First Thing Today | January 11, 2022
Quiet trade overnight... Corn, soybeans and wheat held in relatively tight trading ranges in quiet overnight price action. As of 6:30 a.m. CT, corn is trading mostly a penny higher, soybeans are 3 to 5 cents lower in most contracts and wheat futures are fractionally to 3 cents higher. Front-month crude oil futures are more than $1 higher and the U.D. dollar index is just below unchanged this morning.
Brazil cuts crop forecasts amid drought... Brazil is expected to produce a record 140.5 MMT of soybeans this year, according to the latest forecast from the official crop estimating agency Conab. That’s down 2.3 MMT from its forecast last month but well above private crop forecasters. Conab cut its Brazilian corn crop estimate to 112.9 MMT, down 4.3 MMT from last month. Conab cut its forecast for 2021-22 Brazilian soybean exports by 1.4 MMT from last month to 89.3 MMT but kept its corn export projection at 36.7 MMT, despite the smaller crop estimate.
Consultant continues to cut South American crop estimates... Unfavorable weather continues to reduce production potential in South America, with Argentina and southern Brazil facing hot and dry conditions, while areas of central and northeastern Brazil are too wet. As a result, Crop Consultant Dr. Michael Cordonnier made more cuts to his South American production estimates. He cut the Brazilian bean crop by 3 MMT to 135 MMT, Brazilian corn production by 1 MMT to 112 MMT, the Argentine soybean crop estimate by 2 MMT to 43 MMT and his Argentine corn crop peg by 1 MMT to 51 MMT. Cordonnier left his Paraguay soybean crop estimate at 8 MMT, saying he will wait for more early yield reports before making further adjustments.
China will maintain tariffs on U.S. DDGs during review period... China will maintain anti-dumping and anti-subsidy tariffs on imports of dried distillers grains (DDGs) from the U.S. while it conducts an expiry review starting Jan. 12 that could take a year to complete. On Oct. 25, China’s commerce ministry received a request for an expiry review of the antidumping duties currently at 42.2% to 53.7% and anti-subsidy duties that are at 11.2% to 12%. This comes as USDA Secretary Tom Vilsack said the U.S. is continuing to press China to remove barriers to trade for U.S. goods and fully live up to terms of the Phase 1 agreement reached between the two countries, though he didn’t specifically mention DDGs.
Vilsack updates on WOTUS... At a news conference, Vilsack acknowledged the state Farm Bureau presidents he met with before his speech to the group’s annual meeting on Monday had asked him about the proposed rewrite of the Waters of the United States (WOTUS) rule. Farm Bureau had praised the Trump-era rule, but the Biden administration has withdrawn it. Vilsack said USDA’s role in the WOTUS process is to encourage EPA to “lean in and listen” to farmers, to weigh in on the decision that EPA will reach, and once the decision is made to make sure the regulations are as easy for farmers to comply with as possible. Vilsack says he has the relationship he needs with the U.S. Army Corps of Engineers as well as EPA to achieve those goals.
Powell renomination testimony in the Senate today... Federal Reserve Chair Jerome Powell said the U.S. central bank will prevent higher inflation from becoming entrenched while also cautioning the post-pandemic economy might look different than the previous expansion. “We will use our tools to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched,” Powell said in brief remarks prepared for delivery at a confirmation hearing before the Senate Banking Committee today.
Talks start between U.S., Russia... The first day of talks between Russia and the U.S. ended after almost eight hours with a plan to keep discussing and a Russian declaration that it didn’t plan to invade Ukraine. The U.S. rejected Russian security demands on NATO and Ukraine, but the two sides talked about the possible revival of the Intermediate-Range Nuclear Forces Treaty.
CFAP payouts hold mostly steady... Payments under the Coronavirus Food Assistance Program 2 (CFAP 2) held at $19.06 billion for total payments as of Jan. 9, with $14.23 billion in original CFAP 2 payments and $4.82 billion in top-up payments. A shift in rounding moved total CFAP 1 payments up to $11.75 billion ($11.74 billion prior) while original CFAP 1 payments were at $10.56 billion and top-up payments were at $1.19 billion were unchanged.
No decision yet by the Supreme Court to hear Prop 12 petition from Farm Bureau and NPPC... This is what sources predicted last week, despite others thinking a “decision” would be announced on Monday. Said one industry contact, “We didn’t show up on the order list and have been relisted for Friday again.”
Lawmaker offers beef labeling legislation... With the Biden administration eyeing a rewrite of the “Product of the USA” label, Sen. Roger Marshall (R-Kan.) introduced the Bona Fide Beef Branding Act of 2022 that would direct USDA to eliminate the current Product of USA meat label. Instead, the new bill would create three new voluntary labels to address consumer confusion in the marketplace and help beef producers. Marshall’s bill would allow labels stating, “Processed in USA,” applying to meat that would undergo substantial transformation in a U.S. facility. The legislation would also create a label stating, “Raised and Processed in USA,” covering a live animal raised in the U.S. for not less than 100 days before processed in a U.S. facility. The third label, “Born, Raised and Processed in USA,” means the live animal was born and raised and processed in the United States. Critics of the “Product of the USA” label say a meat product that comes from other countries can qualify for the label if it is processed in the country. Key to any revisions to the voluntary Product of USA label would be what kind of restrictions are imposed as it could impact imports of cattle and/or hogs from Canada, many of which are imported into the U.S. at a young age and fed in the U.S. and processed at U.S. meat facilities.
Thailand finds ASF at slaughterhouse... Thai authorities says African swine fever (ASF) was detected in a sample collected at a slaughterhouse in Nakhon Pathom province, marking the country’s first official confirmation of the disease. As we reported in “Evening Report” on Monday, Thai officials started collecting blood samples from slaughterhouses amid growing speculation that an ASF outbreak was being hidden and decimating the Thai hog herd.
Wholesale beef prices strengthen... Wholesale beef prices firmed $4.22 for Choice boxes and $5.40 for Select on Monday. Packers moved 107 loads of product amid the sharply higher prices. Despite a strengthening product market, traders are expecting generally weaker cash cattle prices again this week, as uncertainty about how much production will be lost due to slowed processing because of absenteeism at some beef plants casts a shadow over the cash market.
Premium in February hogs narrows... The CME lean hog index is up 97 cents to $74.70. With yesterday’s sharp losses, February lean hogs finished just $3.675 above today’s cash index quote. That should limit further near-term selling in the lead contract, but traders are known to pay more attention to short-term momentum than relationships to the cash index until the final days before contract expiration. And momentum currently favors bears.
Overnight demand news... South Korea bought 259,000 MT of optional origin corn in two separate tenders but passed on a tender to buy 65,000 MT of feed wheat. Japan is seeking 107,555 MT of milling wheat from the U.S. and Canada in its weekly tender.
Today’s reports
- No reports scheduled
