming U.S. for crisis... Russian President Vladimir Putin appeared to ratchet down tensions in the standoff over Ukraine, while claiming the U.S. was seeking to goad Moscow into an invasion. Putin said he hoped that “dialogue will be continued” over Russia’s security demands, refraining from repeating his earlier threat to take unspecified “military-technical” measures if the West did not comply. “Their most important task is to contain Russia’s development,” Putin said of the United States, repeating one of his frequent talking points. “Ukraine is just an instrument of achieving this goal. It can be done in different ways, such as pulling us into some armed conflict and then forcing their allies in Europe to enact those harsh sanctions against us.” Asked about the United States’ written responses to Moscow’s security demands, which were delivered last week, Putin said that it was clear “that the principal Russian concerns turned out to be ignored.” The Kremlin, he said, is still assessing the responses as it weighs its next move. Meanwhile, the Biden administration reportedly informed the Kremlin it is willing to discuss giving Russia a way to verify there aren’t offensive Tomahawk cruise missiles stationed at sensitive NATO missile-defense bases in Romania and Poland. The U.S. proposal is aimed at allaying Moscow’s concerns the launchers could be used to target Russia.
Ukraine grain exports remain strong, country may cut VAT... So far in 2021-22, Ukraine has exported 38.6 MMT of grain, up 31.6% from the same period last year. That total included 17 MMT of wheat, 15.6 MMT of corn and 5.5 MMT of barley. Ukraine’s government is reportedly considering cutting the value-added tax (VAT) for ag products from the current 20% rate, which would increase exports from the country. In August, Ukraine restored its VAT for ag products to 20% after lowering it to 14% from March through July last year.
Euro zone inflation hits new high... Consumer inflation in the euro zone rose to a record 5.1% over year-ago in January, up from 5% in December and well above expectations for a decline to 4.4%. Soaring energy prices continued to drive inflation, but food prices also surged. Inflation excluding food and fuel prices slowed to 2.5% from 2.7% the previous month. The unexpected rise in inflation during January puts greater focus on the European Central Bank’s (ECB) decision Thursday on monetary policy. While the Federal Reserve has abandoned the narrative that inflation is “transitory,” ECB has stuck with that stance, arguing that wage growth is still muted and underlying price growth is weak.
Europe to label some nuclear projects as sustainable... The European Commission today will adopt legislation to label some gas and nuclear projects as sustainable under its rulebook for green economic activities, known as the taxonomy. The EU’s executive sees those energy sources as crucial stepping stones for the transition to renewable energy. Meanwhile, some member states continue to close down nuclear plants. Germany has shut almost all its capacity already, and the rest will be switched off at the end of 2022. Some countries, including China and Russia, are moving forward building new reactors. Beijing is expected to surpass the U.S. in number of plants by as soon as the middle of this decade.
DOC makes preliminary determination on UAN from Russia, Trinidad and Tobago... The Department of Commerce (DOC) has issued a preliminary determination that urea ammonium nitrate solutions (UAN) fertilizer from Russia and from Trinidad and Tobago is being imported into the U.S. at less than fair value. DOC’s International Trade Administration (ITA) announced countervailing duty (CVD) rates based on its finding. The dumping rates for Trinidad and Tobago are 63.08% for Methanol Holdings and for all other firms. Rates for specified Russian entities range from 9.15% to 127.19%, with a rate of 15.48% for all other firms. DOC will impose cash deposit requirements on imports of UAN from Russia and Trinidad, based on the preliminary rates of dumping. Additional CVD cash deposit requirements are already in place based on DOC’s previous preliminary finding that UAN imports are unfairly subsidized at rates ranging from 9.66% to 9.84% from Russia and 1.83% from Trinidad. DOC also announced its final determination will be delayed and will now be released June 17 with a final determination by the U.S. International Trade Commission due Aug. 1. “Commerce’s affirmative preliminary antidumping and countervailing duty determinations not only address unfair trade practices that have harmed the U.S. UAN industry and its workers, but also help ensure that this vital product remains readily available to U.S. farmers from reliable domestic suppliers,” said Tony Will, president and CEO, CF Industries.
Manchin: BBB is ‘dead’ but withholds judgement on a revised and differently named package... Sen. Joe Manchin (D-W.Va.) offered a grim update on the status of President Joe Biden's Build Back Better (BBB) measure, calling it “dead.” But he was noncommittal regarding the possibility of a scaled-back BBB that would likely be labeled differently. Democrats remain hopeful to eventually pass some kind of scaled-back version of the social spending legislation. Manchin has raised concerns over inflation and said that passing a government spending bill “has to be done first.”
Next farm bill hearings start today... The House Agriculture Conservation and Forestry Subcommittee holds a hearing today titled a “2022 review of farm bill conservation programs.” The hearing will see Farm Service Agency (FSA) Administrator Zach Ducheneaux and Natural Resources Conservation Service Administrator Terry Crosby testify. The House Agriculture General Farm Commodities and Risk Management Subcommittee has set Feb. 8 for a hearing “to review farm policy” with USDA Undersecretary for Farm Production and Conservation Robert Bonnie. The hearings are the first in a series of sessions that will be held as the panel starts working on the successor to the 2018 Farm Bill. However, contacts continue to signal there could well be an extension of the 2018 law as Republicans expect they will take control of the House following the Nov. 8 elections, which would put them in charge of the agenda for the next farm bill and the new Congress in 2023.
Cash cattle initially trade higher... Light cash cattle trade was reported in the $137 to $139 range in the Southern Plains and around $220 in the dressed northern market on Tuesday, about $1 to $2 higher than last week. The volume was too light to be considered a true market test, but cash sources signal feedlots have no interest in moving cattle at lower prices, so active trade at firmer prices is expected to eventually be seen. If cattle futures continue to push higher, it would seemingly strengthen feedlots’ bargaining power. Packers will also have wintry weather to contend with in some areas.
Cash hog index continues to rise... The CME lean hog index is up another 99 cents to $83.14, adding to its recent string up gains. February lean hog futures finished $5.01 above today’s cash quote, which may slow buyer interest in the lead contract ahead of its Feb. 14 expiration and Feb. 16 settlement. But the recent surge in deferred futures suggests traders expect the cash market to strengthen more than previously thought into its summer-time peak.
Overnight demand news... Tunisia purchased unspecified quantities from its tender for 100,000 MT of soft wheat and 75,000 MT each of durum and feed barley.
- 9:30 a.m. Weekly Ethanol Production — EIA
- 2:00 p.m. Broiler Hatchery — NASS