Evening Report: Jan. 14, 2022

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Check our advice monitor on ProFarmer.com for updates to our marketing plan.
 

Your Pro Farmer newsletter is now available... USDA’s barrage of reports Jan. 12 didn’t contain any major surprises, but there was still a lot of data for markets to sift through. We highlight U.S. production, Dec. 1 grain stocks, U.S. and global balance sheets and winter wheat seedings. South American crop estimates continue to decline amid extreme heat and drought across Argentina, southern Brazil and Paraguay. But there’s potential for a shift in South American weather in the weeks ahead. Inflation remains a concern, with U.S. consumer prices surging to nearly a 40-year high, pushing the Fed closer to raising interest rates. We cover all this and much more in this week’s newsletter, which you can download here.
 

Martin Luther King Jr. Day schedule... Markets and government offices will be closed for Martin Luther King Jr. Day on Monday, Jan. 17. Therefore, there will be on Pro Farmer market reports or commentary. Grain markets will reopen with the overnight session at 7:00 p.m. CT on Monday, Jan. 17, while livestock markets will resume trade at 8:30 a.m. CT on Tuesday, Jan. 18.


USMCA deputies meet, acknowledging ‘challenges’... The first meeting of deputies under the U.S.-Mexico-Canada Agreement (USMCA) took place this week with the officials issuing a positive statement on the meeting which they noted “though there have been challenges, progress continues to be made.”

The challenges likely referred to trade cases that have been brought or are in process under the pact, including Mexico’s challenge of the U.S. interpretation of automobile content rules. Canada announced, as expected, it would align with Mexico on the matter, saying the U.S. interpretation was “inconsistent” with USMCA provisions. Mexico last week formally requested a dispute settlement panel be established on the situation. A spokesperson for the Office of the U.S. Trade Representative (USTR) said they were “confident” the U.S. interpretation of the provisions was “consistent” with USMCA.

Four key issues. The statement from the deputies meeting indicated the three officials — Mexico’s Undersecretary of Foreign Trade, Luz María de la Mora, Deputy U.S. Trade Representative Jayme White, and Canada’s Deputy Minister for International Trade, David Morrison — focused on four key issues: Labor, environment, inclusive trade (including SMEs — small and medium-sized enterprises and competitiveness) and state-owned enterprises (SOEs). Regarding SOEs, which most view as focusing on China without naming the country, the post-meeting statement said USMCA has “high standards and robust disciplines designed to address the trade distortions caused by the non-market-based activities of SOEs.”


U.S. consumer sentiment drops on inflation concerns... U.S. consumer sentiment fell to the second lowest in 10 years in the first part of January. The University of Michigan Consumer Sentiment Index fell to 68.8, down 2.5% compared with the final December reading of 70.6. The reading also represents a 12.9% drop from 79.0 in January 2021.

The drop in sentiment was driven by the 9.4% decline in households with incomes under $100,000.   Three-quarters of consumers in early January ranked inflation, compared with unemployment, as the more serious problem facing the nation.

Confidence in government economic policies is at its lowest level since 2014. When asked to assess their finances, 33% reported being worse off financially than a year earlier, just above the April 2020 shutdown low of 32%, the worst reading since 2014.

The importance of inflation in determining their future financial prospects was dominated by how consumers judged their future inflation-adjusted incomes. Nearly half of all consumers (48%) anticipated the inflation rate would outdistance income increases to produce real income declines. Just 7% expected real income gains in 2022.


No drought improvement likely in HRW areas... Drought conditions for HRW country will continue for at least the two weeks, according to World Weather Inc. It reports for the 90-day period ending Jan. 13, areas of the Central and Southern Plains received less than 50% of normal precip.

World Weather predicts snow in the Central and Southern Plains next Wednesday and Thursday ahead of an arctic airmass. Snow totals will range from a dusting to 2 inches by next Friday morning. The snow may help protect some wheat from the trailing arctic airmass but will be too light to impact long-term soil conditions.

Overall, World Weather says there has not likely been widespread winterkill in parts of Montana, South Dakota, southwestern Nebraska and northeastern Colorado.
 

Federal Reserve Banks: Ag economy stable with some concerns...  Overall, the district Federal Reserve Banks said the agriculture economy within their districts was mainly stable but expressed some concerns. All the districts reported solid prices for most agricultural commodities and strong sentiment for the sector. The Chicago, Kansas City, Minneapolis, San Francisco and St. Louis Federal Reserve Banks reported the farm economy was stable or unchanged. The Dallas and Atlanta Federal Reserve Banks expressed concerns about drought and dry conditions within their districts.

All districts had concerns about supply chain issues such as the availability of input supplies and potentially higher prices. The Kansas City Fed reported labor issues are limiting meat processing. The San Francisco Fed noted shipping bottlenecks are restricting international trade. It also said farmers in that region were hiring more foreign seasonal agricultural workers due to labor supply issues.

 

Ag loans close the year at lowest level since 2012... Non-real estate agricultural loans at U.S. commercial banks decreased by 13% in the fourth quarter and the yearly average was the lowest since 2012, according to the Kansas Federal Reserve Bank Survey of Terms of Lending to Farmers. Economists noted the decline in lending in the fourth quarter was driven by a sharp reduction in the average size of loans that offset an increase in the number of loans. Loan sizes decreased considerably at lenders of all sizes, but the number of loans increased notably at small and mid-sized lenders and decreased at banks with large agricultural portfolios.

The average operating loan size dropped to the lowest level for the end of the year since 2016 after a record in the fourth of 2020.  The number of operating loans is higher than last year but historically low.

Overall, the economists reported the strong agricultural economy supported farm finances. However, they predicted rising input costs could mean more demand for credit from farmers.


Russian Ukraine invasion concerns raised... U.S. officials are getting more concerned Russia is preparing for a Ukraine invasion. The Russian government “is preparing for an invasion into Ukraine that may result in widespread human rights violations and war crimes should diplomacy fail to meet their objectives,” according to a U.S. official reported by Reuters.

The official said the Russian military “plans to begin these activities several weeks before a military invasion, which could begin between mid-January and mid-February.” A cyber attack launched on Friday against Ukraine further inflamed tensions. Russia reportedly has a group of operatives to conduct “a false-flag operation” in eastern Ukraine.

Earlier talks to resolve the issue of Russian troops at the Ukraine border did not resolve the issue. Russia has claimed it has no plans to invade or attack Ukraine.


Covid-19 cases increase at JBS Greeley facility... JBS has reported an increase of Covid-19 cases at its Greeley, Colorado beef processing plant. Local union officials say 40 people tested positive for the virus, and most of the cases have been mild or asymptomatic.

The Greeley JBS plant is one the company’s largest and employs around 3,000. According to a company official, about 80% of the employees are vaccinated and 30% have gotten booster shots. Employees are required to wear face masks. The company conducts daily health screenings, drive-through testing and new hires must be vaccinated.
 

Sorghum crop insurance price election boosted... Sorghum’s crop insurance price for 2022 will be 99.6% of the price of corn, compared to 96% for 2021, due to a change by the Risk Management Agency.  The sorghum crop insurance price election formula is based on a 10-year rolling average of actual sorghum bids at elevators across the U.S. 

 

Latest News

PF Report Reaction: Bullish USDA data for corn
PF Report Reaction: Bullish USDA data for corn

Corn planting intentions and March 1 stocks came in lower than expected.

Report Snapshot: USDA shows lighter-than-expected corn acres and stocks
Report Snapshot: USDA shows lighter-than-expected corn acres and stocks

USDA reported corn acres of 90.036 million acres for 2024 and March 1 stocks of 8.347 billion bu., both well below trade estimates. Soybean acres were slightly lower than expectations, while stocks were higher.

Timeline and Issues in Getting Baltimore Port Channel Reopened
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Exxon Mobil and SAF | Fed governor says ‘no rush’ to lower rates | Russia aids Cuba | Key USDA reports today

Cattle Strength Wanes | March 28, 2024
Cattle Strength Wanes | March 28, 2024

Japan works to support Yen, Eurozone cuts production forecast and the Biden Administration will repair Baltimore Bridge...

Ahead of the Open | March 28, 2024
Ahead of the Open | March 28, 2024

Corn, soybeans and wheat traded in tight ranges overnight, with grains showing relative strength into the break.

Weekly wheat sales exceed expectations, while soybeans miss
Weekly wheat sales exceed expectations, while soybeans miss

Weekly wheat sales were just above the pre-report range for the week ended March 21, while soybean sales missed the expected range by 36,000 MT. Corn sales held steady at 1.21 MMT.