First Thing Today | January 14, 2022
Followthrough selling in soybeans and wheat, corn bounces... Soybeans and wheat extended Thursday’s losses overnight, while corn mildly bounced after holding support at yesterday’s lows. As of 6:30 a.m. CT, corn is trading 1 to 2 cents higher, soybeans are 3 to 4 cents lower, SRW wheat is 4 to 6 cents lower, HRW wheat is 8 to 11 cents lower and spring wheat is 11 to 15 cents lower. Front-month crude oil futures are around 60 cents higher and the U.S. dollar index is around 100 points higher.
Martin Luther King Jr. Day schedule... Markets and government offices will be closed for Martin Luther King Jr. Day on Monday, Jan. 17. Therefore, there will be on Pro Farmer market reports or commentary. Grain markets will reopen with the overnight session at 7:00 p.m. CT on Monday, Jan. 17, while livestock markets will resume trade at 8:30 a.m. CT on Tuesday, Jan. 18.
New Covid vaccination rules on U.S./Canada border alarm shippers, carriers... As we reported in “Evening Report” on Thursday, in a last-minute reversal, Canada said it would no longer require Canadian drivers entering the country to show proof of vaccination. Although details are scarce, the U.S. has signaled that foreign truck drivers will have to show proof of inoculation to enter the U.S. starting on Jan. 22. If both countries keep their respective bans on unvaccinated foreign drivers, thousands will be taken off the roads, creating the first policy measure since the pandemic began that could limit cross-border trucking traffic. According to U.S. trade data, two-way trade in merchandise goods between the U.S. and Canada totaled over $600 billion in 2019. About 80% of those goods move on trucks, the Canadian exporter and trucking sectors estimate. Absent a bilateral solution, which is still possible, trucking and manufacturing trade groups warn of supply-chain upheaval that could lead to further price increases and a possible shortage of critical goods such as food. The American Trucking Associations is urging leaders in Ottawa and Washington to reconsider the cross-border mandates “so we can avoid any further economic disruptions.” The Canadian Trucking Alliance said a survey of Canadian truckers suggested that “at least” 10% of 120,000 truckers in the country weren’t vaccinated.
Another warning Fed may need to be more aggressive to tame inflation... Another Fed official warned the U.S. central bank would have to move interest rates up more aggressively if inflation stays high through the first half of the year. Fed governor Christopher Waller said he still thought it was reasonable to pencil in three rate increases this year, but that the rate path would ultimately depend on what inflation looks like in the second half of the year. Waller said in a Bloomberg Television interview that while three hikes in 2022 is a good baseline, the case could be made for four or even five if inflation remains too high.
China imported fewer soybeans last year for the first time since 2018... China imported 8.9 MMT of soybeans in December, bringing its total for 2021 to 96.5 MMT, down 3.8% from 100.3 MMT in 2020. That was China’s first annual decline in soybean imports since 2018, as crush demand slowed amid reduced soymeal use by China’s hog sector given poor production margins and more wheat feeding.
China posts record trade surplus in 2021... China’s exports rose 20.9% from year-ago in December, while imports jumped 19.5%. China had a record trade surplus of $94.5 billion last month, up from $71.7 billion in November. China posted a record trade surplus of $676 billion in 2021, up from $524 billion the previous year and the highest since 1950. China’s trade surplus with the U.S. was $39.2 billion in December and $396.6 billion for all of 2021, a 25% jump from 2020.
Russia’s wheat export tax declines for first time since late September... Russia’s wheat export tax for Jan. 19-25 will be $97.50 per metric ton, based on an indicative price of $339.30 per metric ton, down from the current rate of $98.20 per MT. This is the first time since the week of Sept. 22-28 the wheat tax has declined. The wheat export tax is still up 247% from the beginning of June when Russia first started using the sliding scale.
House lawmakers urge action against India’s wheat, rice subsidies... On Thursday, 28 House lawmakers sent a letter to USDA Secretary Tom Vilsack and U.S. Trade Representative Katherine Tai requesting the administration pursue a World Trade Organization (WTO) case against India’s domestic support for rice and wheat production. The U.S. has previously highlighted India’s non-compliance through counter-notifications at the WTO Committee on Agriculture. Last month, Sen. John Boozman (R-Ark.), Ranking Member of the Senate Ag Committee, led a parallel letter in the Senate that included 18 senators.
China to release oil reserves around the Lunar New Year... China will release crude oil from its national strategic stockpiles around the Lunar New Year holidays that start on Feb. 1 as part of a plan coordinated by the U.S. with other major consumers to reduce global prices, sources told Reuters. “China agreed to release a relatively bigger amount if oil is above $85 a barrel, and a smaller volume if oil stays near the $75 level,” Reuters reported one source saying, without elaborating. Meanwhile, China’s annual crude oil imports dropped 5.4% in 2021, declining for the first time since 2001, as Beijing clamped down on the refining sector to curb excess domestic fuel production while refiners drew down massive inventories.
China drafts rule to cap banks’ commercial bill financing... The People’s Bank of China (PBOC) published draft rules on Friday to strengthen risk management over the use of commercial bills and set up caps for banks’ commercial bills financing business. Banks and finance companies shall not conduct commercial bill financing business of more than 15% of their total assets, according to the draft released by PBOC. Financial institutions should also be prudent when conducting commercial paper business and take measures to prevent market risks and credit risks, according to the rules.
China’s meat imports dropped 5.4% last year... China imported 654,000 MT of meat in December, bringing the yearly total for 2021 to 9.4 MMT, down 5.4% from 2020. China’s imports of beef jumped last year, but demand for pork fell sharply amid a surge in domestic supplies as the country’s hog sector rebuilt from the African swine fever outbreak that started in August 2019.
Cash cattle trade mostly finished... There might be a few cattle left to clean up this week, but feedlots may carry them into next week in hopes of a pickup in slaughter. Due to Covid slowdowns, this week’s estimated slaughter through Thursday was down 17,000 head (3.6%) from year-ago, though up 5,000 head (1.1%) from the same period last week. Cash sources signal plants in the northern market are running stronger than in the Southern Plains.
Hog slaughter sharply below year-ago... Through Thursday, estimated hog slaughter at 1.79 million head was 63,000 head (3.4%) below last week and 186,000 head (9.4%) under the same period last year. Cash sources don’t have a good idea of how much is associated with Covid-related absences at processing plants and how much is due to reduced market-ready supplies. USDA’s December Hogs & Pigs Report implied hog slaughter should be around 6% under year-ago levels right now.
Overnight demand news... South Korea purchased 198,000 MT of corn – 133,000 MT optional origin and 65,000 MT South American or South African origin – and 50,000 MT of optional origin feed wheat. Algeria purchased an unspecified amount of milling wheat expected to be sourced from South America and the Black Sea region. Taiwan tendered to buy 49,395 MT of U.S. milling wheat.
- 11:00 a.m. Cotton and Wool Outlook Tables: January 2022 — ERS
- 11:00 a.m. Oil Crops Outlook: January 2022 — ERS
- 2:00 p.m. Feed Outlook: January 2022 — ERS
- 2:00 p.m. Rice Outlook: January 2022 — ERS
- 2:00 p.m. Wheat Outlook: January 2022 — ERS
- 2:00 p.m. Peanut Prices — NASS
- 2:00 p.m. Turkey Hatchery — NASS
- 2:30 p.m. Commitments of Traders — CFTC