First Thing Today | February 25, 2022

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Good morning!

Grain, soy markets sharply lower overnight... Wheat and corn futures retreated from yesterday’s strong gains, while soybeans saw followthrough selling overnight after a weak finish Thursday. As of 6:30 a.m. CT, corn futures are trading 10 to 15 cents lower, soybeans are 15 to 33 cents lower and wheat futures are mostly 23 to 30 cents lower. Front-month U.S. crude oil futures are slightly higher after two-sided trade overnight, while the U.S. dollar index is down around 175 points.

Russian airstrikes continued to hit Ukrainian sights overnight... Russian forces captured the Chernobyl power plant north of Kyiv, site of the 1986 nuclear disaster. The White House noted credible reports that Russian soldiers were holding staff at the nuclear site as hostages. Explosions were reported in Kyiv, Kharkiv and elsewhere. At least 40 Ukrainian troops were killed in the fighting, the Ukrainian ambassador to the U.S. said, along with “dozens” of civilians. Russia has failed to take any of its main objectives in the first wave of the attack, said U.K. Defense Secretary Ben Wallace. “It is behind its hoped-for timetable,” he said, adding that Russia had lost 450 personnel during the offensive.

Biden announces ‘severe sanctions’ and export controls against Russia... “The sanctions we imposed exceed anything that’s ever been done,” President Joe Biden said. “The sanctions we imposed have generated two-thirds of the world joining us. They are profound sanctions.” However, U.S. and West penalties against Russia are not as severe as expected, including no sanctions on Russia’s crude oil or natural gas industries. Also, the U.S. and its allies will not bar Russia from the SWIFT global interbank payments system, the international banking communication infrastructure that enables cross-border money flows, because Europe (especially Germany and Italy) does not want to undertake that action, Biden said. Blocking Russia from SWIFT would inflict heavy economic pain on country and is seen as a key geopolitical tool. But severing Russia from the financial system could harm Western business and benefit China, the Wall Street Journal reported. Russia and China have been working on their own alternative to SWIFT. China’s Cross-Border Inter-Bank Payments System would enable the two countries to bypass SWIFT.

Warner: Russian cyberattacks on NATO targets could constitute Article 5 violation...  In an interview on MSNBC’s Morning Joe, Sen. Mark Warner (D-VA), the chairman of the Senate Intelligence Committee, said, “The two gravest immediate concerns I have is if Russia launches its full cyberattacks, further against Ukraine. Those cyberattacks, once you unleash them, know no geographic boundaries. We have reports that system of the cyberattacks launched again Ukraine have had results already in Latvia and Lithuania. If the Russian decide to shut down all the power in Ukraine and that suddenly shuts down the power in eastern Poland, where our [U.S.] troops are, you are getting pretty close to what can be an Article 5 violation. ... We can then see Putin actually launch cyberattacks directly against the West, and against the United States. We are in uncharted territory, and I think we all ought to buckle up.”

China declines to characterize Russian offensive as an ‘invasion’... Reuters reports the Chinese government “rejected calling Russia’s moves on Ukraine an ‘invasion’ and urged all sides to exercise restraint, even as it advised its citizens there to stay home or at least take the precaution of displaying a Chinese flag if they needed to drive anywhere... “China is closely monitoring the latest situation. We call on all sides to exercise restraint to prevent the situation from getting out of control,” said Hua Chunying, spokesperson at China’s foreign ministry.” Hua is quoted as saying, “Regarding the definition of an invasion, I think we should go back to how to view the current situation in Ukraine. The Ukrainian issue has other very complicated historical background that has continued today. It may not be what everyone wants to see.”

Biggest immediate impact on supply chains has been in the shipping sector... Bulk and tanker operations have been hit especially hard by Russia’s attack on Ukraine. Germany’s Hamburger Hafen und Logistik, which runs a large container terminal at Odessa, said Ukrainian authorities closed the port. Commercial shipping in and out of Ukraine has largely stopped, the Wall Street Journal reports, with Kyiv warning ships to stay clear of the Sea of Azov. The sea connects to the Black Sea and is a key transit corridor for oil produced in Russia headed to European markets. One vessel, a Turkish-owned ultramax bulk ship, was hit by a bomb shortly after departing Odessa, highlighting concerns that the conflict could disrupt vital shipping routes that carry much of the world's wheat and other agricultural products. TradeWinds magazine reported the Yasa Jupiter was under charter to commodities trader Cargill.

Weekly Export Sales Report out this morning… For the week ended Feb. 17, traders expect:

 

2021-22 expectations (in MT)

2021-22

last week

2022-23

expectations (in MT)

2022-23

last week

Corn

500,000-900,000

820,041

0-300,000

113,500

Wheat

100,000-450,000

118,060

0-100,000

10,500

Soybeans

500,000-1,200,000

1,361,826

450,000-850,000

1,526,000

Soymeal

100,000-400,000

279,138

0-100,000

40,000

Soyoil

8,000-40,000

35,379

0-20,000

0

Vilsack: Biofuels outlook ‘bright’ from renewable jet fuel demand... USDA Secretary Tom Vilsack said the U.S. biofuels industry has a “bright, positive future,” especially in the burgeoning market for sustainable jet fuel. “We’re going to continue to look for ways to promote this industry, but we’re also excited about the grand challenge to focus on the aviation industry that currently wants, needs biofuel,” Vilsack said Thursday at USDA’s Ag Outlook Forum. USDA chief economist Seth Meyer, also speaking at the conference, noted that EPA’s proposed biofuel blending mandate for 2022 could finally lead the corn-based ethanol industry to achieve 15 billion gallons of blending into the national gasoline supply.

China to step up policy support for economy... China will step up policy support to stabilize the economy, Xinhua news reported, quoting the Politburo, a top decision-making body of the Communist Party. Beijing will implement a strategy to expand domestic demand and promote steady growth in foreign trade and foreign investment. China aims to fend off systemic risks and safeguard financial stability, seeking to combine fighting corruption in the financial sector with preventing risks.

Bird flu confirmations in additional commercial and backyard flocks... USDA’s Animal and Plant Health Inspection Service (APHIS) has confirmed the presence of H5N1 highly pathogenic avian influenza (HPAI) in two commercial turkey flocks in Greene County, Indiana, and in backyard flocks in Kalamazoo County, Michigan (mixed species, non-poultry) and Knox County, Maine (pet chickens, non-poultry), the second confirmed backyard find in Maine. There are now seven confirmed commercial operations with HPAI in Indiana, Delaware and Kentucky, and five backyard flocks in Virginia, Maine, New York and Michigan.

China’s sow herd declines, still up from year-ago... China’s sow herd fell 0.9% during January to 42.9 million head, though that was still up 2% from last year, according to the country’s ag ministry. The country’s hog slaughter totaled 28.5 million head during January, down 1.7% from December, but up 45.9% from last year.

Cattle on Feed Report out this afternoon... Traders expect USDA’s Cattle on Feed Report to show Feb. 1 feedlot supplies up 0.8% from year-ago at roughly 12.2 million head. After bigger-than-year-ago placements the three previous months, the figure for January is expected to be down 0.8% from year-ago. But traders expect last month’s marketings to have fallen 2.7% from last year.

Cash cattle prices weaken... Cattle futures fell sharply on Thursday amid fallout from Russia’s invasion of Ukraine, which prompted packers to pull back cash cattle bids. Some feedlots fearing even further reductions in cash bids sold cattle at the lower prices. But not all feedlots pulled the trigger, meaning some of this week’s showlist could be carried into next week if there aren’t more sales today.

Key day for hog futures... April lean hog futures followed up Wednesday’s key bearish reversal with active selling yesterday, providing stronger signs of a top. While no major technical damage was done the past two days, additional pressure today would swing short-term momentum solidly to bears and point to a deeper correction extending into next week.

Overnight demand news... Taiwan passed on a tender to buy up to 65,000 MT of corn due to offered prices being too high.

Today’s reports

 

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