First Thing Today | March 17, 2022

Good morning!

Corn and beans higher, wheat rebounds from overnight lows... Corn and soybeans firmed after failing to take out Wednesday’s lows overnight. Wheat futures gapped lower but rebounded to fill the gaps and are mixed this morning. As of 6:30 a.m. CT, corn futures are trading 8 to 10 cents higher, soybeans are 6 to 10 cents higher, SRW wheat is mostly steady to a penny higher, HRW and HRS wheat are mixed. Front-month U.S. crude oil futures are around $4.75 higher and the U.S. dollar index is around 400 points lower this morning.

Russia/Ukraine update... Talks between Russian and Ukraine continue via video link, with the Kremlin saying it was putting “colossal energy” into the negotiations. Ukrainian President Volodymyr Zelenskyy urged Germany to take the lead in efforts to end the war in a video address to lawmakers in Berlin. Despite Ukraine’s pleas, Preside Joe Biden and NATO leaders have refused to set up a no-fly zone, which would draw the military alliance directly into a conflict with Russia. Ukrainian Defense Minister Oleksii Reznikov told European lawmakers the EU should recognize Russian President Vladimir Putin as a war criminal a day after Biden used the term in his comments which the Kremlin called “unforgivable.” Russia accused the U.S. of stoking “Russophobia in its attempt to bring it down and said the country “has the might to put its brash enemies into place.”

China’s Shenzhen plans ‘orderly’ work resumption... China’s technology hub of Shenzhen will allow firms to resume work in an “orderly” manner after the restriction of non-essential businesses in an effort to contain an outbreak of Covid-19, a city official said. “On condition that the epidemic prevention and control work is done well, enterprises will resume production in an orderly way based on region and category,” Huang Qiang, deputy-secretary general of the Shenzhen municipal government said. “There must be no loosening or slacking in virus control and prevention work,” the official added.

Canadian Pacific Railway threatens lockout in labor dispute... The railway said it would lock out employees on Sunday if the union representing train conductors and engineers fails to negotiate a new contract or agree to binding arbitration. The parties have been in daily discussions but “remain far apart.” Canadian Pacific will continue to bargain with the union to achieve a settlement. Canadian Pacific “has commenced its work stoppage contingency plan and will work closely with customers to achieve a smooth, efficient and safe wind-down of Canadian operations,” the company said. The disruption is poised to create more uncertainty in fertilizer markets just as farmers need key nutrients to plant spring crops. Canada, along with Russia and Belarus, is one of the main sources for the world’s potash, a mined mineral used in crop nutrients. Sanctions on Belarus and Russia following the invasion of Ukraine have already created a global shortfall and skyrocketing prices. CP is the primary rail transportation provider for the delivery of Saskatchewan potash to overseas markets, according to the provincial government. Nutrien, one of the top crop-nutrient suppliers, and Saskatchewan’s government have asked Canada’s federal government to act swiftly to stop a strike.

Euro zone inflation continues record rise... Euro zone consumer inflation rose 0.9 points in February to a record annual rate of 5.9%. Excluding energy, food, alcohol and tobacco, European consumer prices rose 0.5 from January and 2.7% from year-ago. Despite the record inflation, European Central Bank President Christine Lagarde said any increase in the ECB's policy rate will be gradual and come only “some time” after its bond-buying program ends, likely this summer. “This maintains our traditional sequencing logic, but also gives us extra space if needed after we stop purchasing bonds and before we take the next step towards normalization,” she said.

Weekly Export Sales Report out this morning… For the week ended March 10, traders expect:

Strategie Grains raises EU wheat export forecast, lowers crop outlook... Strategie Grains cut its projection for 2021-22 wheat exports out of Ukraine by almost 6 MMT and from Russia by 5 MMT due to the war. To partially offset those losses, the consultancy raised its estimate for wheat shipments from the 27-member European Union this season by 2 MMT to 32.5 MMT. Strategie Grains lowered its outlook for this year’s EU wheat crop by 1.1 MMT from last month to 126.9 MMT, which would be down 2.5 MMT from last year.

Ukraine winter grains in favorable condition... “As for the new-crop winter crops are indeed in good condition throughout the country. And, despite the difficulties in which field work has to be carried out, Ukraine will have bread,” Deputy Agriculture Minister Taras Dzoba said in a statement. “Of course, the export potential is significantly undermined by this war, which will lead to higher prices,” he added.

Argentina analyzing higher export taxes for soymeal, soyoil... Argentina is weighing raising taxes on soybean oil and meal exports as part of a plan to tamp down sky-high inflation, a government source told Reuters. A hike to soy product export taxes was widely speculated immediately after the country shut off export registrations for soymeal and soyoil on Sunday. A two-point hike to those export taxes would move them to 33% and on par with the soybean export levy, though some believe the soybean rate will also be raised by two points.

Argentina warns beef sector to help tame inflation or risk export bans... Argentina’s government warned beef processors to do their part to help bring down domestic inflation or risk export bans on beef. The Argentine government has broad agreements with the beef sector to ensure the supply of certain cuts at low prices to the domestic market. Minister of Agriculture Julián Domínguez said, “I informed them that those who do not comply with the commitments assumed with the Argentine people will not be able to continue exporting meat.”

USDA confirms bird flu in additional backyard flocks... USDA’s Animal and Plant Health Inspection Service (APHIS) confirmed highly pathogenic avian influenza (HPAI) in a non-commercial backyard flock (non-poultry) in Merrick County, Nebraska, and in a backyard mixed species (non-poultry) flock. This bring total confirmed HPAI cases to 37 with 16 of those being in non-commercial backyard flocks. USDA also updated the number of birds involved in the Jefferson County, Wisconsin HPAI case to 2,757,800 birds in a commercial layer flock — APHIS originally reported the total at 3 million birds.

USDA certainly hasn’t whipped WHIP+ into shape... Around six months ago, lawmakers approved $10 billion for a WHIP+ program for eligible 2020 and 2021 livestock and crops. But Congress conditioned the funding with two requirements: USDA must accelerate payments under the program, and make it less complex. USDA Secretary Tom Vilsack previously said the first tranche of the WHIP+ livestock payments would be made “by March.” That meant by the end of February. Said one farm policy analyst: “All USDA had to do is blow dust off 2018 and 2019, use RMA data, make a few statutory changes required, and address any other anomalies and it would have been done. But… Here we are.” Asked why it is again taking USDA so long on this program, the analyst said: “Change the name. Probably bowing to their marquee issues. You know the ones.”

USDA extends deadline for climate-smart commodities funding... Citing a “high level” of interest in the Partnerships for Climate-Smart Commodities funding pilot programs, USDA has extended the deadlines to submit proposals for the effort. The first funding pool of proposals for pilot programs from $5 million to $100 million will now be May 6. For proposals ranging from $250,000 to $4,999,999, the deadline is now June 10.  USDA also said it was extending the deadline to make sure a “diverse applicant pool is able to apply” and said it provided additional guidance on the definition of “domestic applicant,” specifically noting that means an entity that is “neither a foreign organization nor a foreign public entity.” USDA also provided more information on the eligibility of producers as beneficiaries of the funding and on some of the qualification requirements. USDA said that while early adopters are eligible and encouraged to be a part of the pilot projects, they have stated funds “may not be used to pay for implementation of the same practice on the same land, but funding may be used to enhance a practice or to further incentivize the climate-smart commodity generated, especially with respect to early adopters.” That could become a key participation point for producers who are already using practices such as no-till or minimum tillage. Of note, USDA said carbon is not considered a commodity under the pilot efforts.

Slow developing cash cattle trade... So far this week only light cash cattle trade has taken place at roughly steady prices compared with week-ago, though volume was so light cash sources signal it wasn’t enough for a true market test. Despite losses in live cattle futures yesterday, cash sources are hopeful for higher cash trade this week, though active followthrough selling could dash those hopes.

Pork cutout climbs again... The pork cutout value firmed 54 cents on Wednesday, extending this week’s gains. Though movement slowed to 294.05 loads, there still appears to be plenty of retailer demand as they gear up for end-of-Lent features and the start of the grilling season. While the pork cutout is above $105, pork is still cheap compared to beef as consumer dollars are being squeezed by inflation.

Overnight demand news... South Korea tendered to buy 45,000 MT of U.S. milling wheat and up to 138,000 MT of corn to be sourced from the U.S., Black Sea/eastern Europe, South America or South Africa. Jordan tendered to buy 120,000 MT of optional origin milling wheat.

See ‘Policy Updates’ for late-breaking morning news updates... For updates to items in “First Thing Today” or any late-breaking morning news stories, check “Policy Updates” on www.profarmer.com.

Today’s reports

• 7:30 a.m. Weekly Export Sales — FAS
• 7:30 a.m. Spring Weather Outlook — NOAA
• 2:00 p.m. Food Dollar Series — ERS