Evening Report: Jan. 26, 2022
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Fed signals interest rate hikes starting ‘soon’... “With inflation well above 2% and a strong labor market, the committee expects it will soon be appropriate to raise the target range for the federal funds rate,” said the Federal Open Market Committee (FOMC) said in a statement Wednesday following its two-day monetary policy meeting. The committee did not specify a date for an interest rate increase. However, many traders think an interest rate increase will happen at its next meeting March 15-16.
The Fed’s asset purchase program will conclude on schedule in “early March.” The Fed has previously said the asset purchase program would end before any interest rate increase.
FOMC members agreed on a set of principles for “significantly reducing” the size of its asset holdings by limiting how much of the principal from maturing bonds it would reinvest each month. The plan would start after the interest rate increase without setting a specific date.
The FOMC also removed the previous opening line of its statement, which said the central bank was “committed to using its full range of tools to support the U.S. economy in this challenging time.”
Limited winterkill in SRW areas during cold snap, recovery possible... Bitter cold temps and limited snowcover in the lower parts of the Midwest leaves the SRW crop at risk of winterkill. However, World Weather Inc. says, “Winterkill was not suspected of being very great, but some crop damage cannot be ruled out.”
Overall, World Weather says potential wheat damage represents a tiny portion of the overall crop. However, the accumulative impact of damage combined with drought conditions could produce a smaller wheat crop if drought conditions persist.
Wheat will need spring rains to set new tillers. World Weather predicts the wheat crop will recover some from any damage as late winter and spring is expected to be wetter biased and cooler than usual.
IHS Markit cuts corn, soybean, spring wheat and cotton acreage forecasts... Based on a Reuters story, IHS Markit expects U.S. farmers to plant less corn, soybean, spring wheat and cotton acres compared to its December forecasts.
The firm reduced its U.S. corn acreage projection to 91.489 million acres, down 89,000 acres from its Dec. 16 forecast and 1.868 million acres fewer than farmers planted in 2021.
IHS reduced its projected U.S. soybean acres to 87.805 million acres, down 1.010 million acres from its December forecast. That would still be up 610,000 acres from 2021 planted acres.
Spring wheat acres excluding durum are projected to be 12.010 million acres, down 710,000 acres from its December forecast but up 590,000 acres from 2021. The firm cut its outlook for durum acres to 1.750 million, down 100,000 acres from its December projection but still up 115,000 acres from 2021.
The firm reduced its upland cotton acreage forecast by 14,000 acres from last month to 11.702 million acres and lowered the Pima cotton projection by 4,000 acres to 132,000 acres for 2022.
Record goods trade deficit in December... The U.S. registered a record trade deficit in goods of $101.0 billion in December, according to the U.S. Census Bureau. Economists expected the goods trade deficit to be around $95 billion. November’s deficit was revised to $98.0 billion from the prior reported $97.8 billion. U.S. goods exports in December increased to $157.3 billion, up $2.2 billion (2%) from November. U.S. goods imports increased to $258.3 billion, up $5.1 billion (1.4%) from November.
The December foods, feed and beverage area had a deficit of $2 billion, compared to $1.7 billion in November. December foods, feeds and beverage exports totaled $13.7 billion, down $1.1 billion (7.8%) from November. December imports for the category dropped to $15.7 billion, down $765,000 (4.6%) from the previous month.
Bank of Canada holds interest rates, signals future increase... The Bank of Canada left interest rates unchanged at 0.25%, where it has been since 2014. However, policymakers dropped a pledge not to increase rates, a sign they might raise rates on March 2. The bank said it appears Canada’s economy has fully recovered from the pandemic.
WTO: China can impose retaliatory tariffs on U.S goods... The World Trade Organization (WTO) authorized China to impose $645 million of compensatory tariffs against the United States. The case was based on the U.S. imposing anti-subsidy tariffs on 22 Chinese products ranging from solar panels to steel wire from 2008 to 2012. The case centered on how the U.S. handles government majority-owned and controlled Chinese companies. China had requested to impose $2.4 billion in retaliatory tariffs on U.S goods.
EU challenges Egypt at WTO over import registration... The EU is challenging Egypt’s import registration system under WTO rules, saying it is arbitrary and takes years to get approval. Registration is required to export products to Egypt, including agricultural and food products. The EU argues Egypt has failed to process registration applications for many of the bloc’s countries for long periods. Since the registration system started in 2016, the EU exports to Egypt in 29 categories fell by 40%.
