First Thing Today | February 15, 2022
Soybeans, winter wheat lead overnight price losses... Soybeans extended Monday’s declines overnight, while the winter wheat markets were pressured by an apparent easing of tensions between Russia and Ukraine. Corn followed the other two markets lower. As of 6:30 a.m. CT, soybeans are trading 11 to 15 cents lower, winter wheat futures are 15 to 18 cents lower, spring wheat is 7 to 12 cents lower and corn is 4 to 9 cents lower. Front-month crude oil futures are more than $3 lower and the U.S. dollar index is around 275 points lower this morning.
Russia/Ukraine update... Russia said some troops were being pulled back from around Ukraine, a sign of potential de-escalation. But large-scale military drills are continuing. The U.S. tempered hopes Moscow wanted to find a diplomatic route out of the Ukraine crisis as officials warned that Russia’s military had in the past two days continued to ramp up plans for an invasion. Meanwhile, Sergei Lavrov, Russia’s foreign minister, raised expectations the standoff might be resolved peacefully when he said Moscow was prepared to keep talking to the West about its security concerns and that there could still be a “way forward” in negotiations and “at this stage I would suggest that they be continued and increased.” Officials in Washington said Lavrov’s comments, which were made in a televised meeting with President Vladimir Putin, were at odds with advancing military preparations for an assault. “We have taken note of his comments. What we have not taken note of is any indication of de-escalation. We have not seen any tangible, any real sign of de-escalation,” said U.S. State Department Ned Price spokesperson on Monday.
Consultant slashes Brazilian soybean crop estimate... Crop Consultant Dr. Michael Cordonnier says he was holding out hope that production losses due to drought in southern Brazil would be partially offset by stronger yields in central and northern areas. He no longer has that hope, saying conditions in southern Brazil are worse than expected and there may be additional yield losses due to drought. As a result, Cordonnier slashed his Brazilian soybean crop estimate by 6 MMT to 124 MMT. He also lowered his Argentine soybean crop forecast by 2 MMT to 40 MMT. For all of South America (Brazil, Argentina, Paraguay, Bolivia and Uruguay), Cordonnier estimates production at 174.6 MMT, which would be down 24.2 MMT (12.2%) from last year. Cordonnier kept his Brazilian corn crop peg at 112 MMT, but cut his Argentine corn crop forecast by 1 MMT to 50 MMT. For all of South America, Cordonnier forecasts production at 168 MMT, which would be up 24.6 MMT (17.2%) from last year.
NOPA January crush expected to be record-large... Traders expect NOPA to report its members crushed a 186.7 million bu. of soybeans in January, based on a Reuters survey. If realized, that would top the record crush of 186.4 million bu. in December and be up 1.1% from last year. Soyoil stocks at the end of January are expected to rise to 2.062 billion lbs., which would be up 1.5% from December and 14.6% above last year.
Consultancy raises Russian wheat crop forecast... SovEcon raised its 2022 Russian wheat crop forecast by 3.6 MMT to 84.8 MMT, citing favorable weather conditions.
Trudeau invokes emergency powers to address trucker protests... Canada’s prime minister Justin Trudeau has invoked emergency powers to quell protests against mandatory Covid-19 vaccinations that continue to grip the nation’s capital, drawing the ire of some provincial leaders. Trudeau pledged at a press conference on Monday that use of the powers under the Emergencies Act — which gives the federal government broad authority, including the ability to prohibit public assembly and travel — “will be time-limited, geographically targeted, as well as reasonable and proportionate to the threats they are meant to address.” He also said the military would not be called in to deal with vehicle blockades that have cut off border crossings with the United States. Financial institutions may be directed to regulate or ban “the use of property to fund or support illegal blockades,” Trudeau said.
Costs to move shipments across the U.S./Canada border have increased sharply amid protests... Prices to ship goods from Canada to the U.S. on the spot market for standard heavy-duty trucks jumped 44% to $4.07 a mile from Jan. 2 to Feb. 5, according to Truckstop.com, a platform matching loads to trucks. Rate increases to ship goods from the U.S. to Canada weren’t as steep, but prices still rose by more than 20% during that period, which includes the time when Canada and then the U.S. imposed a Covid-19 vaccine mandate for cross-border truck drivers but doesn’t include the weeklong period when protests blocked the crucial Ambassador Bridge corridor connecting Detroit to the city of Windsor, Ontario. Trucking companies say their costs have been escalating in part because of labor shortages and rising fuel prices, the Wall Street Journal (WSJ) reports.
Inflation is growing on the farm... American farmers are paying significantly higher prices for their weed-killing chemicals, crop seeds, fertilizer, equipment repairs and seasonal labor, eroding some of 2021’s windfall from rising crop prices. Higher farm costs could help push up grocery bills further in 2022, analysts say, following a year in which global food prices rose to decade highs, WSJ notes.
Inflation outlook improves for first time since 2020... U.S. consumers don’t expect red-hot inflation levels to last in the long term, according to the January consumer survey from the Federal Reserve Bank of New York, which showed that median one-year-ahead inflation expectations fell for the first time since October 2020, to 5.8%. The outlook over three years decreased even more sharply, and the decline was broad-based across age, education and income. In a separate analysis of data from the survey, economists said consumers recognize the unusual nature of the current bout of high inflation.
Japan’s economy grew in Q4 2021... Japan’s economy grew 1.3% from the previous quarter in the final three months of last year, equal to 5.4% on an annualized basis. Spending on services recovered solidly after a state of emergency in Tokyo and other cities was lifted on Sept. 30. About 80% of the nation’s population was vaccinated by the end of 2021, making people feel safer to dine out or travel. The new year, however, has brought a surge in Omicron infections, modest restrictions on restaurants and reduced operating hours at some retailers.
China will continue to stabilize commodity prices... China will take steps to support the industrial sector, including efforts to stabilize commodity prices, according to a statement from its cabinet. New measures will include more tax breaks and medium- and long-term loans for small firms. In a related note, China’s state planner will hold what it called a “reminding and warning” meeting with domestic and foreign iron ore traders on Feb.17 in an effort to ensure market stability.
Tyson owns Kentucky chicken farm infected with bird flu... Tyson Foods owns the flock of about 240,000 chickens in Fulton County, Kentucky, that was infected with H5N1 bird flu, government and company officials announced Monday. Birds from the infected flock will be culled and will not enter the food system. Tyson is working with government authorities to prevent the disease from spreading and is heightening safety measures at other local farms, spokesman Gary Mickelson said. Kentucky officials expect final test results for a separate suspected outbreak of bird flu among turkeys in Webster County, Kentucky. Countries announcing trade restrictions for Kentucky thus far include China, South Africa, Tunisia and Benin.
USDA sends new poultry contracting rules for review... USDA moved toward publishing a proposed new rule regulating “tournament systems” heavily used by poultry companies to pay growers, sending the rule to the White House’s Office of Management and Budget. The proposal would be first in a series of proposed USDA rules to address the White House’s goal of more competition in the livestock and poultry processing industries. Advocates of poultry growers have complained the ranking system poultry firms often use to compensate farmers is opaque and unfair.
Bulls make a stand in cattle futures... Cattle futures finished mildly firmer on Monday after a choppy day of trade. That suggests the selling pressure the final two days last week could have been nothing more than a correction in the bull market. But bulls must continue to defend near-term support. Price action the next couple days will determine if the market is gearing up for another push higher or headed for a deeper pullback.
Cash hog index continues to climb... The CME lean hog index is up another $1.59 to $90.51. April hogs assume lead-month status at nearly a $12 premium to today’s cash index quote. Traders have a much-stronger-than-normal seasonal rally built into April hogs. Over the past five years, the cash index has firmed an average of just under $2 from mid-February to mid-April; the 10-year average is just under a $4 cash rally over the next two months.
Overnight demand news... Japan is seeking to buy 54,692 MT of U.S. milling wheat in its weekly tender. South Korea tendered to buy 82,000 MT of U.S. or Canadian wheat.
Today’s reports
- 11:00 a.m. Soybean Crush — NOPA
- 2:00 p.m. Livestock, Dairy, and Poultry Outlook: February 2022 — ERS
- 2:00 p.m. Sugar and Sweeteners Outlook: February 2022 — ERS
