First Thing Today | February 3, 2022

Good morning!

Price pressure overnight... Soybeans were pressured by profit-taking and corrective selling overnight, while the corn and wheat markets faced followthrough selling to Wednesday’s losses. As of 6:30 a.m. CT, soybeans are trading 7 to 12 cents lower, corn is 4 to 6 cents lower, winter wheat is 5 to 7 cents lower and spring wheat is 2 to 3 cents lower. Front-month crude oil futures are more than $1 lower, while the U.S. dollar index is around 175 points higher.  

U.S. deploys more troops to Europe... The U.S. will send approximately 2,000 additional troops to Europe to bolster NATO allies and send a “strong signal” to Russian President Vladimir Putin, Pentagon spokesman John Kirby said on Wednesday. The deployment will involve roughly 3,000 U.S. troops in total, 1,000 of whom are already stationed in Germany, heading to Poland and Romania. Polish Defense Minister Mariusz Blaszczak praised the move as a “strong signal of solidarity,” while the Kremlin said the deployment was “the best proof that we, as Russia, have an obvious reason to be worried.”

U.S. in talks with gas producers and importers about potential disruption of Russian supply... Bloomberg reports “the U.S. and its European allies have approached several major natural-gas importers in Asia, including China, about sending their fuel to Europe if a conflict over Ukraine erupts.” According to Bloomberg, Biden administration officials have “spoken to officials in Japan, South Korea and India as well as Beijing,” although “the engagement with China has been limited.” The newsire reports: “European and U.S. officials are concerned Moscow may react to any additional sanctions against it in the event of a war by reducing gas flows to Europe, which gets around 40% of its supplies from Russia.” It adds: “The White House also is talking to gas producers to see if they can increase output in an emergency. They include Qatar, Nigeria, Egypt and Libya.”

Hopes are rising that Europe will avoid a winter energy crisis... The Wall Street Journal reports a record influx of liquefied natural gas, combined with mild and windy weather, has slowed withdrawals from the region’s heavily depleted underground gas-storage caverns. A boost to flows of gas from Russia via Ukraine is helping, too. Supplies are still slim, but the shortfall compared with previous winters is narrowing and prices are retreating from record highs. Despite efforts to diversify its energy sources, Europe buys much of the gas it needs to generate electricity, heat homes and power factories from Russia, which is why the situation with Ukraine is being so closely monitored.

Putin heading to China on Friday... On Friday, Chinese President Xi Jinping hosts Putin as the Winter Olympics 2022 opening ceremony begins. Foreign Ministers Wang Yi and Sergey Lavrov meet today in the Chinese capital to finalize preparations for the meeting – the first held in-person by Xi since the onset of the Covid pandemic in March 2020. The two men are expected to sign further agreements on gas supplies, Kremlin aide Yury Ushakov said on Wednesday, while Putin outlined some of the likely talking points in a Xinhua guest piece, where he extolled the two countries’ “stabilizing role in today’s challenging international environment.”

Canadian trucker ‘Freedom Convoy’ protest continues... Canadian truckers are protesting Covid-19 health restrictions by staging a blockade of 18-wheelers in Ottawa. Police have declared the week-long assembly an “unlawful” occupation of the country’s capital and say they’re looking at “every single option, including military aid” to bring the situation to an end. The truckers are a part of the “Freedom Convoy” and are protesting a recent mandate requiring drivers entering Canada to be fully vaccinated or face testing and quarantine requirements. The group is also protesting against other health restrictions, like mask mandates and Covid-19 lockdowns. The dozens of trucks are blocking traffic, and forcing businesses in the area to shut down, officials said.

Weekly Export Sales Report out this morning… For the week ended Jan. 27, traders expect:

Ukraine raises grain export forecast... Ukraine now expects to export 65.5 MMT of grain in 2021-22, up 300,000 MT from its prior forecast. The ag ministry did not give a breakdown of exports by commodity, though barley shipments have already exceeded the previously forecast level by 300,000 MT. As we reported yesterday, Ukraine’s grain exports to date are running nearly 32% ahead of year-ago.

FAO world food price index rises to third highest level ever in January... Global food prices measured by the United Nation’s Food and Agriculture Organization (FAO) increased 1.5 points (1.1%) in January, led by gains in vegoils (to a record high) and dairy. The FAO food price index at 135.7 was the highest since April 2011 and only 1.9 points (1.4%) below the all-time high of 137.6 in February 2011. Compared to year-ago, prices are up 12.5% for cereal grains, 33.9% for vegoils, 18.8% for dairy, 17.3% for meat and 19.7% for dairy.

BOE raises interest rates; ECB expected to hold for now... The Bank of England (BOE) raised interest rates 25 basis points, though four of the nine members voted for a 50-basis-point increase. This was the U.K.’s second interest rate increase, following one in December. BOE said consumer price inflation, which stood at 5.4% in December, now looks set to peak at around 7.25% in April. Meanwhile, the European Central Bank is expected to keep interest rates unchanged later this morning, despite record consumer and producer price inflation in the bloc.

Toomey: Fed nominee Raskin to face ‘significant Republican opposition’...  In an appearance on CNBC’s Squawk Box, Sen. Pat Toomey (R-Pa.), a member of the Senate Banking Committee, which will hold a hearing today on President Biden’s Federal Reserve nominees, said one nominee will likely face strong opposition. He said, “I have supported Fed noms from the opposite party in the past, and I’d like to be able to get to yes in some cases here.” But “I think this set of noms, and specifically Sarah Bloom Raskin, her candidacy for vice chair of supervision, in some ways it’s a referendum on the idea of whether or not the Fed... should be empowered to engage in policy decisions that have nothing to do with their mandate.” Toomey said Raskin has “expressly advocated that financial regulators generally, and the Fed in particular, advocate capital away from the fossil fuel sector... because she thinks climate change is such a serious thing that the Fed simply has to step up and do this... That’s not a decision to be made by unelected Fed governors who never face the voters.” Toomey predicted “there will be very significant Republican opposition to” Raskin, and “it’s hard for me to see how I could get to yes in this case.”

NCBA votes to oppose cash trade mandate... While a Sens. Deb Fischer (R-Neb.) and Chuck Grassley (R-Iowa) continue to push their livestock market reform bill via the Senate Ag panel, a National Cattlemen’s Beef Association (NCBA) committee voted Wednesday to oppose cash trade mandates, a major feature of the bill sponsored by the two senators. The American Farm Bureau Federation previously opposed those requirements, upping the odds the senators will fail in their legislative attempt.

Wholesale beef prices continue to weaken... Choice boxed beef prices dropped $2.29 and Select was 65 cents lower on Wednesday, continuing the recent slide in wholesale values. Over the past week, Choice beef dropped $6.31 and is down $10.31 from this year’s peak on Jan. 24. Packers are having to reduce wholesale prices to encourage retailer demand.

Pork cutout holding strong... The pork cutout value firmed $3.47 on Wednesday and is up slightly more than that over the past week. While packers are reducing wholesale beef prices to move product, there appears to be ample pork demand to support current prices.

Overnight demand news... Japan purchased 53,957 MT of wheat from its weekly tender, including 26,807 MT from Canada and 27,150 MT from Australia.

Today’s reports

• 7:30 a.m. Weekly Export Sales — FAS