First Thing Today | January 12, 2022

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Good morning!

Quiet trade overnight ahead of USDA’s reports... Corn, soybeans and wheat held in tight trading ranges overnight as traders await USDA’s January crop reports later this morning. As of 6:30 a.m. CT, corn is trading fractionally lower in most contracts, soybeans are mostly around a nickel lower, winter wheat futures are 3 to 4 cents lower and spring wheat is mostly 1 to 2 cents higher. Front-month crude oil futures are modestly higher, while the U.S. dollar index is holding near unchanged.

Barrage of January crop reports out later this morning... USDA will release its final 2021 corn and soybean crop estimates, Dec. 1 grain stocks, winter wheat seedings, along with updated U.S. and global balance sheets at 11 a.m. CT. Because there’s so much data, there are bound to be some surprises and the reports have potential to swiftly move markets. Click here for pre-report estimates.

China lowers corn consumption forecast... China’s ag ministry lowered its forecast for 2021-22 corn consumption amid slowing demand from both the feed sector and industrial users. The country’s 2021-22 corn consumption is now forecast at 287.7 MMT, down 3 MMT from last month, but that would still be up 5.5 MMT from 2020-21. It continues to call for corn imports of 20 MMT in the current marketing year, down 9.56 MMT from 2020-21. China’s ag ministry made no changes to the soybean balance sheet this month. It forecasts soybean imports will reached 102 MMT in 2021-22, up 2.22 MMT from the previous marketing year.

FAS official predicts China Phase 1 shortfall at $5 billion to $6 billion for ag products... Foreign Agricultural Service (FAS) Administrator Dan Whitely predicted shipments of ag goods to China in December should be $5 billion to $6 billion, bringing the 2021 total to around $36 billion. In remarks at the American Farm Bureau Federation (AFBF) meeting, Whitely said that would mark a new record for U.S. ag exports to China, but one that could be even higher if Beijing would remove barriers to trade. Whitley said he expects China will end up being around $5 billion to $6 billion shy of its Phase 1 ag commitments. That is a narrower figure than suggested by USDA Secretary Tom Vilsack earlier this week in his AFBF remarks when he said it appeared China was about $16 billion “light” on its Phase 1 commitments. Whitely also said USDA and the Office of the U.S. Trade Representative were looking at the tariff exclusion process as the initial round of exclusions “left off a lot” of agricultural products, including inputs. Another factor ahead could be additional Section 301 trade actions to address unfair activities by China. He acknowledged there is a fear in agriculture that the sector could be targeted further if the U.S. were to levy more trade actions against China.

France cuts wheat export forecast... FranceAgriMer lowered its forecast for 2021-22 French soft wheat exports outside the European Union to 9 MMT, down 200,000 MT from last month. The French farm office also cut its forecast of soft wheat exports within the 27-member bloc by 100,000 MT to 7.7 MMT. It increased its projection of French soft wheat ending stocks for 2021-22 by 100,000 MT to 3.6 MMT.

World Bank warns pandemic will slow economic growth in 2022... Global economic growth is expected to slow to 4.1% this year from 5.5% in 2021, according to the World Bank, as output is expected to be weaker and inflation is likely to be hotter than previously thought. Growth is expected to drop further to 3.2% in 2023. “The Covid-19 crisis wiped out years of progress in poverty reduction,” David Malpass, the World Bank president, wrote in an introduction to the report. “As government’s fiscal space has narrowed, many households in developing countries have suffered severe employment and earning losses — with women, the unskilled and informal workers hit the hardest.”

China’s producer, consumer inflation rises at slower rates in December... China’s producer price index (PPI) climbed 10.3% from a year earlier in December, slower than the 12.9% jump in November and less than economists expected. Factory-gate prices rose more slowly than expected in December after government measures to contain high raw material prices. China's consumer price index (CPI) grew 1.5% versus year-ago in December, down from a 2.3% rise in November and below expectations. Food prices fell 1.2%, the second drop in three months, after a 1.6% gain in November as pork prices plunged 36.7% from year-earlier levels.

China had record bank loans in 2021... Chinese banks extended 1.13 trillion yuan ($178 billion) in new loans in December, down from 1.27 trillion yuan in November. Despite new loans falling more than expected last month, lending in 2021 set a record at 19.95 trillion yuan (313 billion) for the year, up 1.6% from 2020, as the central bank ramped up policy support to cushion the slowing economy. China’s central bank cut reserve requirement ratios (RRR) twice in 2021 and also lowered the rates on its relending facility by 25 basis points to support the rural sector and small firms. Most analysts expect further cuts to RRR this year, with some also penciling in modest cuts in policy rates if economic activity continues to slow.

Russia-NATO talks today... NATO members meet with Russian representatives in Brussels today for the first NATO-Russia Council since 2019. U.S. Deputy Secretary of State Wendy Sherman, following her bilateral discussions on Monday, will represent the United States. Ahead of the talks, Kremlin spokesman Dmitry Peskov said his side saw no “no significant reason for optimism” and would not be satisfied “with the endless dragging out of this process.”

Farm Bureau votes for boost in reference prices... The full voting membership adopted a report of the Resolutions Committee calling for a reference price increase for all Title I commodities, increased commodity loan rates and inflation-adjusted farm program payment limits. Farm Bureau President Zippy Duvall said the final decisions on these policies would be made by the Farm Bureau board. The delegates debated whether to support the proposal by some senators to require a set percentage of cash sales. Duvall said the Farm Bureau board would decide its position on the Grassley-Fischer bill after comparing it to the Farm Bureau positions. The delegates adopted a resolution that said Farm Bureau supports the rights of producers and packers to enter into formula pricing, grid pricing and other marketing arrangements and contract relationships with a goal of “increasing the share of negotiated sales in fed cattle markets with a central focus on providing price transparency.”

House ag panel to look at EV impacts to ag, rural areas... The House Agriculture Committee is holding a hearing today on the implications of electric vehicle (EV) spending for rural areas and the agriculture sector. David Strickland, vice president of global regulatory affairs at General Motors, and Trevor Walter, vice president of petroleum supply management at Sheetz, are among the witnesses before the panel. “Fuel retailers already have the real estate that customers visit when they refuel,” Walter, testifying on behalf of National Association of Convenience Stores, said in written testimony. “Until consumers see alternatives like electricity at the outlets where they currently refuel, they will not adopt those alternatives in large numbers.”

House, Senate panels to review WRDA... The House Transportation and Infrastructure Committee wants to know how the Army Corps of Engineers is implementing funding for water projects included in the bipartisan infrastructure law, Chairman Peter DeFazio (D-Ore.) said in prepared remarks in advance of this morning’s subcommittee hearing kicking off work on the 2022 Water Resources Development Act (WRDA). It also wants info on changes to the harbor maintenance trust fund enacted in 2020. The infrastructure law which President Joe Biden signed into law on Nov. 15, provided more than $17 billion to the Corps, with $11 billion targeted specifically for project construction. Congress directed the Corps to submit a specific spending plan to the appropriations committees within 60 days of the law’s enactment, a date that is fast approaching.

Air France adds charge for sustainable aviation fuel... The Franco-Dutch company said it will add to tickets a surcharge of up to 12 euros ($13.50) in order to help pay for the use of pricey sustainable aviation fuel (SAF). “In the absence of industrial production, the cost of using sustainable aviation fuels is four to eight times higher than that of fossil fuels,” Air France-KLM said in a statement yesterday.

Cash cattle trade starts at lower prices... Cash cattle trade started in the $136 to $137 level on Tuesday, down around $1 to $2 from last week. Despite the weaker cash trade, February live cattle led a corrective price recovery in futures. The weaker cash tone may limit followthrough buying interest, but traders should want to maintain some premium in front-month futures.

February hogs’ premium to cash almost gone... February lean hog futures settled at $77.85 on Tuesday, just $2.72 above the CME lean hog index quote of $75.13, which is up another 43 cents. Traders are concerned about the wave of Omicron infections hurting U.S. and/or global demand and also fear packers may have to continue slowing slaughter rates due to worker absenteeism. We feel these concerns are overblown and futures are undervalued with the cash index rising.

Overnight demand news... Japan is seeking 80,000 MT of feed wheat and 100,000 MT of feed barley. Iran tendered to buy a nominal 60,000 MT of milling wheat from unspecified origins.

Today’s reports

 

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