First Thing Today | March 2, 2022
Winter wheat firmer, corn and soybeans retreat... Winter wheat futures are sharply higher this morning in followthrough buying, though well off their overnight highs. Spring wheat is mostly firmer, while corn and soybeans are lower. As of 6:30 a.m. CT, winter wheat futures are mostly 31 to 64 cents higher, spring wheat is mostly 16 to 17 cents higher, corn is 4 to 8 cents lower and soybeans are 10 to 16 cents lower. Front-month U.S. crude oil futures are more than $6 higher and the U.S. dollar index is up around 125 points this morning.
Russia/Ukraine update... Russia and Ukraine will hold a second round of talks later today as battles rage on with Ukraine, according to Russian news agency TASS, citing an aide to the Ukrainian president’s office. Ukraine’s Foreign Minister Dmytro Kuleba says Russia’s demands remain unchanged from what they were before it started the war and his country is unwilling to bow to those ultimatums. The Ukrainian city of Kharkiv has not yet been taken by Russia, despite an intensive shelling effort that took place over the past 24 hours.
Sanctions on Russia will have limited impact on China... The impact on China from Western sanctions against Russia will remain limited, the head of China's banking and insurance regulator said. China will not join in sanctions on Russia and will maintain normal economic and trade exchanges with the country. Meanwhile, China’s central bank says it will step up the counter-cyclical adjustment function of its macro management system. It will also expand its toolbox of macro policies and step up monitoring, assessment and warning of systemic risks.
Russian crisis could cause Germany to rethink its exit from coal-powered energy... Germany would consider a slower exit from coal-powered energy should Russia stop gas deliveries to Europe in response to sanctions over its invasion of Ukraine, Economy Minister Robert Habeck said. “Short term it may be that, as a precaution and in order to be prepared for the worst, we have to keep coal-powered plants on standby and maybe even let them operate,” said Habeck. Germany had planned to shut its nuclear power plants by the end of this year and phase out coal-fired plants by 2030, but the Russian situation has forced it to consider both keeping nuclear and extending the lifespan of coal plants.
China buying U.S. soybeans, corn... Export sources told Reuters China booked at least five cargoes of U.S. old-crop soybeans for delivery in April-May. “While prices of U.S. and Brazil beans were almost the same, logistics for U.S. cargoes were faster,” one trader said. On Monday, China was rumored to have purchased at least 10 cargoes of U.S. corn to replace shipments from Ukraine due to the closure of its ports until at least the Russian invasion ends.
Biden’s State of the Union address... President Joe Biden repackaged his prior controversial proposals into a speech that many say lacked a coherent theme and ended up being a traditional laundry wish list. Not once did he mention China, and he stayed away from noting the withdrawal (some say surrender) in Afghanistan. Biden lashed out at Russian President Vladimir Putin, saying he “badly miscalculated” by ordering the invasion of Ukraine. He pledged that Russia will suffer even more economically the longer the conflict goes on. Noting risks both economically and militarily, Biden said: “I want you to know that we are going to be okay. When the history of this era is written, Putin’s war on Ukraine will have left Russia weaker and the rest of the world stronger,” he said. Biden did not mention Build Back Better once but listed its provisions that failed to garner enough Democratic support. He scolded CEOs to “lower your costs, not your wages.” And Biden again said his plan to fight inflation is to spend. On Covid, Biden warned it could flare up again if a new variant emerges, and he said the country must be ready. The president got bipartisan support for his remarks about the next phase of Covid-19, saying the tools are now available for Americans to return to more normal lives.
Biden again goes after meatpackers, ocean carriers... Biden again singled out meatpackers and ocean carriers for blame when it comes to inflation. His attack on the four big packers was not in the text of the speech provided by the White House. “I’m a capitalist, but capitalism without competition isn’t capitalism,” Biden said. “It’s exploitation — and it drives up prices. When corporations don’t have to compete, their profits go up, your prices go up, and small businesses and family farmers and ranchers go under. We see it happening with ocean carriers moving goods in and out of America. During the pandemic, these foreign-owned companies raised prices by as much as 1,000% and made record profits. Tonight, I’m announcing a crackdown on these companies overcharging American businesses and consumers.”
Euro zone inflation reaches another high in February... Euro zone inflation soared to another record high last month as consumer prices surged 5.8% from year-ago, up from a 5.1% rise in January. A 32% jump in energy costs drove inflation but unprocessed food prices also rose a sharp 6.1%. Inflation excluding food and energy prices accelerated to 2.9% in February from a 2.4% rise the previous month.
Powell testimony to Congress starts today... The marketplace awaits Fed Chair Jerome Powell’s testimony today to a U.S. House panel. Many market watchers think the geopolitical crisis will alter the timing and degree of the Fed’s expected interest rate increases this year. Powell could shed more light on that notion in his remarks today. He will appear before a Senate panel on Thursday.
CFAP 1, 2 payouts mostly static as spot checks on payments continue... Payments under the Coronavirus Food Assistance Program 1 (CFAP 1) and CFAP 2 both were largely unchanged in data from USDA as of Feb. 28. CFAP 2 payments totaled $19.08 billion, with original CFAP 2 payouts at $14.25 billion and top-up payments at $4.83 billion. CFAP 1 payouts stood at $11.77 billion, with $10.58 billion in original CFAP 1 payments and $1.19 billion in top-up payments ($1.18 billion prior). Meanwhile, FSA has been conducting spot checks on CFAP 1 and CFAP 2 payments, an effort to “provide program oversight and ensure payments are issued to eligible program applicants and certifications provided by the applicants are supported by appropriate documentation.” County FSA offices are to complete the reviews by May 27.
Slow developing cash cattle market... Packers have been reluctant to make initial bids for cash cattle, while feedlots are seeking $144 or higher for this week’s supplies. Market-ready supplies will tighten through spring and recent weekly slaughter totals have been strong, but the drop in cattle futures throws some uncertainty into this week’s cash cattle negotiations. Unless packers unexpectedly come with firmer cash bids, it appears the bulk of this week’s cash trade will be pushed deep into the week.
Cash hog index continues to climb, pork cutout rolling over... The CME lean hog index is up another 57 cents to $99.66, the highest since Sept. 3. The pork cutout market, which had also been strengthening, dropped $4.08 on Tuesday and is down nearly $6 from its Feb. 24 peak. While the cutout remains strong, price action the past three days signals some retailer resistance, especially to bellies and hams, as hams dropped sharply on Monday and bellies fell nearly $28 on Tuesday.
Overnight demand news... South Korea purchased 134,000 MT of optional origin corn. Japan purchased 24,074 MT of U.S. milling wheat. Turkey provisionally purchased 370,000 MT of milling wheat from unspecified origins, though the final tally could be adjusted as the tender remains open. Tunisia purchased around 100,000 MT of optional origin durum wheat. Jordan received no offers in its tender to buy 120,000 MT of wheat.
Today’s reports
- 2:00 p.m. Broiler Hatchery — NASS
