First Thing Today | February 16, 2022
Soybeans lead price rebound overnight... Soybeans regained most of Tuesday’s losses overnight, while corn and wheat recouped only a fraction of their declines. As of 6:30 a.m. CT, soybeans are trading 12 to 18 cents higher, corn is 1 to 4 cents higher and wheat futures are mostly 2 to 3 cents higher. Front-month crude oil futures are more than $1 higher and the U.S. dollar index is nearly 150 points lower.
Russia/Ukraine update... After a meeting with German Chancellor Olaf Scholz in Moscow, Russian President Vladimir Putin said that although the U.S. and other NATO members have yet to provide a satisfactory answer to Russia’s demands, there was room to follow the negotiation track. Large-scale exercises involving land, sea and air units were ongoing, but Russia announced this morning that more troops would be returning to their bases, though NATO Secretary General Jens Stoltenberg said there’s no proof of de-escalation. With exercises close to the Ukrainian border and in Belarus not due to end until Feb. 20, it may be several days before there is clarity on troop movements. U.S. Defense Secretary Lloyd J. Austin III is set to travel today to meet with allies and NATO defense ministers “to discuss Russia’s military buildup in and around Ukraine.” Pentagon Press Secretary John Kirby reiterated President Joe Biden’s message that in the event of a Russian invasion, the U.S., which has said that none of its troops would fight in Ukraine, would respond swiftly with severe economic consequences. Meanwhile, Russia’s lower house of parliament approved a resolution to send Putin a proposal to recognize Donetsk and Luhansk, the two regions in eastern Ukraine held by Russia-backed separatists, as independent republics. The recognition would upend the so-called Minsk agreement, a 2015 deal aimed at returning the two regions to Ukrainian rule while granting them special status.
Report: China could cut soybean demand by 30 MMT... China can reduce its soybean demand by 30 MMT by continuing to promote lower soymeal rations in feed and using alternative proteins, the official Xinhua news agency reported, citing unnamed agriculture officials. After China issued guidelines last year recommending the reduction of soymeal use, the portion of soymeal in feed reportedly dropped to an average 15.3%, down 2.4 percentage points compared with 2020. Among the top 33 feed companies, soymeal rations averaged 11.8%, a decrease of 1.6 points from the previous year. China has said boosting soybean production will be a “major political task.” The report on the potential sharp reduction in soybean demand comes after front-month soybeans topped $16 for only the fifth time ever last week.
Reuters: Paraguay soy crushers risk running out of supplies... Paraguay’s soy crushing industry will run out of soybeans to process by the middle of the year due to a drought slashing production, the country’s soy crushers association told Reuters. The Paraguayan Chamber of Oilseed and Cereal Processors (Cappro), which represents major commodity companies such as ADM, Bunge, Cargill and Louis Dreyfus, has petitioned the government to approve a tax exemption to enable soybean imports for crushing. If the measure is approved, it would be the first time Paraguay has imported raw soybeans.
China’s inflation eased in January... China’s producer price index (PPI) increased 9.1% from a year ago in January, which was lower than expected and down from 10.3% in December. Factory gate inflation was the lowest reading since July, reflecting the effect of government measures to secure supply and control commodity prices. The country’s consumer price index (CPI) rose 0.9%, which was also less than anticipated and down from 1.5% in December. This was the lowest consumer inflation since September, as the cost of food dropped 3.8%, the most in four months amid a steeper decline in pork prices.
UK inflation surges to highest level since 1992... The United Kingdom’s CPI increased 5.5% from year-ago in January, the highest level since March 1992, behind supply chain struggles and lingering effects of Covid. The Bank of England earlier this month raised interest rates for the second time in as many policy meetings to help combat rising inflation. The BOE expects inflation to top 7% in the coming months.
Report assesses China’s compliance with WTO membership... The Office of the U.S. Trade Representative (USTR) detailed the Biden administration’s assessment of China’s membership in the World Trade Organization (WTO). “China has not moved to embrace the market-oriented principles on which the WTO and its rules are based, despite the representations that it made when it joined 20 years ago,” said USTR Katherine Tai. “China has instead retained and expanded its state-led, non-market approach to the economy and trade. It is clear that in pursuing that approach, China’s policies and practices challenge the premise of the WTO’s rules and cause serious harm to workers and businesses around the world, particularly in industries targeted by China’s industrial plans.” The report said the Biden administration is pursuing “a multi-faceted approach to address the harm caused by China’s trade and economic policies through both bilateral engagement with China and the use of trade tools” to protect American workers and businesses. The strategy also includes “enhanced engagement with allies and partners in order to build broad support for solutions to the many unique problems posed by China and defending our shared interests.”
USTR also addresses China’s Phase 1 compliance... USTR said: “Many of the commitments in the Phase 1 Agreement reflected changes that China had already been planning or pursuing for its own benefit or that otherwise served China’s interests, such as the changes involving intellectual property protection and the opening up of more financial services sectors. Other commitments to which China agreed reflected a calculation, as it saw them as appeasing U.S. priorities of the prior Administration, as evidenced by the attention paid to the agriculture sector in the Phase 1 Agreement and the novel commitments relating to China’s purchases of U.S. goods and services ostensibly as a means to reduce the bilateral trade deficit. Given these dynamics, and given China’s interest in a more stable relationship with the United States, China followed through in implementing some provisions of the Phase 1 Agreement. At the same time, China has not yet implemented some of the more significant commitments that it made in the Phase 1 Agreement, such as commitments in the area of agricultural biotechnology and the required risk assessment that China is to conduct relating to the use of ractopamine in cattle and swine. China has also fallen far short of implementing its commitments to purchase U.S. goods and services in 2020 and 2021.”
China to survey soils as part of its food security initiative... China will collect data on soil quality and use a national soil survey running from 2022 until the end of 2025, as part of an effort to ensure grain security. Vice Premier Hu Chunhua will chair the group set up to lead the survey, covering farmland, grassland and uncultivated salt–alkali soils, the State Council said. China last conducted a similar survey in 1979.
Senate panel hearing on RFS today... The Senate Environment and Public Works Committee holds a hearing today on the Renewable Fuel Standard (RFS), a session that features testimony from Cory-Ann Wind, Oregon Clean Fuels Program Manager, Oregon Department of Environmental Quality; Emily Skor, Chief Executive Officer, Growth Energy; Lucian Pugliaresi, President, Energy Policy Research Foundation, Inc.; and LeAnn Johnson Koch, Partner, Perkins Coie, LLP. The session comes on the heels of a report released this week that indicated the production of corn-based ethanol results in greater greenhouse gas (GHG) emissions than gasoline, a study disputed by the biodfuels industry. The authors of the paper put together “a series of worse-case assumptions” and “cherry-picked data” for their report, according to Geoff Cooper, president of the Renewable Fuel Association. The association argues that even with the tillage, past studies have shown corn ethanol still produces fewer emissions than gasoline.
CEQ publishes notice on carbon capture efforts... The Council of Environmental Quality (CEQ) released an interim document on Carbon Capture, Utilization, and Sequestration (CCUS) aimed at providing guidance to U.S. government agencies on regulating and permitting CCUS projects and carbon dioxide pipelines. CEQ said the notice is to “support the efficient, orderly, and responsible deployment of CCUS projects and carbon dioxide pipelines.” The guidance is in line with a report to Congress from the CEQ issued in June 2021 on CCUS efforts. Comments on the notice, which was published in today’s Federal Register, are due March 18.
Digital assets could soon threaten global financial stability... That’s according to a report this morning from the Financial Stability Board, which was set up by the G-20 in the wake of the financial crisis. The report highlighted the scale of the asset class, increasing interconnectedness with traditional finance and its structural vulnerabilities. Bitcoin remained mostly unmoved by the release of the report with the largest cryptocurrency holding above $44,000 this morning.
USDA confirmation of potential second Indiana bird flu case awaited... Indiana reported a “presumptive-positive case” of H5 bird flu at a commercial turkey farm in Dubois County. The Indiana Board of Animal Health is awaiting confirmatory test results from a USDA lab. The expected outbreak was in a flock of 26,473 turkeys and depopulation is ongoing.
Slow developing cash cattle market... Cash sources indicate feedlots are asking $142 to $143 for this week’s showlist supplies in the Southern Plains, while the northern market was still quiet on Tuesday. Packers have not yet established initial bids, suggesting cash trade will be pushed until the latter part of the week. Cash sources generally expect steady to slightly firmer prices to develop.
Pork cutout pulls back... After dropping $1.98 on Monday, the pork cutout value was another $1.26 lower yesterday as packers were unable to maintain morning gains. While the product market is suggesting a short-term top, the CME lean hog index continues to rise. The cash index is up another $1.33 to $91.84 today (as of Feb. 14).
Overnight demand news... Jordan tendered to buy 120,000 MT of optional origin milling wheat. Iran tendered to buy 60,000 MT each of corn, soymeal and feed barley from unspecified origins. Japan received no offers in its tender for 80,000 MT of feed wheat and 100,000 MT of feed barley. Syria made no purchase in its tender to buy 200,000 MT of milling wheat.
Today’s reports
- 9:30 a.m. Weekly Ethanol Production — EIA
- 2:00 p.m. USDA Agricultural Projections to 2031 — ERS
- 2:00 p.m. Broiler Hatchery — NASS
- 2:00 p.m. Turkey Hatchery — NASS
- 2:00 p.m. Vegetables - Annual — NASS
