First Thing Today | January 4, 2022

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Good morning!

Firmer tone overnight... Soybean futures built on Monday’s gains overnight, while corn and wheat mildly rebounded from yesterday’s losses. As of 6:30 a.m. CT, soybeans are trading mostly 4 to 8 cents higher, corn is 3 to 4 cents higher, HRW wheat is 5 to 6 cents higher, while SRW and HRS wheat futures are 1 to 2 cents higher. Front-month crude oil futures are just above unchanged, while the U.S. dollar index is around 225 points higher this morning.

Consultant further cuts South American crop estimates... Extreme weather continues in Brazil with some southern areas of the country staying dry for over 60 days and northern growing regions not seeing any sunshine over that period. As a result, Crop Consultant Dr. Michael Cordonnier cut his Brazilian soybean crop estimate another 2 MMT to 138 MMT. He lowered his Brazilian corn crop estimate by 1 MMT to 113 MMT. Cordonnier has been hesitant to make cuts to his Argentine soybean crop estimate “because the crop was still being planted and in vegetative development.” But with above-normal temps and below-normal rainfall continuing to stress soybeans in northern and eastern areas of the country, he cut his estimate by 3 MMT to 45 MMT. Since he was already at the low end of most private estimates, he left his Argentine corn crop peg at 52 MMT. Cordonnier also left his soybean estimate for Paraguay at 8 MMT, even though the situation in the country is “bad and getting worse.”

Brazilian states declare emergencies due to drought, flooding... The government of Mato Grosso do Sul today declared an emergency situation due to the lack of rain in the state. A state of emergency was previously declared in Parana due to drought, while some municipalities in Rio Grande do Sul (drought) and Bahia (flooding) also have declared emergencies.

HRW crop conditions plunged in December... Individual state crop conditions ratings released on Monday showed major deterioration of the HRW wheat crop during December. The “good” to “excellent” ratings for HRW wheat plunged 29 points in Kansas, 28 points in Oklahoma, 13 points in Colorado and 25 points in Nebraska during December. The “good” to “excellent” ratings for HRW wheat improved two points in South Dakota and five points in Montana over the past month. Texas did not release updated crop condition ratings. The largest SRW producer Illinois reported a four-point drop in “good” to “excellent” ratings during December. Most SRW states did not update crop ratings.

Biden to fight meatpackers on inflation... President Joe Biden promised to “fight for fairer prices” for farmers and consumers yesterday as he announced plans to combat the market power of the giant conglomerates that dominate meat and poultry processing. “Capitalism without competition isn’t capitalism, it’s exploitation,” Biden said. “That’s what we’re seeing in meat and poultry.” Biden joined USDA Secretary Tom Vilsack and Attorney General Merrick Garland to meet virtually with ranchers and farmers to hear complaints about consolidation in the industry, ratcheting up a campaign blaming anti-competitive practices in the industry for contributing to surging food inflation. Click here for our special report on the topic.

White House will press ahead with tighter labelling standards for ‘Product of USA meat products... This would hurt large producers and processors that rely on imports in their production process and could fuel tensions with exporters of meat to the U.S. who have often complained of barriers to access the U.S. market. “Under current labelling rules, meat can be labelled ‘Product of USA’ if it is only processed here — including when meat is raised overseas and then merely processed into cuts of meat here. We believe this could make it hard for American consumers to know what they are getting,” the White House said on Monday.

China’s factories expanded in December... China’s official manufacturing purchasing managers index (PMI), which gauges larger and state-owned factories, rose to 50.3 last month from 50.1 in November. China’s Caixin/Markit manufacturing PMI rose to 50.9 in December, signaling expansion of smaller and privately owned firms. That was the highest Caixin/Markit manufacturing PMI reading since June.

Factory supply strains start to ease... Factories in Europe and the U.S. reported a further easing of supply-chain problems and associated cost increases as 2021 ended, although the rapid spread of the Omicron variant of Covid threatens to worsen shortages of labor and supplies. Factories around the world have faced shortages since the end of 2020 as a surge in consumer demand took many by surprise at a time when shipping and other parts of the logistics network were in disarray. Those shortages have held back growth and helped drive a pickup in consumer price inflation. According to surveys of purchasing managers, there were some signs of a modest easing of bottlenecks in the final months of last year as Asian factories reopened following pandemic-related lockdowns.

Little change in CFAP figures... Payments under the Coronavirus Food Assistance Program (CFAP) showed little change as of Jan. 2, with total CFAP 2 at $19.06 billion – original CFAP 2 payments at $14.23 billion ($14.24 billion the prior week) and top-up payments remained at $4.82 billion. Figures for CFAP 1 remained at $11.74 billion, including $10.56 billion in original CFAP 1 payments and $1.19 billion in top-up payments.

Solid start for wholesale beef... Wholesale beef prices firmed 77 cents for Choice boxes and 67 cents for Select, while packers moved a solid 129 loads of product at the higher prices. Choice cuts accounted for 81 loads of the total, while trimmings and ground beef only totaled 28.6 loads, suggesting retailers continued buying pricier and high-graded beef, which was also the case ahead of the holidays when wholesale prices started to show signs of bottoming.

Prices drop, but packers move a lot of pork... The pork cutout value dropped $5.33 Monday amid losses in loins, hams, bellies and picnics. If there was a silver lining, it’s that packers pushed a strong 381.31 loads of product out the door at the lower prices. But traders will want to see prices stabilize and movement stay strong to encourage them the market is well supported.

Overnight demand news... Tunisia tendered to buy 125,000 MT of soft wheat, 75,000 MT of durum and 75,000 MT of feed barley from unspecified origins.

Today’s reports


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