First Thing Today | February 10, 2022

Good morning!

Soybeans surge above $16... Soybean futures continued their strong rally, with most old-crop contracts surging above $16 overnight. Corn and wheat followed soybeans higher. As of 6:30 a.m. CT, soybeans are trading 22 to 28 cents higher, corn is 2 to 3 cents higher and wheat futures are 7 to 9 cents higher. Front-month crude oil futures are around 75 cents higher and the U.S. dollar index is holding near unchanged this morning.  

Brazil slashes soybean crop estimate... Conab slashed its official Brazilian soybean crop estimate by 15 MMT from last month to 125.5 MMT due to drought in “the entire southern region and part of Mato Grosso do Sul.” The government forecasting agency slashed its 2021-22 soybean export forecast by 9.1 MMT to 80.2 MMT. Conab cut its Brazilian corn crop estimate by 559,000 MT from last month to 112.3 MMT. It now forecasts 2021-22 Brazilian corn exports at 35 MMT, down 1.7 MMT from last month.

Russia blocks portions of Black and Azov Seas... The Russian government has reportedly warned shippers to avoid significant portions of the northern end of the Black Sea, as well as the adjacent Sea of Azov due to upcoming naval exercises. This could amount to a de facto blockade of Ukraine’s southern coastlines, which in turn might be part of preparations for new large-scale Russian military intervention into that country. Ukraine’s ministry of foreign affairs “strongly protests” the seaway blockades saying: “Unprecedented coverage of maneuvers makes navigation in both seas virtually impossible. In essence, this is a significant and unjustified complication of international shipping, especially trade, which can cause complex economic and social consequences, especially for the ports of Ukraine. Such aggressive actions of the Russian Federation, which fit into the concept of its hybrid war against Ukraine, are unacceptable. This is a manifestation of open disregard for the norms and principles of international law, including the UN Charter, UN General Assembly resolutions and the UN Convention on the Law of the Sea. Ukraine is closely working with the partners, primarily those of the Black Sea region, to ensure that such actions of the Russian side receive a proper assessment and response.”

Weekly Export Sales Report out this morning… For the week ended Feb. 3, traders expect:

Fed’s Bostic foresees three or four rate hikes this year; market focus on CPI data... CNBC reports Atlanta Federal Reserve President Raphael Bostic “said Wednesday he anticipates hiking interest rates three or four times this year, but he stressed that the central bank isn’t locked into a specific plan.” According to CNBC, in an appearance on Squawk Box, Bostic “signaled a view that is less aggressive than the markets on rates.” Bostic is quoted as saying, “In terms of hikes for the interest rates, right now I have three forecast for this year. I’m leaning a little towards four, but we’re going to have to see how the economy responds as we take our first steps through the first part of this year.” Bloomberg reports, “A hotter-than-expected U.S. inflation print would push the Federal Reserve closer to considering its single-largest rate hike in more than two decades. The January consumer price index, due today, is one of the most important data releases before the central bank’s March meeting, which Chair Jerome Powell has signaled will kick off a series of interest-rate hikes. A reading above the projected 7.2% annual advance in prices – which would be the largest since 1982 — may pressure the Fed to consider its first half-percentage-point increase since 2000, instead of a typical quarter-point move.”

EU cuts economic growth forecast, raises inflation outlook... Euro zone economic growth will be slower than earlier expected this year because of a new wave of Covid infections, high energy prices and continued supply-side disruptions, while inflation will be much stronger, the European Commission said. It now forecasts 2022 EU GDP at 4.0%, down from its previous forecast of 4.3% growth. The commission now expects inflation will be 3.5% this year, up sharply from its 2.2% forecast in November.

Strategie Grains cuts EU wheat export forecast... Consulting firm Strategie Grains cut its 2021-22 EU wheat export forecast by 800,000 MT to 30.4 MMT due to competition from Black Sea and South American exporters, as well as reduced expectations for imports from Algeria and Egypt. The firm raised its estimate for this year’s EU wheat crop to 128 MMT, up 300,000 MT from its prior forecast.

France lower winter wheat plantings estimate... France’s ag ministry lowered its estimate of area sown to winter wheat to 4.75 million hectares from 4.92 million hectares previously. That would be down 4.3% from the 4.96 million hectares that were harvested in 2021. Weather conditions for winter wheat are mostly favorable, according to the ministry.

China new bank loans record-strong in January... New bank lending in China more than tripled in January from the previous month, hitting a record high, as the People’s Bank of China (PBOC) eased monetary policy to boost economic activity. Chinese banks extended 3.98 trillion yuan ($626 billion) in new yuan loans in January, up from 1.13 trillion yuan in December. Broad M2 money supply in January grew 9.8% from a year earlier, PBOC data showed.

Trade restrictions from Indiana bird flu situation... Confirmation of the H5N1 strain of highly pathogenic avian influenza on a commercial turkey farm in Dubois County, Indiana, has resulted in trade actions by importers of U.S. poultry. USDA said it is encouraging countries to follow World Organization for Animal Health standards and minimize trade impacts. The following trade actions have been taken by U.S. trading partners, according to USDA’s Food Safety and Inspection Service (FSIS), with halts on imports of poultry/products:

• From Indiana birds slaughtered on/after Feb. 8: China, Korea and Tunisia.
• From Indiana birds slaughtered on/after Jan. 18: Benin, Namibia and South Africa.
• Loaded on/after Feb. 9: Taiwan.
• From the affected area within Indiana processed on/after Feb. 8: Singapore.

Canada reports bird flu case, too... Canada confirmed H5N1 bird flu in a commercial poultry flock in Nova Scotia, according to the Canadian Food Inspection Agency said. The discovery also prompted varying trade actions to be deployed against poultry from Canada.

China halts Lithuanian beef in apparent political row... China suspended beef imports from Lithuania without giving a reason, though there is a growing trade spat between the two countries centered on Chinese-claimed Taiwan. Lithuania allowed Taiwan to open a de facto embassy in its capital Vilnius last year, angering Beijing, which regards the self-governed island as its own territory. The suspension comes after Britain said on Monday it will join the U.S. and Australia in backing an EU trade case against China at the World Trade Organization over Beijing’s alleged trade curbs on Lithuania.

Cash cattle price forecast inches higher... USDA raised its average cash steer price forecast by 50 cents to $137.50, which would be up $15.10 from last year. The higher price forecast came despite an increase to expected beef production and no change to exports. USDA cited expected “firm packer demand” for cattle during the second half of the year as the reasoning for raising the cash price forecast.  

Big jump in cash hog price forecast... USDA raised its 2022 average cash hog price forecast by $4.50 on Wednesday to $65.00 based on “current prices and slower growth of production” expected this year. The cash hog price is still expected to fall $2.29 from last year’s average. USDA reduced its pork production and export forecasts. Pork production is now expected to decline 1.1% from last year, while exports are projected to decline 3.1% amid “continued weakness in demand from China and increased competition in other markets.”

Overnight demand news... Taiwan purchased one cargo (about 65,000 MT) of Argentine corn. Japan purchased 115,913 MT of wheat in its weekly tender, including 54,684 MT from the U.S., 32,526 MT from Canada and 28,703 MT from Australia.

Today’s reports

• 7:30 a.m. Weekly Export Sales — FAS
• 11:00 a.m. Feed Grains Database — ERS
• 11:00 a.m. Meat Price Spreads — ERS
• 2:00 p.m. Dairy Monthly Tables and Dairy Quarterly Data — ERS
• 2:00 p.m. Season Average Price Forecasts — ERS
• 2:00 p.m. Wheat Data — ERS