First Thing Today | January 19, 2022

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Good morning!

Broad price strength across the grain and soy complex overnight... Soybeans rebounded from Tuesday’s losses overnight, while wheat and corn extended yesterday’s gains. As of 6:30 a.m. CT, soybeans are trading 9 to 13 cents higher, corn is around 6 cents higher and wheat is mostly 11 to 18 cents higher, led by HRS contracts. Front-month crude oil futures are around $1.10 higher and the U.S. dollar index is around 130 points lower this morning.  

U.S./Russia talks continue... U.S. Secretary of State Antony Blinken will meet with Sergey Lavrov, Russia’s foreign minister, in Geneva on Friday as the two sides explore whether there is still a diplomatic path to avoiding a conflict in Eastern Europe. Negotiating sessions last week ended in an impasse. Meanwhile, Russia revealed it is discussing a joint naval exercise with Iran and China.

Biden to hold press conference... The press briefing is scheduled for 3 p.m. CT and comes amid soaring energy and food bills while the Omicron variant of Covid surges across the country. Gasoline prices are rising, adding to inflationary pressures and complicating matters for President Joe Biden, who released crude from the strategic reserve in the fall in an attempt to help drivers facing shock at the pump. The national average gasoline price stands at $3.314 a gallon, according to AAA, up from $2.386 a year ago. Meanwhile, Russia is becoming Biden’s worst foreign policy crisis since his hasty retreat from Afghanistan, with a potential Russian invasion of Ukraine.

British inflation hits nearly 30-year high... The annual rate of British consumer price inflation increased to 5.4% in December from November’s 5.1%, the highest since March 1992. In December, the Bank of England (BOE) became the first major central bank to raise interest rates in an attempt to combat surging inflation. Financial markets now price in a more than 90% chance BOE will raise its main interest rate again on Feb. 3.

China’s zero-Covid policies disrupting Asian trade... China’s strict Covid policies are impacting routes across its land borders that are lifelines for the region’s farmers and merchants, the Wall Street Journal reports. In neighboring Vietnam, thousands of trucks laden with dragon fruit, jackfruit, watermelons and other produce have been backed up at the border awaiting passage for weeks. Their trips were disrupted after Chinese authorities toward the end of last year suspended operations at several gates or slowed traffic citing a need to contain Covid-19. For Vietnam’s farmers and traders, not being able to reach Chinese consumers is crippling.

PBOC comments spark speculation of near-term China rate cut... China’s central bank “should hurry up, make our operations forward-looking, move ahead of the market curve, and respond to the general concerns of the market in a timely manner,” People’s Bank of China (PBOC) Vice Governor Liu Guoqiang said on Tuesday, calling for policies that would help economic stability. That comment sparked heightened expectations that the country's benchmark lending rate will be cut as early as this week to shore up the cooling economy. Liu’s comments followed an unexpected cut to borrowing costs for medium-term loans on Monday, as we reported yesterday.

China takes more steps to help embattled real estate sector... China is drafting nationwide rules to make it easier for property developers to access pre-sale funds held in escrow accounts, in its latest move to ease a severe cash crunch in the embattled sector, four people with knowledge of the matter told Reuters. The new rules would help developers meet debt obligations, pay suppliers, and finance operations by letting them use the funds in escrow that are currently controlled by the municipal governments with no central oversight, the sources said. Beijing aims to roll out the new rules by as early as end of this month in a push to prevent a wider crisis within the real estate sector.

IEA: Global oil demand will top pre-pandemic levels... Global oil demand will exceed pre-pandemic levels this year thanks to growing Covid-19 immunization rates and as recent virus waves haven’t proved severe enough to warrant a return to strict lockdown measures, the International Energy Agency (IEA) said. In its monthly oil market report, IEA hiked its oil demand growth forecast for 2022 by 200,000 barrels a day (bpd) to 3.3 million bpd. Total demand this year should stand at 99.7 million bpd, around 200,000 bpd more than 2019 levels, IEA said. Last month IEA was expecting this year’s oil demand to be broadly on par with pre-pandemic levels.

U.S. finds more avian flu in wild birds... USDA reported two more cases of highly pathogenic avian flu in wild birds late Tuesday afternoon, one in Colleton County, South Carolina, where Friday’s infection was found in a wild duck, and another in Hyde County, North Carolina. USDA said all three confirmed cases are a Eurasian H5 type of the virus and the H5N1 strain. There have been no trade disruptions for U.S. poultry from the avian flu findings in wild birds.

No Supreme Court decisions on ag case petitions...  The cases of primary note for agriculture involve California’s Proposition 12 (sow housing) and federal wetland regulations. The court’s next conference is Friday, the last one for a month.

USDA seized more than $1.7 million in prohibited agricultural products in 2021... USDA’s Animal and Plant Health Inspection Service (APHIS) Smuggling Interdiction and Trade Compliance (SITC) program seized 224,568 pounds of prohibited agricultural items valued at over $1.7 million in 2021, the agency said. The items included 1,900 pounds of prohibited pork, poultry and ruminant products in the New York City area that were seized during October-December.

Cattle slaughter rebounds a little... USDA estimated cattle slaughter through the first two days of the week at 230,000 head, up 3,000 head from last week and even with year-ago. While the cash cattle market has been negatively impacted by slaughter slowdowns due to worker shortages, it’s had a positive effect on wholesale beef prices. Strong retailer demand and reduced production has strengthened wholesale beef prices. Choice boxes firmed $1.63 and Select gained $1.34 Tuesday.

Wholesale pork prices can’t hold morning gains... The pork cutout value traded $1.79 higher Tuesday morning, but faded $4.73 for the day, falling back below $90.00. That’s a level where packers have struggled to find sustained retailer demand. The cutout market as a whole remains volatile, with ham prices leading the volatility. Ham prices firmed $10.68 Tuesday morning but plunged to a $10.65 decline for the day, pulling the cutout value down.

Overnight demand news... Japan received no offers from a tender to buy 80,000 MT of feed wheat and 100,000 MT of feed barley. Jordan tendered to purchase 120,000 MT of optional origin milling wheat. Iran tendered to buy 60,000 MT of milling wheat.

Today’s reports

 

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