Evening Report: Feb. 2, 2022
Check our advice monitor on ProFarmer.com for updates to our marketing plan.
Corn producers: Increase old- and new-crop sales… After rallying to new contract highs on Monday, the corn market is showing signs of short-term exhaustion. While there could be another push higher, corn likely needs help for that to happen. We advise hedgers and cash-only marketers to sell another 10% of 2021-crop to get to 80% priced in the cash market. We also advise all corn producers to sell another 10% of expected 2022-crop production for harvest delivery to get to 30% forward-priced.
Soybean producers: Increase old- and new-crop sales… Soybean futures have posted a string of contract highs over the past week as the market has gone parabolic. With today’s price action showing signs of potential short-term exhaustion, we advise hedgers and cash-only marketers to sell another 10% of 2021-crop. This gets hedgers to 95% sold in the cash market and cash-only marketers to 85% sold. We also advise all soybean producers to sell another 10% of expected 2022-crop production for harvest delivery to get to 30% forward-priced.
Wheat producers: Increase old- and new-crop sales… Wheat futures need help from soybeans and corn to push higher. If that support falters, wheat will struggle, especially with the seasonal price trend down sharply from mid-February through spring. We advise hedgers and cash-only marketers to sell another 10% of 2021-crop. This gets hedgers to 80% sold in the cash market with the other 20% covered via a hedge in March SRW wheat futures, and cash-only marketers to 80% sold. We also advise all wheat producers to sell another 10% of expected 2022-crop production for harvest delivery to get to 30% forward-priced.
Cotton producers: Increase new-crop sales… December cotton futures are trading a couple cents above our target of 100.00 cents. As a result, we advise cotton hedgers and cash-only marketers to sell another 10% of expected 2022-crop production for harvest delivery to get to 50% forward-priced.
Ukraine/Russia diplomatic solution reduced... U.S. officials announced on Wednesday nearly 3,000 extra U.S. troops would be headed to Poland and Romania to assist European NATO allies as part of the Russian/Ukraine border crisis. In signs a diplomatic solution has been reduced, Western countries say Russia’s demands are non-starters. Russia shows no signs of withdrawing its demands. Russian officials also criticized U.S. and UK officials. However, French President Emmanuel Macron was working to avoid raising tensions by talking to U.S. President Joe Biden and did not rule out traveling to Russia to meet with Russian President Vladimir Putin.
USTR official sounds familiar refrain relative to China Phase 1 commitments... Deputy U.S. Trade Representative (USTR) Sarah Bianchi Tuesday addressed the Washington International Trade Association (WITA) and echoed comments made Monday by USTR Katherine Tai relative to China regarding their failing short of meeting commitments under the Phase 1 trade deal. “You know, it is really clear that the Chinese haven’t met their commitment in Phase 1,” Bianchi said. “That’s something we’re trying to address.” She also said the discussions USTR is holding with China on the Phase 1 agreement are “difficult” and that the U.S. was “unflinchingly honest” in those talks, two terms Tai used Monday to describe the negotiations, and added it was “important” the two sides are having the discussions.
Bianchi also did not discuss or mention any potential Phase 2 negotiations with China on additional issues that were not covered under the Phase 1 deal. A spokesperson for the Chinese embassy in Washington told Reuters in an email that China has tried to implement the Phase 1 agreement “despite the impact of Covid-19, global recession and supply chain disruptions.” The spokesperson indicated the two sides are in “normal communication.”
U.S. trade data on goods and services due to be released Feb. 8 will provide December U.S. figures and give a picture of the full-year trade figures between the two countries. The Phase 1 agreement that outlined Chinese purchase commitments said verification would be based on official Chinese and official U.S. trade data. Consultations are called for under the deal if there are “conflicting assessments” of whether the purchase commitments have been made.
Rabobank: Global pork trade will decline, higher input prices continue... Overall, global pork imports and exports are predicted to decrease from 2021 levels, according to the latest outlook from Rabobank. China, Vietnam and the Philippines are expected to reduce pork imports as their pork production increases in 2022. However, traditional pork importing countries such as Japan and South Korea will likely increase pork imports.
The report’s authors predict input costs will continue to rise. Shipping rates, energy prices, feed grain prices and labor costs are challenging pork supply chains. As a result, they expect margins to be under pressure since producers and processors will find it difficult to pass on all additional costs to consumers.
JBS agrees to price-fixing case settlement... JBS agreed to pay $52.5 million to settle litigation accusing meat-packing companies of conspiring to limit supply in the U.S. beef market. The settlement is the first in nationwide antitrust litigation over beef price-fixing. Cargill Inc., National Beef Packing Co. and Tyson Foods Inc. are other defendants in case. Chief Judge John Tunheim of the federal court in Minneapolis still needs to approve the settlement.
In the lawsuit, direct purchasers accused the meat-packing companies of conspiring since 2015 to reduce slaughter volumes, creating a shortfall that smaller companies could not make up. Commercial beef purchasers, cattle producers and consumers have also brought lawsuits.
OPEC+ keeps output plan... OPEC+ agreed today to keep its target of monthly increases of 400,000 barrels per day (bpd). Some countries including the U.S. and India have asked the group to increase oil production even more. However, there are some concerns about how much more oil production can be added, as several countries have already failed to increase their output. OPEC+ hopes to wind down production cuts imposed during the pandemic by the end of the year as demand is expected to increase.
January private payrolls drop... Private payrolls decreased by 301,000 jobs in January, according to the ADP National Employment Report. Economists polled by Reuters expected a 207,000 increase in jobs in the report. ADP revised its December jobs figure down 31,000 to 776,000 jobs. The Bureau of Labor Statistics employment report will be released on Friday.
U.S. trucker vaccine convoy being planned... A group of U.S. truckers are planning a convoy from California to Washington D.C. to protest the U.S. vaccine mandate for truckers. The group, “Convoy to D.C. 2022,” had a Facebook page that was removed on Wednesday morning. The U.S. protest follows the Canadian trucker convoy that traveled to Ottawa to protest Canada’s vaccine mandate. Other truckers blocked the U.S./Canada border crossing at Coutts, Alberta. That is preventing cattle from being transported into the U.S.
Belarus bans Lithuanian fertilizers, oil and chemical... In response to Lithuania stopping shipping Belarus’ potash to its ports, Belarus will ban Lithuanian fertilizers, oil and chemicals from crossing its country effective Feb. 7, the Belarusian foreign ministry said on Wednesday. Lithuania ships fertilizer and oil to Ukraine through Belarus. Poland’s largest oil refiner said it could reroute its Lithuanian exports through Poland instead of Belarus. The ban will affect 1.6 MMT a year in products worth $1 billion.
Countries explore options to ship Belarus potash... Belarus is working with other countries to sell its potash internationally. On Tuesday, Belarus’ president said potash shipments had been rerouted to Russia to export after Lithuania stopped shipping the fertilizer to its port. Kremlin spokesman Dmitry Peskov said today the country was discussing shipping Belarusian potash via Russian ports. However, he didn’t think the transport had started.
Meanwhile, Indian officials suggested Belarus could open a rupee account with a state-run Indian bank so the country could purchase 1 MMT of potash. U.S. and EU sanctions prevent Belarus from dollar and euro trade.
