First Thing Today | January 7, 2022
Wheat leads overnight price declines... Wheat futures extended their sharp price drop overnight, while corn and soybeans also declined. As of 6:30 a.m. CT, wheat futures are mostly 9 to 13 cents lower, corn is 2 to 4 cents lower and soybeans are 7 to 9 cents lower. Front-month crude oil futures are around 60 cents higher and the U.S. dollar index is around 125 points lower.
Weather closes Washington DC again... The federal government is closed today due to the snow. Despite the closure, most if not all scheduled reports should be issued.
Better jobs growth expected in December... The Labor Department is expected to show the U.S. economy added around 425,000 non-farm payrolls in December, though some estimates have crept up to near 500,000 jobs added after ADP data earlier this week greatly topped expectations. But Labor Department payrolls data has underperformed compared with economists’ expectations in recent months. The unemployment rate is seen edging down to 4.1% from 4.2%.
Number of small firms lifting compensation hits a new high... Fierce competition for workers among U.S. employers has inspired another record month for wage hikes at small firms, according to the monthly employment survey from the National Federation of Independent Business (NFIB). NFIB Chief Economist William Dunkelberg reports:
- Seasonally adjusted, a net 48% reported raising compensation, up four points from November and a 48-year record high. A net 32% plan to raise compensation in the next three months, unchanged from November’s record reading.
- Rising wages haven’t been nearly enough to attract workers to fill all of the open positions.
- Overall, 60% reported hiring or trying to hire in December, unchanged from November.
- 57% (95% of those hiring or trying to hire) of owners reported few or no qualified applicants for the positions they were trying to fill (up one point).
Record Euro zone inflation in December... European consumer prices in December rose a record 5% from a year earlier following a 4.9% increase in November, according to the EU’s statistics agency. The European Central Bank (ECB) hasn’t been overly concerned that price pressures will endure, despite inflation running well above its target. ECB plans outlined last month to wind down pandemic-era stimulus were less aggressive than those from the Fed, Bank of England and some other central banks.
Has inflation peaked?... Some of the same observers who didn’t catch the recent inflation are now saying it could have reached its peak. They cite purchasing managers’ indexes, which while remaining high, note that international companies reported input prices fell for a second month in December and those for manufacturers reached their lowest level since last March. Delivery times may also be improving. Meanwhile, others note that food prices are slightly coming off recent price gains. And a new gauge of global supply-chain disruptions developed by the Federal Reserve Bank of New York showed that while pressures are the highest level since at least 1997, there are signs of a peak and strains “might start to moderate somewhat going forward.” JPMorgan Chase economists predict global inflation will slow to a still heady 3.5% this quarter from 5.9% in the prior three months, which was around the highest in a quarter century. “For the first time in a year, we assess risks at the start of the quarter as skewed towards a downside inflation surprise,” they said.
Major Chinese port threatened by Covid outbreaks... A suspension of trucking services in several parts of East China’s Zhejiang province has slowed the transportation of manufactured goods and commodities through one of the world’s most important ports. There are strict controls on trucks moving goods to or from the Beilun district in Ningbo after the discovery of several cases of Covid-19 in the area, shipping line A.P. Moller-Maersk A/S said in a Thursday customer advisory. This suspension, along with restrictions on truckers in some areas in and around Zhejiang, has halted operations at some yards and warehouses at Ningbo port.
U.S. mortgage rates rise to highest level since May 2020... The higher mortgage rates are driving up the costs associated with home buying at a time when home-sales prices are already near record highs. The average rate for a 30-year fixed-rate loan was 3.22%, up from 3.11% last week and 2.65% one year ago, according to mortgage finance giant Freddie Mac. Ultralow interest rates have been a major force in the housing boom of the last two years. But with the Federal Reserve on course to raise short-term interest rates this year, mortgage rates are likely to accompany them higher, making home affordability an even greater challenge. Mortgage rates in recent days have followed the steep climb in U.S. Treasury yields, which set a floor on borrowing costs across the economy.
President of Kazakhstan orders forces to ‘kill without warning’... The order is an effort to crush to violent protests raging in the country. What began as demonstrations against rising fuel prices has grown to include larger, long-simmering political grievances. President Kassym-Jomart Tokayev claims the increasingly violent conditions were caused by “terrorists” and “specialists trained in ideological sabotage.” Dozens of people have been killed in the violence. Tokayev has appealed to the Russian-led Collective Security Treaty Organization for assistance. The unrest is also posing a problem for Russia, which maintains close relations with Kazakhstan and relies on a spaceport there.
China tries to avoid real estate meltdown... China will make it easier for state-backed property developers to buy up distressed assets of debt-laden private peers, a source with direct knowledge told Reuters. State-owned developers acquiring distressed assets will not have those loans counted as debt under rules that cap borrowing. The “three red lines” policy restricts the amount of new borrowing property developers can raise each year by placing caps on their debt ratios. Banks have told state-owned developers about the exclusion of M&A loans in calculating their debt ratios, the source said, but added that the appetite to acquire assets is not high. Chinese authorities have encouraged state-owned builders to look at the assets of private peers struggling with liquidity issues, as an increasing number have failed to meet their debt obligations.
U.S. forecast to be top LNG exporter in 2022... Global analytics firm IHS Markit says the U.S. is positioned to ship more liquefied natural gas (LNG) overseas during 2022 than major competitors Australia and Qatar, which led the world in 2021. Australia exported 83 MMT of LNG last year, while Qatar exported 81.3 MMT, per IHS numbers. The U.S. was responsible for the single largest supply increase among exporting nations, with 25.3 MMT of additional LNG shipments year over year, a 52% jump, and reached 73.6 MMT total.
Brazil posts record pork exports in 2021... Brazil exported a record 1.13 MMT of pork last year, industry group ABPA said, topping the previous high of 1.02 MMT in 2020. China accounted for about half of Brazil’s exports, as shipments to the country rose 3.9% to 533,700 MT.
Slaughters slowed by absenteeism... Absenteeism at slaughter plants, thought to be due to a rise in Covid cases, has reduced slaughter this week. Through Thursday, USDA’s federally inspected slaughter dropped more than 5% from week-ago for cattle and 1.7% for hogs. Industry sources expect just a temporary disruption and not a repeat of the widespread shutdowns in spring 2020.
Some cattle left to move... Cash cattle trade has been described as “moderate” so far this week by cash sources, who indicate asking prices on remaining supplies are above prices received thus far. If packers don’t raise bids from earlier in the week, feedlots with supplies left to sell will need to decide whether to take the lower prices or carry animals into next week.
Pork cutout clawing back... After a rough start to the week, the pork cutout value has firmed the past two days, including a $3.64 gain on Thursday. Strong gains in loins, hams and butts more than offset heavy pressure on picnics and a smaller loss in bellies. Pork movement has averaged 388 loads through the first four days this week, signaling strong post-holiday retailer restocking.
Overnight demand news... Jordan tendered to buy 120,000 optional origin milling wheat.
Today’s reports
- 10:00 a.m. Livestock and Meat International Trade Data — ERS
- 2:00 p.m. U.S. Agricultural Trade Data Update — ERS
- 2:00 p.m. Peanut Prices — NASS
- 2:30 p.m. Commitments of Traders — CFTC
