First Thing Today | March 30, 2022
Corn and soy complex futures bounce, wheat trades mixed... Corn and soy complex futures posted modest corrective gains overnight. Wheat futures were weaker for most of the overnight session but have turned mixed early this morning. As of 6:30 a.m. CT, corn futures are trading 4 to 7 cents higher, soybeans are 4 to 8 cents higher, winter wheat futures are mostly 1 to 2 cents lower and spring wheat is mostly around a penny higher. Front-month U.S. crude oil futures are around $2.75 higher and the U.S. dollar index is more than 450 points lower.
Russia/Ukraine update... Russia’s pledge to scale back in Ukraine was met with skepticism, with a U.S. spokesman branding the move “a repositioning, not a real withdrawal.” Ukrainian officials say there was no reduction in hostilities overnight, and no area in the country was without sirens as the siege persists. U.K. Deputy Prime Minister Dominic Raab also expressed skepticism over Russia’s claims that it intends to scale back its military operations in some parts of Ukraine. “We judge the Russian military machine by its actions, not just its words,” he told Sky News on Wednesday, saying the U.K. was not putting a lot of faith in Russia’s stated intentions. “Japan shares the belief that it is important to achieve a concrete cease-fire as soon as possible, and we will continue to monitor the situation with great interest, and at the same time, we will provide the various types of support to Ukraine that we have already announced in a prompt and steady manner,” Japan’s Chief Cabinet Secretary Hirokazu Matsuno said. Meanwhile, the U.S. Treasury department is preparing sanctions against Russia’s military supply chain. The aim is to hit “Russia’s ability to build and maintain the tools of war that rely on these inputs.”
Russian grain exporters may seek ruble payments... The Russian Union of Grain Exporters asked the central bank to consider making it possible for foreign buyers of grain to pay in rubles under export contracts, Kommersant reports. The initiative was discussed, among other topics, at a meeting with the central bank last week. The union asked the central bank to provide ruble liquidity to foreign banks serving grain buyers, the largest of which are Turkey, Egypt, Iran and Saudi Arabia. While most contracts are now agreed in foreign currency, international sanctions that followed Russia’s invasion of Ukraine complicated payments in foreign exchange because some banks sometimes refuse to transfer money. Interfax also reports Russian grain exporters asked the central bank to help them resolve issues receiving foreign currency payments. Exporters said many foreign banks won’t send money to Russian lenders, even if they are not subject to sanctions. They also face losses when servicing foreign exchange loans due to a regulation requiring them to exchange 80% of foreign exchange earnings.
World Bank: Ukrainian farmers need assistance... Ukraine will need quick help from other countries to get the fertilizer and seeds needed to restore its farming output and crucial exports to the rest of the world once Russia’s invasion is over, according to the head of the World Bank. Ukraine would be helped by fertilizer from western Europe to replace imports from Belarus that have been cut off, David Malpass, president of the Washington-based development lender, said in a Bloomberg Television interview. In a remark that will get the attention of U.S. biofuel proponents, Malpass said that at a time of food shortages in the developing world, governments in advanced economies also should reduce subsidies that keep prices artificially high — such as those for ethanol in the U.S. and the Common Agricultural Policy in the European Union. Countries should instead focus on targeting support to the poor, he said. World Bank provides about $17 billion annually in food support and has disbursed more than $500 million overall in assistance for Ukraine in recent weeks, Malpass said.
Farm-state senators urge Biden to prioritize green fertilizer... Democratic Senator Amy Klobuchar (D-Minn.) and four colleagues asked President Joe Biden to prioritize domestic green ammonia production and other uses as they develop Regional Clean Hydrogen Hubs. “A clean, stable, domestic source of ammonia-based nitrogen fertilizers is extremely important for America’s agriculture industry,” the senators said in a letter. “A Regional Clean Hydrogen Hub focused on the manufacture of green ammonia for fertilizer would allow America’s farmers to drastically reduce their carbon footprint while also providing price and supply stability to this critical farm input.” Sens. Chuck Grassley (R-Iowa), Tina Smith (D-Minn.), Deb Fischer (R-Neb.) and Tammy Baldwin (D-Wis.) also signed the letter.
China to step up financial support for soybeans, other oilseeds... China’s central bank said it would step up monetary policy support for rural areas this year, including providing more financial support to ensure food security and the supply of soybeans and oilseeds. It also encouraged firms to use the yuan currency for bilateral payments abroad.
Dudley: The Federal Reserve has made a recession all but inevitable... “The Fed needs to adjust how it puts its monetary policy framework into practice. It shouldn’t be completely reactive, waiting passively until inflation exceeds target and the labor market is extremely tight. Such extreme ‘patience’ forces it to slam on the brakes, increasing the likelihood of an early recession. Also, officials need to be more forthright about the road ahead: Getting inflation down will be costly, in terms of jobs and economic growth,” former New York Fed President Bill Dudley writes at Bloomberg Opinion.
Global debt default might be looming... A World Bank economist said Russia’s war on Ukraine could spark the worst debt crisis for developing nations in a generation. “The Ukraine war immediately darkened the outlook for many developing countries that are major commodity importers or highly dependent on tourism or remittances,” wrote Marcello Estevao, the World Bank’s global director for macroeconomics, trade, and investment. The poorest nations have increasingly taken greater amounts of variable-rate debt, which increases their vulnerability to rate hikes.
Tai to tell lawmakers China not heeding push to fulfill Phase 1 commitments... U.S. Trade Representative (USTR) Katherine Tai today will start two days of congressional testimony on the Biden administration’s trade policy before the House Ways and Means Committee. She will tell lawmakers China is still not living up to terms of the Phase 1 agreement reached during the Trump administration, despite sessions she has held since October 2021 with Chinese Vice Premier Liu He. She is also expected to signal the administration now has to more directly take on China relative to its economic actions and failure to meet the its commitments. However, it is not clear whether Tai will spell out what kind of actions the Biden administration plans to take on that front.
H&P Report out this afternoon... USDA’s Hogs & Pigs Report is expected to show the U.S. hog herd contracted 1.2% from year-ago as of March 1. Based on the average pre-report estimate, the March 1 hog herd is expected to total just over 73 million head, including a market hog inventory of 66.8 million head (down 1.3%) and breeding herd of 6.2 million head (up 0.1%).
USDA confirms two more HPAI cases in Iowa commercial poultry operations... USDA’s Animal and Plant Health Inspection Service (APHIS) March 28 confirmed two additional cases of highly pathogenic avian influenza (HPAI) in commercial operations in Iowa. Cases were found in 1,460,030 commercial layer chickens in Guthrie County, Iowa, and 28,000 commercial turkeys in Hamilton County, Iowa. That raises total U.S. cases of HPAI to 79.
Chicken price-fixing prosecution ends in second mistrial; third trial planned... Jurors in Denver deadlocked for the second time in the trial of 10 chicken company executives accused of price fixing, handing a significant setback to efforts by the U.S. Justice Department to police competition in food markets. U.S. District Judge Philip Brimmer ended the case Tuesday after jurors said they were unable to reach a verdict against the defendants, who worked for companies including Tyson Foods, Pilgrim’s Pride and Perdue Farms. In December, an earlier trial also ended in a deadlock. Chicken producers have been sued by buyers claiming anti-competitive practices. The Denver case was the first trial for a federal investigation targeting the biggest companies in the $95 billion chicken market. After the mistrial, a member of the prosecution team said the government plans to try the 10 defendants for a third time, according to three lawyers who were in the court room. The judge ordered the head of the Justice Department’s Antitrust Division to travel to Denver next week to explain that decision, the lawyers said.
Steady, possibly firmer cash cattle expectations... Packers have been slow to establish cash cattle bids this week, but cash sources expect trade to eventually take place around steady levels with last week’s average of just under $139. Cash expectations could strengthen if futures are able to build on Tuesday’s impressive price performance.
Pork cutout gain fails to hold morning gains... The pork cutout value firmed more than $2 Tuesday morning but ended $3.47 lower for the day primarily because primal belly prices fell from an $11.53 gain in the morning to a $15.00 decline. While the pork cutout value is falling, the CME lean hog index is firming. The cash index is up another 63 cents today to $103.56.
Overnight demand news... Taiwan purchased 40,000 MT of U.S. milling wheat. Bangladesh tendered to buy a nominal 50,000 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
- 9:30 a.m. Weekly Ethanol Production — EIA
- 2:00 p.m. Fruit and Tree Nuts Outlook: March 2022 — ERS
- 2:00 p.m. Broiler Hatchery — NASS
- 2:00 p.m. Hogs and Pigs — NASS
