First Thing Today | January 5, 2022
Wheat leads overnight price pullback... Wheat futures erased most or all of Tuesday’s gains overnight, while corn and soybeans mildly favored the downside. As of 6:30 a.m. CT, corn futures are trading mostly 2 cents lower, soybeans are around a penny lower in most contracts and wheat futures are 7 to 10 cents lower, led down by HRW contracts. Front-month crude oil futures around 25 cents higher and the U.S. dollar index is around 200 points lower this morning.
Talk of China buying U.S. soybeans, corn... Part of the explosive move higher in soybean and corn futures on Tuesday was tied to unconfirmed rumors China was in the market for supplies of both U.S. commodities. If China indeed booked U.S. soybeans and corn yesterday, it should be confirmed via daily sales announcements by week’s end.
Supply Chain Disruptions Task Force signals progress in the supply-chain congestion... Some progress the task force noted:
- A nearly 50% reduction in containers dwelling at the ports of Los Angeles and Long Beach for more than eight days, according to John Porcari, Port Envoy to the White House Supply Chain Disruptions Task Force. “This is striking progress since November,” President Joe Biden said.
- Five days was the average dwell time for containers at the Port of Long Beach, down from 12 days in mid-October, Porcari said.
- Four days was the average dwell time for containers at the Port of Los Angeles, down from nine days in mid-October.
- $17 billion of funding is available in the bipartisan infrastructure framework (BIF) deal to speed and modernize the ports.
- There has been a 25% drop in ocean shipping prices between Asia and the West Coast, White House Press Secretary Jen Psaki said in a briefing following the task force meeting. Freightos data shows rates around $14,500 from Asia to the West Coast — a dip from peaks in September but still more than triple the rates in December 2020.
Supreme Court to consider E15 case during Jan. 7 conference... The U.S. Supreme Court is scheduled to consider whether it will review a July 2, 2021, decision handed down by the U.S. Court of Appeals for the D.C. Circuit that vacated an EPA rule allowing year-round E15 sales during its Jan. 7 conference.
China to auction more wheat reserves... China will auction another 500,000 MT of state-owned wheat reserves on Jan. 12. This is the second straight week of wheat sales from state reserves after China had not held any auctions since October.
China to ensure stable economic growth in Q1... China will ensure stable economic growth in the first quarter of 2022, state radio quoted Premier Li Keqiang as saying. Beijing will implement larger tax and fee cuts and will provide targeted support for Covid-affected sectors such as services, Li said. Beijing will also increase transfer payments to local governments. Zhang Ming, senior economist at the Chinese Academy of Social Sciences, a top government think-tank, said the government would adopt “more expansionary” policies this year to prevent growth slowing further from the fourth quarter of last year. He says China’s economy could grow 5.3% to 5.5% this year.
Walmart/Sam’s Club denies it purposely removed items from Xinjiang... Walmart branch Sam’s Club denied it deliberately removed products sources from Xinjiang in a call with analysts, terming the situation “a misunderstanding.” A Sam’s Club says Chinese consumers failed to find products from Xinjiang because the app does not support searches for products based on names of places. Chinese social media users and local news outlets criticized Sam’s Club last week for the removal of the products from its domestic online stores. China’s anti-graft agency accused the retailer of “stupidity and short-sightedness” over the matter.
Notices published on Canada’s request for USMCA case in lumber duties decision... Canada Dec. 21 said it would request a dispute settlement panel under the U.S.-Mexico-Canada Agreement (USMCA) be established over the increased duties on imports of Canadian softwood lumber that were levied by the International Trade Administration (ITA), a unit of the U.S. Department of Commerce (DOC). ITA’s review of anti-dumping and countervailing duties saw the levies on imports of Canadian softwood lumber rise to 17.9%. Two notices appear in today’s Federal Register on the Dec. 28 filing of a request for a review panel by Conseil de l'Industrie Forestiere du Québec, Ontario Forest Industries Association, and several private companies with another by the governments of Alberta, British Columbia, New Brunswick, Ontario, Québec and several lumber associations and lumber companies. The dispute settlement provisions under USMCA do have finite deadlines and thus this situation may set the stage for an eventual resolution to this decades-old dispute between the U.S. and Canada.
‘The Great Resignation’... More than 4.5 million Americans quit their jobs in November, the most in two decades of tracking, as openings remained near a record. The rate of quitting has been especially high in hospitality and other low-wage sectors, where workers have been taking advantage of strong demand to look for jobs with better pay or working conditions. Wells Fargo analysts note: “Job openings dipped over November to end the month at 10.6 million. Along with some easing in the share of small businesses planning to hire, demand for workers appears to be cooling off a touch, although it remains plenty hot. With openings and hiring plans still near record rates, we look for hiring to have rebounded after November’s underwhelming initial gain of 210,000, and have penciled in an increase of 400,000 jobs in December’s payroll report to be released on Friday. While the emergence of the Omicron variant in late November represents a risk to how vigorously firms tried to staff up in December, the biggest headwind to hiring remains the availability of workers. The number of unemployed workers per job opening fell to a fresh record low of 0.65 in November, leaving businesses increasingly reliant on workers returning to the labor force.”
JBS investigation urged by U.S., European lawmakers... Senate Foreign Relations Committee Chairman Bob Menendez (D-N.J.), U.K. House of Commons MP Ian Liddell-Grainger and European Parliament Committee on Agriculture and Rural Development Chair Norbert Lins called for a coordinated investigation into Brazilian-owned company JBS, its parent company J&F Investimentos and subsidiaries in Europe and the United States. “We also encourage our governments to scrutinize JBS’ antitrust and anticompetitive practices and assess whether the company’s abuses could permanently damage food supply chains,” the lawmakers said in a statement.
Cash cattle trade likely slow to develop... Sharp pressure on cattle futures the first two days this week is likely to give packers pause in actively bidding for cash cattle after hiking bids sharply last week. At the same time, feedlots likely aren’t in any hurry to move cattle at lower prices. With bids and asking prices not yet established, it appears it will be late in the week before there’s active cash trade.
Cash hog index jumps... The CME lean hog index is up 90 cents to $72.75, the highest level since Dec. 20. While the cash index looks to have put in an early seasonal low in late November, the rise from that level has been limited. Even with yesterday’s decline in February hog futures, the lead contract is still $7.40 above the cash index, which is more than a normal seasonal rally from now until mid-February.
Overnight demand news... Tunisia purchased around 125,000 MT of soft wheat, 75,000 MT of durum and 75,000 MT of feed barley from unspecified origins.