First Thing Today | February 11, 2022

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Good morning!

Soybeans lead overnight price rebound... Soybeans are higher this morning after there was limited followthrough selling from Thursday’s poor closes early in the overnight session. Corn and wheat are following soybeans higher. As of 6:30 a.m. CT, soybeans are trading 10 to 12 cents higher, corn is 4 to 5 cents higher, SRW wheat is 9 to 10 cents higher, HRW wheat is 5 to 6 cents higher and spring wheat is 5 to 8 cents higher. Front-month crude oil futures are more than $1 higher and the U.S. dollar index is up around 175 points this morning.

Russia/Ukraine update... The Kremlin is tightening its military vise on Ukraine, as thousands of Russian troops yesterday began 10 days of exercises in Belarus. Ukraine also warned of upcoming Russian naval drills so extensive that they would block shipping lanes. Aside from Belarus, satellite images revealed deployments of Russian military equipment and troops in Crimea and western Russia, according to the New York Times. In Moscow, Sergey Lavrov, the Russian foreign minister, dismissed his talks with his British counterpart as a conversation of a “mute person with a deaf person,” asserting again that the West was not seriously addressing Russia’s most pressing concerns. Russian President Vladimir Putin said negotiations were continuing, and added that he planned to speak by phone in the coming days with French President Emmanuel Macron. Meanwhile, Kyiv is encouraging the arming of nationalist paramilitary groups to thwart a Russian invasion. But they could also destabilize the government if it agrees to a peace deal they reject, some observers note.

Russian wheat export taxes declines for fifth straight week... Russia’s wheat export tax for Feb. 16-22 will be $92.80 per metric ton, based on an indicative price of $332.70 per metric ton. The wheat export tax has dropped five straight weeks and is down from the peak rate of $98.20 per MT in mid-January, but is still 230% higher than the initial rate of $28.10 per MT at the beginning of June when Russia started using the sliding scale.

Goldman Sachs raises interest rate hike expectations... Goldman Sachs economists now expect the Federal Reserve to raise interest rates seven times this year to contain surging U.S. inflation, up from the five hikes they had seen earlier. The change of view comes after the U.S. consumer price index for January showed a 7.5% annual increase, the biggest since 1982.

Lagarde warns against rush to raise interest rates... European Central Bank President Christine Lagarde warned the Governing Council would harm the euro zone’s economic rebound from the pandemic if it were to rush to tighten monetary policy. Lagarde also stressed that the euro zone can’t be compared to other major jurisdictions. “The U.S. economy is overheated, whereas our economy is far from being that,” she told Redaktionsnetzwerk Deutschland in an interview. “That’s why we can — and must — proceed more cautiously. We don’t want to choke off the recovery.”

China urges U.S. to scrap additional tariffs, sanctions... China says it has worked hard to promote the joint implementation of its Phase 1 economic and trade agreement with the U.S. since the deal came into force. The country overcame multiple negative impacts of the Covid-19 pandemic, a global economic recession, and disrupted supply chains, Gao Feng, spokesperson of the Ministry of Commerce, told a press conference. Gao called for action from the U.S. to create a conducive atmosphere and sound conditions for the two sides to expand trade cooperation. He added that the economic and trade teams of the two sides are in regular communication.

Senate to vote next week on stopgap spending plan... The House-passed continuing resolution (CR) that would keep the government operating through March 11 will be voted on in the Senate next week, Senate Majority Leader Chuck Schumer (D-N.Y.) said Thursday. This comes as Senate Appropriations Committee leaders said earlier this week they reached an agreement on a framework for an omnibus spending package to cover government operations for the remainder of fiscal year (FY) 2022. “I am very confident we’re on a path to finish with something that can be strongly supported,” Senate Appropriations Committee Chairman Pat Leahy (D-Vt.) said. It is not clear what the specific spending levels will be under the framework deal and details of the effort are being worked out with House Appropriations Committee Chair Rosa DeLauro (D-Ct.) and Ranking Member Kay Granger (R-Texas). The lack of detail indicates there is still a lot of work left to do on the package but getting an agreement on a framework sets lawmakers on a path to getting the FY 2022 spending situation finally put to rest (FY 2022 ends Sept. 30).

U.S. registers rare monthly budget surplus as aid spending dwindles... The U.S. registered a budget surplus of $119 billion in January, the first since the pandemic began, as tax receipts rose to $465 billion (up 21% from year ago) against spending that fell 37% from January 2021 to $346 billion. In January 2021, the budget red ink totaled $163 billion. Covid-related spending has continued to fall and rising wages have resulted in more payroll taxes flowing into federal coffers — payroll taxes were up 21% in January compared with a year ago. This puts the deficit for fiscal year (FY) 2022 at around $259 billion, considerably lower than the $736 billion that was registered at this point in FY 2021.

Ag groups suing EPA over agency’s ignoring science & safety findings... U.S. farm groups representing thousands of farmers and farmer-owned cooperatives that will be harmed by EPA’s decision to revoke all tolerances of chlorpyrifos are taking legal action against the agency. In a news release, the groups reiterated that the chlorpyrifos revocation rule does no good for human health, is harmful to farmers and farm co-ops, and EPA must be held accountable. Brad Doyle, soy farmer from Arkansas and president of ASA commented, “EPA’s proposed interim decision back in December 2020 for the re-registration of chlorpyrifos found 11 high-benefit, low-risk crop uses that the agency was confident ‘will not pose potential risks of concern.’ How can they now deny all uses, even when the court gave them options for keeping those found safe? The agricultural stakeholders taking legal action are first seeking an injunction of the rule to prevent the first wave of significant, irreparable damage the chlorpyrifos revocation would cause if it were to take effect on the Feb. 28 implementation date. The groups are ultimately seeking vacatur of the rule where it conflicts with well-established, properly developed science — specifically, the 11 uses found to be safe.

China’s sow herd drops in Q4 but still 4% bigger than last year... China’s sow herd fell 2.9% at the end of December compared to the previous quarter, the country’s ag ministry said. But the herd at 43.3 million head was 4% greater than Dec. 31, 2020. China’s pig herd at the end of December was up 10.5% from the previous year, at 449.22 million head and 2.6% bigger than the third quarter.

China targets 15% increase in meat output by 2025... China is aiming for meat production of 89 MMT by 2025, growing by an annual average of 2.8% from the 77.5 MMT produced in 2020, a cabinet document showed on Friday. Under the plan, pork production would be about 55 MMT, with output at 22 MMT for poultry meat, 6.8 MMT for beef and 5 MMT for lamb. The five year plan to modernize agriculture follows a blueprint issued last month for development of the livestock sector over that period.

Cash cattle move higher... Packers paid as much as $226 for cash cattle in the northern dressed market on Thursday, which would be up $4 from last week. The stronger northern prices encouraged feedlots in the Southern Plains to hold firm on their asking prices for $142, with some holding out for even higher prices. Despite the strong cash market, cattle futures finished lower Thursday amid profit-taking and fund selling.

Cash hog index continues to rise... The CME lean hog index is up another 52 cents to $87.74. While deferred lean hog futures finished lower on corrective selling yesterday after earlier posting new contract highs, front-month February hogs firmed on the strengthening cash market. February hogs expire next Monday and are settled against the cash index next Wednesday. The February contract finished yesterday at a $2.435 premium to today’s cash index quote.  

Overnight demand news... Exporters reported no tenders or sales.

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