First Thing Today | February 9, 2022
Soybeans rebound overnight... Old-crop soybean futures recouped Tuesday’s corrective losses overnight, while new-crop November futures pushed to a new contract high. Corn was supported by the strength in soybeans, while wheat futures pulled back from yesterday’s gains. As of 6:30 a.m. CT, soybeans are trading 10 to 13 cents higher, corn is fractionally to 3 cents higher and wheat futures are mostly 1 to 3 cents lower. Front-month crude oil futures are mildly weaker, while the U.S. dollar index is down around 200 points this morning.
USDA’s February S&D Report out later this morning... There won’t be any U.S. crop updates this month, so the domestic focus in USDA’s Supply & Demand Report at 11 a.m. CT will be on updated domestic usage forecasts. A bigger focus will be on USDA’s updated South American crop production forecasts, though those estimates will likely remain above most if not all private crop forecasters. Based on Reuters surveys, traders expect U.S. ending stocks to be 1.512 billion bu. for corn (1.540 billion bu. in January), 310 million bu. for soybeans (350 million bu.), 629 million bu. for wheat (628 million bu.) and 3.29 million bales for cotton (3.20 million bales). The average pre-report estimate for Brazilian production is 133.65 MMT for soybeans (139.00 MMT in January) and 113.63 MMT for corn (115.00 MMT). For Argentina, traders expect USDA to lower production to 44.51 MMT for soybeans (46.50 MMT in January) and 52.16 MMT for corn (54.00 MMT).
China cuts cotton import forecast... China’s ag ministry now expects the country to import 2.2 MMT of cotton in 2021-22, down 200,000 MT (8.3%) from its forecast last month and 530,000 MT (19.3%) less than last year. The ministry made no changes to its old-crop corn or soybean balance sheets, though it raised the import price for corn.
Trade deficit with China grows as it falls short of Phase 1 commitments... The U.S. trade deficit with China grew 14.5% for the 2021 calendar year and, according to an analysis by Chad Bown, a senior fellow at Peterson Institute for International Economics, Beijing fell far short of the purchase targets set under the Phase 1 agreement. The wider trade gap and missed targets increase pressure on the Biden administration to respond to Beijing on trade policy. Administration officials have said they would hold China accountable but haven’t disclosed specific steps.
Ukraine wants sanctions against Russia, still sees chance of diplomacy... Ukraine believes there is still a chance of resolving the standoff with Russia through diplomacy but says there are grounds to impose sanctions on Moscow. Foreign Minister Dmytro Kuleba said Russia had already violated international law by issuing Russian passports to some Ukrainian citizens in separatist-controlled areas of eastern Ukraine, which provided a basis for imposing sanctions. The U.S. and its allies have threatened Russia with new sanctions, including stopping the Nord Stream 2 pipeline if it attacks Ukraine. French President Emmanuel Macron traveled from Russia to Kyiv Tuesday to meet with Ukrainian President Volodymyr Zelensky and said both sides were committed to the Minsk accords, the 2014 peace agreement, as a path to resolving the ongoing disputes. Macron indicated Russian President Vladimir Putin signaled he did not want the situation to escalate. However, Zelensky was still skeptical of his Russian counterpart.
North Korea issues threatening rhetoric... North Korea boasted it is one of the few countries capable of “shaking up the world” by firing a missile that could reach the U.S. mainland. The hostile statement comes amid rising international tension over a recent series of North Korean ballistic missile tests. The U.S. State Department issued a statement urging North Korea to return to peaceful dialog, calls that Pyongyang has persistently ignored.
USDA climate pilot effort challenged by House ag panel’s top Republican... House Agriculture Committee Ranking Member GT Thompson (R-Pa.) pressed USDA Undersecretary for Farm Production and Conservation Robert Bonnie Tuesday on the effort announced Monday for a $1 billion pilot program for climate-smart commodities. He questioned whether USDA has the authority to operate the effort using authority under the Commodity Credit Corporation (CCC). Bonnie said he agreed with USDA Secretary Tom Vilsack that the agency is properly using its CCC authority as the effort seeks to find ways of measure the reduction in greenhouse gases to quantify the role agriculture plays in climate efforts. But Thompson characterized the USDA effort as a “conservation program dressed up as a marketing program.” Bonnie also sought to assure lawmakers from both parties that early adopters of practices like no-till or minimum-till will not be penalized under the coming pilot efforts. Thompson also warned Bonnie there will be coming oversight on the USDA effort, an action linked to the expectation that Republicans are likely to gain control of the House, which would put Republicans in charge of the agendas pursued by congressional committees. It is clear from the initial hearings by House Agriculture subcommittees that climate issues are going to be a major focus and potential friction point on the panel as it works toward a new farm bill, and that discord continues to build expectations there will be a one- or two-year extension of the current farm law while lawmakers sort out these and other issues.
Vehicle sticker shock revenge... Ford Motor and General Motors are clamping down on dealerships that are trying to charge more than the sticker price, a tactic that has proliferated amid the vehicle shortage. Ford Chief Executive Jim Farley said dealers who engage in this practice will face consequences, including losing supplies of future models. In a letter to its dealers last month, GM also said it could take action against “a small minority of bad actors” who were selling or leasing vehicles at rates “far in excess” of sticker prices set by the auto company.
Wholesale beef prices continue to slide... Choice boxed beef prices fell another $1.50, with Select down $1.20 on Tuesday and the Choice/Select spread narrowed to only $3.62. The tight spread suggests there is plenty of Choice-graded beef to meet demand needs. However, there are signs prices may have fallen far enough to attract stronger retailer demand, as packers moved a strong 180 loads of product yesterday, including 119.2 boxes of Choice beef.
Hogs continue bullish run... Strong gains in lean hog futures Tuesday resulted in contract highs for deferred months and pushed the lead February contract close to its June 2021 peak. While the market is overbought technically, signally a pause or corrective pullback is due, hog traders typically don’t react strongly to short-term momentum indicators.
Overnight demand news... South Korea purchased 68,000 MT of corn from an unspecified origin out of a tender for 140,000 MT but passed on another tender for 68,000 MT of corn. South Korea also purchased 65,000 MT of feed wheat from an unspecified origin. 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
- 11:00 a.m. WASDE — ERS
- 11:00 a.m. Cotton Ginnings — NASS
- 11:00 a.m. Crop Production — NASS
- 11:15 a.m. Cotton: World Markets and Trade — FAS
- 11:15 a.m. Grain: World Markets and Trade — FAS
- 11:15 a.m. Oilseeds: World Markets and Trade — FAS
- 11:15 a.m. World Agricultural Production — FAS
- 2:00 p.m. U.S. Agricultural Trade Data Update — ERS
- 2:00 p.m. Broiler Hatchery — NASS
