First Thing Today | December 14, 2022
Good morning!
Price pressure overnight... Corn, soybean and wheat futures traded solidly lower overnight despite supportive outside markets. As of 6:30 a.m. CT, corn futures are trading 2 to 4 cents lower, soybeans are 7 to 9 cents lower and wheat futures are 6 to 10 cents lower. Front-month crude oil futures are about 50 cents higher and the U.S. dollar is around 125 points lower this morning.
Fed expected to slow pace of interest rate increases... The Fed is expected to raise interest rates 50 basis points at the conclusion of its two-day monetary policy meeting this afternoon, which would end the four-meeting string of 75-basis-point increases. Markets will pay particular attention to Chair Jerome Powell’s post-meeting press conference and the updated economic forecasts from Fed officials for clues as to how long the monetary tightening cycle will persist.
Progress on omnibus spending measure... House and Senate Appropriations committee leaders reached an agreement Tuesday evening on “a bipartisan, bicameral framework” that will allow them to complete details of the omnibus spending bill. Congress is expected to approve a one-week stopgap spending bill to extend the funding deadline from Dec. 16 to Dec. 23. The House will vote at about noon on the rule for consideration of the week-long stopgap. The rule also would send a separate bill back to the Senate to be used as a vehicle for an eventual omnibus funding package, a maneuver that’s meant to expedite a final vote in the Senate. The topline agreement will allow lawmakers to spend the coming week hashing out specific spending levels for each federal agency as well as what additional legislative items they will attach to the bill, likely including an extension of the Emergency Relief Program (ERP), and a possible aid program for rice producers.
WHO: China faces ‘very tough’ zero-Covid exit... China is facing a “very tough” time as it dismantles its rigid “zero-Covid” policy and allows people to live with the virus, posing challenges preparing hospitals and ensuring people are sufficiently protected, the World Health Organization (WHO) said. Asked about the policy changes, WHO spokesperson Margaret Harris said, “We’ve always said before: don’t go into lockdown too easily and too quickly because it’s really, really hard to come out.” Among the challenges are ensuring the population is “appropriately vaccinated” and preparing hospitals for both a potential increase in cases and a potential rush of people who may be infected with other illnesses. China’s National Health Commission announced it will roll out the second Covid-19 vaccine booster shots for high-risk groups and elderly people over 60 years old.
China asks banks to buy bonds via proprietary trading desks... China asked some of the nation’s largest banks to help stabilize the domestic bond market after a wave of fund redemptions by retail investors fueled the biggest credit selloff since 2015, Bloomberg reported, citing people familiar with the situation. Regulators asked lenders to buy bonds via their proprietary trading desks with a goal of absorbing the selling pressure caused by retail withdrawals from some of those same banks’ wealth management products. The so-called window guidance on bond purchases includes notes issued by Chinese local government financing vehicles and underscores regulators’ concern that a downward spiral of fund redemptions and falling bond prices may stoke financial instability.
Russia may increase grain export quota... Moscow could increase its grain export quota for 2022-23 from its current level of 25.5 MMT, Interfax news agency quoted Russian Agriculture Minister Dmitry Patrushev as saying, without providing further details. Russia produced a record grain crop this year, including around 100 MMT of wheat.
Ukraine grain exports fall sharply... Ukraine has exported almost 19.7 MMT of grain so far in 2022-23, down 31.5% from the same period last year, according to ag ministry data. The volume included 10.8 MMT of corn, 7.3 MMT of wheat and 1.5 MMT of barley. Ukraine expects to export around 51 MMT of grain this marketing year, down sharply from a record 86 MMT in 2021-22.
France raises non-EU wheat export forecast... France expects to export 10.3 MMT of wheat outside of the EU trade bloc in 2022-23, up 300,000 MT from the ag ministry’s previous forecast. That would be a 17% increase from 2021-22 exports. The ag ministry cut its 2022-23 wheat export forecast within the bloc by 210,000 MT to 6.73 MMT.
British consumer inflation declines more than expected... British inflation fell more than expected in November after it hit a 41-year high in October, raising hopes the price surge has peaked. The annual rate of consumer price inflation dropped to 10.7% in November from 11.1% in October, a bigger fall than the 10.9% decline economists predicted. Core inflation, which excludes energy, food, alcohol and tobacco prices, dropped to 6.3% in November from 6.5% in October. Economists expect the Bank of England will raise interest rates another 50 basis points on Thursday, though that would be down from the 75-point increase last month.
ECB sees inflation above target through 2025... The European Central Bank (ECB) expects inflation to remain above its 2% target for the next three years, a source told Reuters, more than markets currently expect and signaling its fight against runaway prices is far from over. ECB again will increase interest rates on Thursday and will also announce new quarterly economic projections. The new forecasts, which are regarded as crucial in informing ECB’s policy moves until a fresh round of estimates is published in March, will reportedly be higher than the market currently expects. ECB’s forecasts rarely prove accurate but the bank uses them as an input in its decisions because it targets “medium term” rather than current inflation.
IEA warns of possible crude oil price rise in 2023... The International Energy Agency (IEA) warned Wednesday it can’t rule out an increase in the price of crude oil in 2023 due to the tightness of the global market, despite the decline in demand caused by the weakening of the world economy. IEA estimates 2022 will close with global demand at 99.9 million barrels per day (bpd), up 2.3 million bpd. It expects 2023 growth will rise at a slower 1.7 million bpd rate to 101.6 million bpd.
Cattle traders remain cautious... December live cattle futures finished Tuesday 89 cents below last week’s average cash cattle price. While the longer-term outlook is bullish as supplies tighten, traders remain cautious toward nearby futures, as they expect packers will try to limit strength in the cash market through the end of the year.
Hog traders increasing bets seasonal low in place... December lean hog futures firmed 45 cents on Tuesday, extending the lead contract’s premium to the cash index, which is up 15 cents to $81.62 (as of Dec. 12). While December hog’s 78-cent premium to the cash index is modest, it signals traders sense the cash market is in the process of posting a seasonal bottom.
Overnight demand news... Tunisia tendered to buy 100,000 MT of optional origin durum wheat. Japan received no offers in its tender to buy 70,000 MT of feed wheat and 40,000 MT of feed barley.
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
- 11:00 a.m. Feed Grains: Yearbook Tables — ERS
- 1:00 p.m. FOMC meeting concludes — Fed
- 2:00 p.m. Broiler Hatchery — NASS
- 2:00 p.m. North American Potatoes — NASS
- 2:00 p.m. Organics — NASS
- 2:00 p.m. Turkey Hatchery — NASS
