First Thing Today | September 21, 2022

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Good morning!

Followthrough buying as Putin threatens nuclear war... Wheat futures led a round of followthrough buying overnight as tensions between Russia and the West escalated. As of 6:30 a.m. CT, corn futures are trading 1 to 2 cents higher, soybeans are 2 to 3 cents higher and wheat is 6 to 11 cents higher. Front-month crude oil futures are around $1.75 higher and the U.S. dollar is more than 450 points higher.

Putin escalates Ukraine war, issues nuclear threat... Russian President Vladimir Putin on Wednesday ordered Russia’s first mobilization since World War II and backed a plan to annex swathes of Ukraine. He also warned the U.S. and its western allies he would be prepared to use nuclear weapons to defend Russia. Citing NATO expansion towards Russia’s borders, Putin said the West was plotting to destroy his country, engaging in “nuclear blackmail” by allegedly discussing the potential use of nuclear weapons against Moscow, and accused the U.S., European Union and Britain of encouraging Ukraine to push military operations into Russia itself. “If the territorial integrity of our country is threatened, we will without doubt use all available means to protect Russia and our people – this is not a bluff,” Putin said in a televised address to the nation. Putin signed a decree on partially mobilizing Russia’s reserves, arguing that Russian soldiers were effectively facing the full force of the “collective West,” which has been supplying Kyiv’s forces with advanced weapons, training and intelligence. Russian Defense Minister Sergei Shoigu said Russia would draft some 300,000 additional personnel.

Putin backs plan to annex parts of Ukraine... Putin gave his explicit support to referendums that will be held in coming days in swathes of Ukraine controlled by Russian troops – the first step to formal annexation of about 15% of Ukrainian territory. “We will support the decision on their future, which will be made by the majority of residents in the Donetsk and Luhansk People's Republics, Zaporizhzhia and Kherson,” Putin said. “We cannot, have no moral right to hand over people close to us to the executioners, we cannot but respond to their sincere desire to determine their own fate.” The West and Ukraine have condemned the referendum plan as an illegal sham and vowed never to accept its results. But by formally annexing Ukrainian territories, Putin is giving himself the potential pretext to use nuclear weapons from Russia’s arsenal.

Ukraine’s wheat crop could fall 1 MMT to 3 MMT due to less planted acreage... Ukraine’s 2023 wheat crop may decrease to 16 MMT to 18 MMT, down from 19 MMT this year due to an expected fall in the winter wheat sowing area, first deputy agriculture minister Taras Vysotskyi said on Tuesday. Ukrainian ag officials have said the area under winter wheat could fall by at least 20% due to Russian occupation of some areas of the country as farmers prefer to sow oilseeds that have stable export demand. The area sown to winter wheat for 2023 could total around 3.4 million hectares, 10.5% less than the ag ministry expected in late August, a report of Barva Invest consultancy showed.

Fed rate decision this afternoon... The Federal Open Market Committee (FOMC) is expected to raise interest rates by at least 75 basis points for the third consecutive time, which would lift the federal funds rate to a new target range of 3% to 3.25%, though a 100-basis-point increase is possible. The decision will be accompanied by a fresh “dot plot” that compiles officials’ forecasts for interest rates and other economic factors until the end of 2025.

CNBC survey: Interest rates forecast to peak in March... Economics expect interest rates to peak at 4.26% in March as the Federal Reserve raises rates to combat high inflation, according to a CNBC survey. The September CNBC Fed Survey found that most respondents expect the Fed to raise interest rates to a high level and keep them there for an extended period. Most respondents are concerned about the Fed going too far, with 57% indicating it will raise rates too much and cause a recession. Only 26% said the Fed will tighten economic growth the right amount and cause just a modest slowing of the economy. 

China’s interest rate for corporate loans reaches record-low... China’s average interest rate for corporate loans stood at 4.05% at the end of August, the lowest level ever, according to the country’s central bank. China will continue to strengthen the guiding role of credit policy and improve financial mechanisms to support the real economy, said the central bank.

Biden expected to announce major boost to U.S. food aid... The announcement from President Joe Biden will come today during his United Nations speech. Since Russia’s February invasion of Ukraine, Washington has provided $6.1 billion in humanitarian assistance and $2.3 billion in development aid to fight hunger and bolster food security. Secretary of State Antony Blinken said Tuesday Washington is working with other members of the UN Security Council to ensure that food and medicine are carved out of any sanctions linked to Russia’s invasion or other conflicts, he said. Jake Sullivan, the White House national security adviser, said the U.S. was working to help the developing world finance its own agricultural systems. “In addition to that, the president will be pressing for the elimination of export bans and of hoarding so that there is a better supply of food to the world market and overall prices come down,” he said.

India to extend free food program... The Indian government is likely to extend its free food program for the poor by three to six months, local media reported. India has spent nearly $43 billion since April 2020 on the program.

Taiwan signs letters of intent to buy nearly $3 billion of Iowa corn, soybeans... Members of a Taiwanese trade mission signed letters of intent to buy between 96 million and 107 million bu. of soybeans and 59 million bu. of corn in 2023-24 at a ceremony in Iowa. Those purchases would be valued at around $2.6 billion.

China to sell more pork stocks... China will release another 14,400 MT of frozen pork from state-owned reserves on Sept. 23, continuing its recent sales onto the domestic market to ensure adequate supplies amid rising prices as the country heads into its extended holiday season. In total, China plans to sell around 200,000 MT of pork from state-owned reserves.

Choice beef falls to nearly 18-month low... Choice boxed beef prices dropped 81 cents Tuesday to $251.64, the lowest level since April 2021. While the Choice/Select spread is unusually wide due to tight Choice supplies, falling wholesale prices suggest packers are having to lower prices to attract retailer buying. But with Choice-grading running well under the past two years and the five-year average, there probably isn’t a lot of downside price risk from current levels.  

Direct cash hog prices jump... The national direct cash hog price firmed $5.01 on Tuesday. While the CME lean hog index is down 6 cents to $98.36 (as of Sept. 19), the direct market signals cash prices are still supported near-term. That should limit seller interest in nearby lean hog futures.

Overnight demand news... The Philippines tendered to buy 45,000 MT of optional origin feed wheat.

See ‘Policy Updates’ for late-breaking morning news updates... For updates to items in “First Thing Today” or any late-breaking morning news stories, check “Policy Updates” on www.profarmer.com.

Today’s reports

 

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