First Thing Today | January 3, 2022
Bullish start to 2022... The first trading session of the new year started with a bang as soy futures led overnight gains in the grain and soy complex. As of 6:30 a.m. CT, soybeans are trading mostly 19 to 22 cents higher, soymeal is $4-plus higher, soyoil is around 90 points higher, corn is mostly 6 to 7 cents higher and wheat is 4 to 8 cents higher. Front-month crude oil futures are around 50 cents higher and the U.S. dollar index is around 150 points lower this morning.
Gov’t closed for a snow day... The Office of Personnel Management has declared today a snow day for the federal government, meaning federal offices are closed to all but essential personnel. In the past, USDA has still released weekly export inspections data when offices are closed. We are checking to see whether the grain and soy crush reports scheduled for this afternoon will be released.
Some rains in southern Brazil and Argentina, but more needed... Rainfall was limited from southwestern Mato Grosso through much of Mato Grosso do Sul to western Sao Paulo, Parana, Santa Catarina and western and northern Rio Grande do Sul as well as Paraguay Friday through Sunday afternoon, according to World Weather Inc. Rain was heavier across central and northeastern Brazil. Extreme heat was seen across far southern Brazil during the weekend. Beneficial rains fell across central Brazil during the weekend, but rains were lighter and excessive heat was noted across northeastern areas of the country. World Weather says periodic rains will offer some relief in southern Brazil over the next 10 days, while rainfall will remain frequent in northeastern areas. Conditions will remain favorable in far western and central Argentina, though any rains in northeastern areas won’t be enough to counter the expected hot temps. World Weather says, “A ridge of high pressure is expected to build up across Argentina after day ten of the forecast (around Jan. 12-13) and prevail through mid-month, which may lead to drier and warmer weather for Argentina, southern Brazil, Uruguay and Paraguay.”
Limited winterkill likely occurred for U.S. winter wheat... U.S. hard red winter wheat production areas experienced bitter cold temps during the weekend and snowcover was not as well distributed as it could have been. Patches of winterkill may have occurred due to thinly covered wheat and some extreme temps in some areas. World Weather says, “Damage cannot be ruled out from southwestern Nebraska, Colorado, extreme northwestern Kansas or some of the more seriously drought impacted areas in the Texas Panhandle, but the odds of widespread crop loss are very low.”
California’s Prop 12 took effect Jan. 1... California’s Prevention of Cruelty to Farm Animals Act, also known as Proposition 12, took effect on Saturday that is expected to have major impacts on the pork industry and product prices. The law establishes minimum space requirements for farm animals and prohibits the sale of meat from animals raised in housing that doesn’t meet its specifications. For more details, click here. Sources note a petition by NPPC and Farm Bureau on Prop 12 is scheduled for a Supreme Court conference on Jan. 7. “There is a high likelihood they [Supreme Court] will have an initial discussion in conference on Jan. 7, then wait until Jan. 14 to make a final decision on taking the case or not. If they do that, we would find out likely at about 9:30 am ET on Tuesday, Jan. 18,” a contact detailed. “The court isn’t deciding the case, they are merely deciding whether to take the case up.”
Grain, soy crush reports scheduled for this afternoon... Traders expect USDA to report soybean crush totaled 191.8 million bu. in November, based on a Bloomberg survey. If realized, that would be down from the all-time record of 196.9 million bu. in October but up slightly from November 2020. Traders expect USDA to report corn-for-ethanol use at 453.1 million bushels. If realized, that would be down from 469.3 million bu. in October but up from 431.7 million bu. in November 2020.
Russia/Ukraine update... As Russia amasses about 100,000 troops on Ukraine’s eastern frontier, Washington, Moscow and NATO member states are set to meet for talks early this month. President Joe Biden conferred on Sunday with Ukrainian president Volodymyr Zelensky, promising the U.S. and allies will act “decisively” if Russia further invades Ukraine. Russian President Vladimir Putin has previously refused to rule out military action and has warned he has “all kinds” of options if his demands for “security guarantees” to limit NATO expansion are unmet.
Heilongjiang to expand soybean area... The Heilongjiang province in Northeast China will increase its soybean planting area by 10 million mu (about 666,667 hectares or 1.6 million acres) in 2022, local authorities said. The province is China’s top soybean producer.
The week ahead in Washington... The Senate returns today with some leftover issues from last year left to take care of, most prominently a scaled-back Build Back Better (BBB)/social spending measure that will get acceptance of centrist Sen. Joe Manchin (D-W.Va.). Work will also start on a fiscal year 2022 spending measure, as the current stopgap continuing resolution runs through Feb. 18. The key economic data this week is Friday’s employment report, which is expected to show a gain of 374,000 non-farm payrolls in December, up from 210,000 jobs added the previous month. On Wednesday, the Fed will release minutes from its Dec. 14-15 Federal Open Market Committee meeting, which will be combed through for details on the Fed’s plans to ramp up tapering of its asset purchases and insights into the path of monetary policy amid surging inflation.
Child tax credit ends... Families are bracing for bank balances to suffer when the monthly child-tax-credit payment doesn’t come this month. More than 30 million households started getting up to $300 per child in July after Congress temporarily transformed an annual tax break into a near-universal monthly benefit. Families spent the money on essentials like groceries and stashed it as emergency savings, researchers found, according to the Wall Street Journal. Democrats hailed the expansion as a simple yet groundbreaking policy that would prove so popular and beneficial that Congress wouldn’t let it lapse. But it just lapsed.
Antitrust actions remain in focus... Agriculture remains one of the focal points for the Biden administration on the antitrust front, with President Biden opening the week with a virtual meeting at 12:30 p.m. CT with Attorney General Merrick Garland, USDA Secretary Tom Vilsack and independent farmers and ranchers. The session is aimed at discussing the administration’s efforts to boost competition and reduce prices in the meat processing industry. The officials will listen to complaints about consolidation in the industry, while launching a new portal to allow farmers and ranchers to report unfair trade practices by meatpackers.
Cattle traders will monitor cash trade, beef movement... Packers raised cash cattle bids last week, ending the downturn in cash prices the previous couple weeks. Beef movement also improved last week, suggesting retailers began restocking for after the holidays. The level of post-holiday beef movement could be an indicator of whether packers will raise cash cattle prices to open the new year.
Focus will be on cash hog market... Packers will be working with a full slaughter schedule for the first time in a couple of weeks. With slaughter numbers continuing to run well under year-ago levels, that could increase post-holiday demand for hogs and support the cash market. If the cash market doesn’t show strength early this week, an extension of Friday’s corrective pullback would be likely.
Weekend demand news... Exporters reported no tenders or purchases.
Today’s reports
- 10:00 a.m. Export Inspections — AMS
- 2:00 p.m. Cotton System Consumption and Stocks — NASS
- 2:00 p.m. Fats & Oils: Oilseed Crushings, Production, Consumption and Stocks — NASS
- 2:00 p.m. Grain Crushings and Co-Products Production — NASS
