First Thing Today | February 7, 2022
Soybeans lead overnight price gains... Soybeans rallied sharply overnight, scoring new contract highs, amid South American weather concerns. Corn and wheat followed soybeans higher. As of 6:30 a.m. CT, soybeans are trading 19 to 23 cents higher, corn is 5 to 8 cents higher and wheat is mostly 8 to 10 cents higher. Front-month crude oil futures are down around 65 cents, while the U.S. dollar index is trading just below unchanged this morning.
South American weather remains price-supportive... Rains were lighter than expected across central and northern Argentina and southern Paraguay during the weekend, though beneficial precip was seen across southern Argentina and interior southern Brazil, according to World Weather Inc. The weather forecaster says, “Net drying is expected over much of central Argentina, Paraguay and southern Brazil during the coming week while frequent rain falls from northeastern Mato Grosso to Minas Gerais where delays in harvest progress and worry over crop quality will continue.”
Russia could invade Ukraine ‘any day now’... “Russia is close to completing preparations for what appears to be a large-scale invasion of Ukraine that could leave up to 50,000 civilians killed or wounded," the Washington Post reports. National security adviser Jake Sullivan on the timing of a potential Russian invasion of Ukraine, on Fox News Sunday: “We are in the window. Any day now, Russia could take military action against Ukraine, or it could be a couple of weeks from now, or Russia could choose to take the diplomatic path instead.” On negotiations with Russia, on NBC’s Meet the Press, Sullivan said: “We’re prepared to sit down with the Russians, alongside our allies in NATO and other partners in Europe, to talk about issues of mutual concern in European security… But what we’re not prepared to negotiate are the fundamental principles of security that include an open door to NATO for countries who can meet the requirements.” Some reports note Russian President Vladimir Putin needs more time to move military units into place. Others say he has decided to wait until Feb. 20, the end of the Winter Olympics, to avoid offending China’s Xi Jinping. Or he’s simply decided to negotiate to find out what price he can command for standing down. Germany’s Olaf Scholz will meet Joe Biden today and the U.S. president is expected to push the new German leader to support tough sanctions on Russia should Moscow invade Ukraine. Russia and Belarus will launch joint military exercises not far from the Ukraine border on Feb. 10.
China and Russia propose a plan for new world order... China and Russia outlined a vision of international relations anchored in their potential to reinforce each other in disputes with the U.S. and its allies while cooperating on an array of economic and diplomatic fronts. Presidents Xi and Putin issued a joint statement that forecast the “transformation of the global governance architecture and world order.” That transformation would be marked by the progress of concepts and initiatives that Moscow and Beijing conceived separately, often in opposition to the U.S. and its Western allies, and now could develop into an integrated challenge to American power. In the statement, the two sides are redefining the very meaning of democracy to embrace their repressive systems that censor media, prohibit dissent, lock up political opponents, and support like-minded authoritarian systems. U.S. officials cautioned Beijing that conflict in Ukraine would affect China’s international interests, White House Press Secretary Jen Psaki said following the meeting between Xi and Putin.
The week ahead in Washington... Both the House and Senate are in session this week but as usual, the pace of important legislation is slow at best. Lawmakers will need to do another continuing resolution because House members want to take off next week. The current stopgap measure runs through Feb. 18. Meanwhile, the White House is expected to soon ask Congress for more Covid-related spending, and that could further muck up the spending process. USDA Secretary Tom Vilsack is giving a speech today that will be an update on USDA’s plan to support climate-smart commodities. Recall that Vilsack is tapping the Commodity Credit Corporation (CCC) for $1 billion to fund projects aimed at measuring the impact of climate-related agriculture practices on greenhouse gas emissions and making the commodities marketable as low-carbon. A House Ag panel subcommittee will hold a hearing on farm policy with USDA Undersecretary for Farm Production and Conservation Robert Bonnie, a chief architect of USDA’s climate-smart efforts. On the economic front, the Bureau of Labor Statistics reports the Consumer Price Index (CPI) for January on Thursday. Economists forecast a 7.3% year-over-year spike, after a 7% jump in November. The core CPI, which excludes volatile food and energy prices, is seen rising 5.9%, compared with 5.5% previously. The University of Michigan releases its Consumer Sentiment Survey for February on Friday. For the ag markets, attention will be on Wednesday’s Supply & Demand Report, with a particular focus on South American production estimates. Conab will update its official Brazilian crop estimates on Thursday.
Key port congestion amendment added... The House adopted a China competition bill as an amendment to competition legislation now on its way to the Senate. If enacted (by no means a certainty), the bill would amend for the first time since 1998 the duties of the Federal Maritime Commission to include requiring ocean carriers to comply with minimum service standards that meet the public interest, requiring ocean carriers or marine terminal operators to certify that any late fees meet federal regulations, and putting the responsibility on the ocean carrier to prove the reasonableness of the fees. The legislation would prohibit ocean carriers from unreasonably refusing to take U.S. exports, directing the Federal Maritime Commission to define unreasonableness through rulemaking. The legislation would direct the commission to use the rulemaking to prevent ocean carriers and marine terminal operators “from adopting and applying unjust and unreasonable demurrage and detention rules and practices.” Ocean carriers also would be required to report to the Federal Maritime Commission on a quarterly basis about total import and export tonnage as well as loaded and empty containers on each vessel that makes port in the U.S. Bottom line: Democrats must face reconciling the House and Senate versions before it can become law. The bills in the House and Senate look very different, so some of the rah-rah commentary on this topic in the ag press may be premature at best.
WOTUS comments due today... Today is the deadline for public comment on the Biden administration’s plan to return to the pre-2015 definition of waters of the United States (WOTUS) regarding those areas regulated under the Clean Water Act. The Supreme Court is considering a lawsuit over the government’s CWA jurisdiction. Some 50 Republicans submitted a letter appealing to the EPA and Army Corps of Engineers to drop the plan to rewrite the WOTUS rule.
Yellen wants to remain as Treasury Secretary... Janet Yellen says she wants to remain head of the U.S. Treasury because “we still have a huge amount of important work to do.” Yellen, 75, in a statement last week to Bloomberg News following a wide-ranging interview marking her first year in office, said: “I have no plans to leave Treasury anytime soon.” Yellen’s track record is at best incomplete. The biggest “win” of her tenure — a global agreement on corporate taxes that Yellen engineered through international diplomacy — remains incomplete, with Congress yet to endorse it and Republicans in the Senate likely not giving it final approval. The administration’s “Build Back Better” package of social investments is also dead in its latest form, with a modified version still not officially unveiled. Meanwhile, high inflation is marring assessments of the $1.9 trillion Covid aid bill enacted last March. And recall Yellen had to admit she was wrong, along with her Fed Chair successor Jerome Powell, in saying for months in 2021 that inflation was “transitory.”
Ukraine winter crops rated highly... Ukrainian winter grain crops were mostly in favorable condition as of Feb. 3, APK-Inform agriculture consultancy reported. It said crop ratings were 91% to 99% good to satisfactory, depending on region and most “have good regenerative capacity.”
Cattle traders focused on cash trade... Cash cattle prices firmed last week and futures responded with contract highs. To maintain upward momentum in futures, traders likely need to see signs that packers will raise cash bids again this week. Speculative money flow was also a big part of last week’s price gains and will at least partially determine if there’s followthrough buying or a price pullback.
CME lean hog index rises... The upward trajectory in the CME lean hog index continues, with the quote up 97 cents today (as of Feb. 3) to $84.30. February lean hog futures, which expire on Feb. 14 and are settled against the index two days later, finished Friday $2.725 above the index. The premium will somewhat limit buying in the lead contract, though we don’t anticipate any active selling unless the cash index declines. Money flow will be the primary driver for deferred hog futures, which are overbought after last week’s price surge.
Weekend demand news... In two separate tenders, South Korea purchased a total of 201,000 MT of optional origin corn. South Korea also bought around 110,000 MT of optional origin feed wheat. Syria tendered to buy 200,000 MT of milling wheat from unspecified origins.
Today’s reports
- 10:00 a.m. Export Inspections — AMS
- 2:00 p.m. Amber Waves, February issue — ERS
