First Thing Today | January 24, 2022

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Good morning!

Wheat firmer, corn and beans weaker to start the week... Wheat futures were supported by increased geopolitical tensions between Russia and Ukraine, while soybeans and corn were pressured by South American weather. As of 6:30 a.m. CT, corn futures are trading 1 to 2 cents lower, soybeans are 4 to 7 cents lower, winter wheat futures are 5 to 9 cents higher and spring wheat is mostly 2 to 3 cents higher. Front-month crude oil futures are near unchanged, while the U.S. dollar index is more than 300 points higher this morning.

Argentina gets needed rains, scattered showers in southern Brazil... Rainfall in Argentina during the weekend was “significant and further improved soil moisture and crop conditions,” according to World Weather Inc., while temps in northern locations were hot. Scattered showers are expected across the country the first half of this week. Light and scattered rains were seen across portions of southern Brazil during the weekend, though much of the rainfall was too light to counter evaporation. World Weather says much of Brazil will receive “very well distributed” rainfall the next two weeks.

Russia/Ukraine situation growing in importance... The U.S. and Russia have agreed to continue negotiations over Russia’s buildup of troops along the Ukraine border, but in a major development, the New York Times reported President Joe Biden is considering deploying troops to eastern Europe and the Baltics. Meanwhile, Russia’s Foreign Ministry on Sunday rejected a British claim that President Vladimir Putin is seeking to replace Ukraine’s government with a pro-Moscow administration. Secretary of State Antony Blinken signaled the U.S. and its European allies were prepared to make a “united response” against any further Russian aggression Ukraine, following his diplomatic trip through Europe last week. The U.S. State Department on Sunday ordered the departure of eligible family members from the U.S. Embassy in Kyiv, Ukraine, and said American citizens in the country should consider departing now.

U.S. food system is under renewed strain... The Omicron variant of Covid is stretching workforces from processing plants to grocery stores, leaving gaps on supermarket shelves, the Wall Street Journal reports. Food-industry executives and analysts warn the situation could persist for weeks or months, even as the current wave of Covid-19 infections eases. Recent virus-related absences among workers have added to continuing supply and transportation disruptions, keeping some foods scarce.

The week ahead in Washington... The focus in Washington will be on the Federal Reserve’s two-day monetary policy meeting Tuesday and Wednesday. Fed watchers believe this will be the meeting in which central bank officials tip their hands on raising interest rates in March, with a keen interest on what words the Fed uses on forward guidance. The market is pricing in an 88% chance of a quarter-point interest rate increase in March, though some believe the Fed will be more aggressive. Congress is out on another recess this week.

Biofuels policy questions elicit strong pledge from Vilsack... During last Thursday’s hearing at the House Ag Committee, USDA Secretary Tom Vilsack bristled at suggestions the Biden administration has not been supportive of the biofuel industry and by extension farmers, countering they have been very supportive of the biofuel industry. He pointed out that there are “800 million reasons why we're doing that: $800 million provided the biofuel industry in terms of support during the pandemic, as well as the $100 million dollars to expand access to higher blends, the ability to have consumers have access to higher blends.” Some lawmakers noted the 15-billion-gallon level for conventional biofuels was a positive from the administration relative to the Renewable Fuel Standard (RFS), with one lawmaker recounting a recent Reuters report that EPA was considering lowering the mark for 2022 relative to conventional ethanol. Vilsack said the 15-billlion-gallon figure was a “real number” that will provide stability for the industry. “The stability comes not just in setting a number but in making sure that that number is real,” he stressed, noting that the prior Trump administration set the conventional ethanol level at 15 billion gallons but used small refinery exemptions to reduce that figure. “EPA basically said 65 waivers… not going to grant them, not going to approve them. The number we’re giving you is a real number, and you can count on it. And I think the stability is going to be very helpful to this industry.”

China begins review of duties on U.S. DDGs... China’s commerce ministry will decide whether to renew its steep anti-dumping and countervailing duties on U.S. dried distillers grains (DDGs) with or without solubles. China is accepting public comments through Feb. 7, according to USDA’s Foreign Agricultural Service. China was the largest foreign market for U.S. DDGs before the commerce ministry levied the steep anti-dumping and countervailing duties. The U.S. exported 6.5 MMT of DDGs to China in 2015, worth $1.6 billion, according to the U.S. Grains Council.

China sells 94% of wheat put up for auction... China sold 468,738 MT of state wheat reserves it auctioned last week, 94% of the total put up for sale. The average sales price was 2,630 yuan (around $415) per metric ton, down from 2,713 yuan ($427) per metric ton the previous week.

Algeria to reduce grain imports by around 25%... Algeria will reduce its grain imports by 25% to 26% in 2021-22 it produces 27 million to 30 million quintals (2.7 MMT to 3.0 MMT), as expected, state news agency APS quoted the agriculture minister as saying.

Cold Storage Report out this afternoon... USDA’s Cold Storage Report will detail meat stocks in frozen storage as of Dec. 31. The five-year average is an 8.8-million-lb. build in beef stocks and a 12.8-million-lb. decline in pork stocks during December.

Bearish Cattle on Feed Report... All three categories in USDA’s Cattle on Feed Report were on the bearish side of the average pre-report estimates. A bigger-than-expected jump in placements pushed the Jan. 1 feedlot inventory higher than expected. The bulk of the price pressure should be felt in deferred live cattle futures, though the rise in placements was in the lightest four categories, meaning the marketings will be spread out. Plus, Cattle on Feed Reports rarely have much lasting price impact on the market and we expect focus to quickly return to wholesale price action and the cash cattle market.

 Will bullish momentum continue or will hogs correct?... Lean hog futures rallied sharply last week and while they backed off their highs into the close Friday, still finished solidly higher. Bullish momentum is strong and the CME lean hog index is up 72 cents today to $77.51. But February hogs finished Friday at an $8.69 premium to the cash index and deferred contracts are overbought, which could trigger corrective trade – either via a pause or a short-term price pullback.

Weekend demand news... Exporters reported no tenders or purchases.

Today’s reports


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