Biden Visits Kyiv, More Support for Ukraine | U.S. Signals ‘Red Line’ for China Re: Ukraine

EPA’s Regan to visit Ohio | U.S. winter storm | Russia, Turkey to discuss Black Sea grain deal

Farm Journal
Farm Journal
(Farm Journal)

EPA’s Regan to visit Ohio | U.S. winter storm | Russia, Turkey to discuss Black Sea grain deal



In Today’s Digital Newspaper

In a national address on Tuesday, Russian leader Vladimir Putin insisted that he would not pull back from his invasion of Ukraine, suggesting the war would continue for a long time. His remarks came hours before President Biden was scheduled to speak in Poland. He also said Russia would suspend participation in New START, its last major nuclear arms control treaty with the U.S.

President Joe Biden met President Volodymyr Zelensky on Monday, reiterating U.S. support for Ukraine and announcing new military assistance and sanctions against Russia. The secretive visit comes at a critical moment in the 12-month conflict, with Russia preparing for an expected spring offensive and Ukraine hoping to soon retake territory.

Beijing is growing worried that increased Western military support for Ukraine will severely weaken Russia, a key partner. Top foreign-affairs official Wang Yi, visiting Moscow this week, will lay out a proposal to end the conflict.

Walmart, the nation’s biggest retailer, grocer and employer posted earnings and revenue that easily beat Wall Street’s expectations for the holiday quarter. And, according to CEO Doug McMillon, the company is cruising into its new fiscal year with a lot of momentum, as the economy faces uncertainty this year.

Home Depot said Tuesday that it would spend $1 billion to boost wages for its hourly workers. The raise officially went into effect Feb. 6, so employees will see the bump in their paychecks this month.

Eurozone business activity growth hits 9-month high. See Markets section.

EPA Administrator Michael Regan will visit East Palestine, Ohio, today amid mounting reports of rashes, headaches, nausea and other symptoms that residents fear could be related to the February 3 derailment of a train carrying toxic chemicals. Transportation Secretary Pete Buttigieg told reporters on Monday that he also plans to visit the community “when the time is right” and announced new efforts by his agency to improve rail safety. Meanwhile, residents are criticizing the federal and state response to the wreck, saying more needs to be done to assure residents that the air and water in the town are safe.

A major winter storm is set to impact millions across the U.S. this week with heavy snow, dangerous winds, possible blizzard conditions and for some, the coldest temperatures of the season.

MARKET FOCUS

Equities today: Global stock markets were mostly lower overnight. U.S. stock indexes are pointed toward lower openings. Market participants will keep a tab on quarterly results from Home Depot (today), Walmart (today/see previous item in black box), Mosaic Company (Wed.) and Nvidia (Wed.). In Asia, Japan -0.2%. Hong Kong -1.7%. China +0.5%. India flat. In Europe, at midday, London -0.3%. Paris -0.5%. Frankfurt -0.5%.

Home Depot missed Wall Street’s revenue expectations for the first time since November 2019. The home improvement retailer provided a muted outlook for fiscal 2023 and expects sales growth to be approximately flat. The company attributed the flat outlook to a tougher consumer backdrop and a pivot away from goods towards services.

U.S. equities Friday: The Dow recovered to close higher. It added 129.84 points, 0.4%, to 33,826.69. The S&P 500 fell 11.32 points, 0.3%, to 4,079.09, its second down day in a row. The Nasdaq declined 68.56 points, 0.6%, to 11,787.27.

With fourth-quarter earnings season nearly complete, the net profit margin of companies in the S&P 500 has fallen to 11.3%, based on actual results and analyst estimates for companies that have yet to report. That would mark the sixth consecutive quarterly decline from the peak of 13% in 2021, according to FactSet.

Venture capital fund-raising hits a nine-year low. Venture firms collected $20.6 billion in the fourth quarter, down 65 percent year on year and their lowest amount since 2013, according to the Wall Street Journal (link). Potential factors include the continued slump in publicly traded tech stocks and belt-tightening amid fear of a recession.

Agriculture markets Friday:

  • Corn: March corn futures rose 1 3/4 cents to $6.77 3/4 and for the week lost 2 3/4 cents.
  • Soy complex: March soybeans rose 3/4 cent to $15.27 1/4 but is down 15 1/4 cents on the week. March meal fell 30 cents to $491.10 and March soyoil dropped 39 points to 61.51 cents.
  • Wheat: March SRW closed 1/2 cent higher at $7.65 1/2 but is down 20 1/2 cents on the week. March HRW rose 8 cents to $9.06 1/2, while March spring wheat futures fell 1/2 cent to $9.29 3/4. Wheat futures were largely flat on the week after the prior week’s rally.
  • Cotton: March cotton fell 100 points to 80.25 cents and is down 502 points on the week.
  • Cattle: April live cattle futures rose 57 1/2 cents to $164.65, closing near mid-range after setting a new contract high today. For the week, April cattle rose 70 cents. March feeder cattle futures gained 30 cents to $186.525 and nearer the session high. For the week, March feeders gained 12 1/2 cents.
  • Hogs: Hog futures couldn’t sustain early gains, with nearby April ending the day having fallen 50 cents to $85.275. The closing price marked a weekly rise of $1.95.

Ag markets today: Soybean and soymeal futures traded sharply higher on Argentine crop concerns coming out of the extended holiday weekend, while corn and wheat followed to the upside. As of 7:30 a.m. ET, corn futures were trading mostly 2 to 3 cents higher, soybeans were mostly 10 to 13 cents higher, SRW wheat futures were fractionally higher, HRW wheat was 1 to 2 cents higher and HRS wheat was 3 to 4 cents higher. Front-month crude oil futures were around 75 cents higher, and the U.S. dollar index was more than 200 points higher this morning.

Technical viewpoints from Jim Wyckoff:

On tap today:

• S&P Global’s U.S. manufacturing index is expected to rise to a preliminary reading of 47.6 in February from a final reading of 46.9 in January. The services index is forecast to tick up to 47 from 46.8. (9:45 a.m. ET)
• U.S. existing home sales are expected to rise to an annual rate of 4.07 million in January from 4.02 million one month earlier. (10 a.m. ET)
• USDA Grain Export Inspections report, 11 a.m. ET.

IRS tax backlog. According to the National Taxpayer Advocate, the IRS had 29 million tax returns and correspondence at the end of the last filing season. Weeks before the start of the current tax season — as of Dec. 9, 2022 — the IRS still had about 5.1 million pieces of taxpayer correspondence and Accounts Management cases (excluding amended returns) and 2.6 million paper tax returns and an additional 1.5 million amended returns to process.

Meanwhile, the IRS on Friday missed the Biden administration’s own deadline for detailing how it will spend its $80 billion cash infusion, punting on a plan that is set to spell out its implementation of the unprecedented funding surge. Link for details via Government Executive.

Larry Summers: Federal Reserve’s efforts to cool inflation via interest-rate hikes aren’t doing the job. “The Fed’s been trying to put the brakes on, and it doesn’t look like the brakes are getting much traction,” he said. That could set the U.S. economy up for a “collision or crash,” the former Treasury Secretary said.

Business activity in the Eurozone grew unexpectedly quickly in February, according to estimates released on Tuesday, bolstering hopes that the bloc’s economy will avoid a recession. S&P Global’s flash composite purchasing managers’ index rose to 52.3 this month, compared with January’s reading of 50.3; a score above 50 represents growth. Activity in the service sector increased at its fastest rate since June.

Market perspectives:

• Outside markets: The U.S. dollar index was modestly higher. Nymex crude oil futures prices are higher and trading around $77.25 a barrel. The yield on the benchmark U.S. 10-year Treasury note is presently fetching 3.877%.

• Bond traders have been pricing in higher interest rates. Derivatives markets show traders expect the fed-funds rate to peak around 5.25% in August, according to FactSet. Around the start of the month, traders had bet the rate would peak around 4.88% in June. Meanwhile, economists at Bank of America and Goldman Sachs all upped their predictions for how high the Federal Reserve will hike interest rates as economic data last week revealed the central bank’s fight to rein in inflation isn’t over.

• U.S. natural gas prices fall further. U.S. natural gas futures fell further below $2.3/MMBtu on Friday, the lowest since September 2020, and bringing the weekly decline to almost 10% as mild weather kept heating demand weak and stockpiles above usual levels. Also, the prices in Europe declined to below €50 per megawatt-hour, the lowest since August 2021, as region energy crises are easing.

• Much of the world relies on just a few nations for most of its fertilizers — Russia, its ally Belarus and China. While Russia’s agricultural products including the three main types of fertilizer — potash, phosphate and nitrogen — are not targeted by sanctions, exports remain curtailed through disruptions to ports, shipping, banking and insurance. Link for more via Bloomberg.

Nutrient costs have since come down significantly, but they remain above pre-pandemic levels.

• The price of permits in the European Union’s carbon market hit 100 euros per tonne for the first time, a milestone that reflects the increased costs that factories and power plants must pay when they pollute. Link to more via Reuters.

• Norfolk Southern is under scrutiny as cleanup continues weeks after a freight train derailed in Ohio. Drone footage captured by federal safety officials shows the scale of the environmental operation ahead, the Wall Street Journal reports (link). It also highlights the large volumes of toxic chemicals that pass by American homes every day via freight networks that crisscross the country delivering fuel, solvents and other materials to plants and factories. Officials believe that nine cars, some carrying hazardous materials, caught fire or spilled their contents into the air, ground and waterways near the town of East Palestine. Some of the chemicals are carcinogens and can be toxic if inhaled. Norfolk Southern says it is cleaning up the area and that soil and water sampling results will be available soon. The Environmental Protection Agency says it hasn’t detected toxic chemicals in air testing at more than 400 homes. But residents say they remain worried about the ground, water and air in their community.

• India plans to push another 2 million tonnes of wheat into domestic market. India wants to release an additional 2 million tonnes of wheat into the open market to bring domestic wheat prices down, according to the government, with 5 million tonnes of wheat now being put into the domestic market. India has grappled with rising wheat prices and has halted wheat exports as it has sought to boost supplies on the Indian market, but wheat prices have remained elevated.

• Ag demand: Japan is seeking 94,387 MT of milling wheat in its weekly tender. Egypt tendered to buy up to 60,000 MT of wheat funded by the World Food Bank.

• NWS weather outlook: A major winter storm will spread a large swath of heavy snow from the West Coast to the Northeast through Thursday; freezing rain forecast for the Lower Great Lakes... ...Widespread very strong, gusty winds expected across the West and adjacent High Plains... ...Heavy rain with the potential for scattered flash flooding and severe weather for the Midwest and Plains Wednesday... ...Widespread record-breaking highs possible in the East and much below average cold in the West beginning mid-week.

Items in Pro Farmer’s First Thing Today include:

• Soybeans, soymeal lead overnight gains
• Frost nips Argentine crops
• Consultant makes additional cut to Argentine soybean crop forecast
• Status quo weather for South America
• Bullish cash cattle expectations
• Cautious buying in hog futures

RUSSIA/UKRAINE

— Putin says Russia will suspend participation in New START, last remaining nuclear nonproliferation treaty with U.S. Russian President Vladimir Putin said that he was suspending participation in the New Strategic Arms Reduction Treaty, which set limits on deployed intercontinental ballistic missiles. Putin did not signal any change to his war aims in Ukraine.

  • Russia’s leader gave a defiant state-of-the-nation address to the country’s parliament. He blamed the West entirely for starting the “special operation” in Ukraine, as the Kremlin calls its invasion, and accused America of escalating the conflict.
  • Putin vowed to continue the faltering invasion of Ukraine until Russia has achieved its goals. “We will solve the set tasks step-by-step, carefully and consistently,” Putin told Russia’s parliament and top officials in Moscow on Tuesday, a day after President Joe Biden made a surprise visit to Kyiv.
  • Putin’s expansive vision for Russia remains unabated, extending beyond Ukraine to Belarus as well, with Yahoo News obtaining a leaked Kremlin strategy document detailing Moscow’s plan to “take full control” of that country, too.
  • Putin is due to meet later today with China’s top diplomat, Chinese Foreign Minister Wang Yi, who is visiting Moscow, the latest sign of their countries’ strengthening ties.
  • Western nations are readying a new batch of sanctions against Russia over its war in Ukraine. The European Union is considering expanding restrictions on the country’s banks, Radio Free Europe reported, while Bloomberg said wider sanctions against companies and people in third countries are also being discussed. The White House is reportedly planning new export controls, while the G7 and the EU are looking at ways to better track Russian-mined diamonds across borders to further curtail Moscow’s income from its natural resources.
  • The European Union is considering what the Financial Times described as “an unprecedented foray into the defense industry” to accelerate arms shipments to Ukraine.
  • 331: The number of seafarers stranded aboard ships that have been stuck in Ukrainian ports since Russia’s invasion one year ago.
  • Russia, Turkey to discuss Black Sea grain deal soon. Leaders from Russia and Turkey will discuss the Black Sea grain export initiative “in the near future,” though there has been no exact date set, RIA Novosti reported, citing a source familiar with the situation. Last week, Ukrainian officials said they expected a meeting on the grain export deal to occur this week.
  • Russia to export 55 MMT to 60 MMT of grain in 2022-23. President Vladimir Putin said Russia will export between 55 MMT and 60 MMT of grain in 2022-23. He noted Russia has all the financial resources it needs to guarantee its national security and development despite Western economic sanctions. Putin said Russian firms had rebuilt their supply chains and that Moscow was working with other countries to build new payments systems and financial architecture.

PERSONNEL

— FDA chooses non-veterinarian to lead CVM. The Food and Drug Administration (FDA) will name 30-year FDA veteran Tracey Forfa to be the new director of the Center for Veterinary Medicine (CVM), putting her permanently in the role where she has been serving as acting director. The CVM regulates animal food, drugs and devices, including those intended for pets, as well as food producing animals. Forfa has been in the CVM since 2002 and has served as deputy director since 2008. She is the first non-veterinarian to lead the CVM. FDA will name a Chief Veterinary Officer to advise the agency on veterinary issues.

CHINA UPDATE

— China again keeps rates unchanged. The People’s Bank of China (PBOC) kept its key lending rates steady for the sixth straight month, as widely expected. The one-year loan prime rate (LPR), which the medium-term lending facility uses for corporate and household loans, was left unchanged at 3.65%; the five-year rate, a reference for mortgages, was maintained at 4.3%. PBOC held its medium-term policy rate at 2.75% last week while adding more cash into the financial system to meet a rebound in loan demand after the country eased its strict Covid measures.

— Why ‘made in China’ is becoming ‘made in Mexico’. Alarmed by shipping chaos and geopolitical fractures, exporters from China are setting up factories in Mexico to preserve their sales to the United States. Link to more via the New York Times.

— China to maintain hog breeding herd size at reasonable size. China will keep the country’s breeding sow herd at a reasonable level of around 41 million, the country’s ag ministry said.

— Empty shipping containers pile up at packed Chinese port as orders dwindle. Outside the major Yantian container terminal in Guangdong province, a long queue of idle trucks reflects how exports are doing little to help drive China’s economic recovery. Link for details via the South China Morning Post.

HEALTH UPDATE

Summary:

  • Global Covid-19 cases at 674,186,146 with 6,863,836 deaths.
  • U.S. case count is at 103,124,655 with 1,117,564 deaths.
  • Johns Hopkins University Coronavirus Resource Center says there have been 670,987,625 doses administered, 269,332,266 have received at least one vaccine, or 81.1% of the U.S. population.

POLITICS & ELECTIONS

— Wisconsin voters will today decide which state Supreme Court candidates will advance to an April election that carries major consequences for abortion rights, control of the state government and the 2024 presidential election.

— Vice President Kamala Harris said she plans to run as President Joe Biden’s running mate in 2024, even as her approval rating remained low for the majority of her first two years in the White House and members of both political parties wonder if Biden is too old for a second term.

CONGRESS

— Sen. John Fetterman (D-pa.) set for lengthy hospital stay. He could remain hospitalized for more than a month as he undergoes treatment for depression following a series of health setbacks, according to a senior aide. A senior aide to Fetterman said in an interview late Friday that the senator will remain hospitalized as doctors try out new medications and dosages to test their efficacy. Fetterman will also engage in talk therapy, the aide said, meeting with a professional therapist to discuss the experiences he has had, including the challenges of campaigning for office.

OTHER ITEMS OF NOTE

— North Korea fired two short-range missiles off its east coast, just two days after it launched an intercontinental missile towards Japan. The flurry of launches prompted Kishida Fumio, Japan’s prime minister, to request an emergency meeting of the U.N.’s Security Council. On Sunday the U.S. held joint air drills with Japan and South Korea. North Korean officials said such exercises are “destroying the stability of the region.”

— The Chicago Bears are taking steps toward moving out of the city to a forthcoming $5 billion mixed-use suburban compound anchored by a stadium an hour away. For the government to help out with the plan, the team needs sign-off from billionaire Illinois governor J.B. Pritzker, who Forbes says (link) doesn’t seem keen on the idea — despite the fact he and his family have benefited from plenty of tax breaks of their own. Of note, Pritzker, the wealthiest U.S. officeholder, and his wife reportedly paid no state income tax in 2014 despite reporting a taxable income of $2.9 million.

KEY LINKS


WASDE | Crop Production | USDA weekly reports | Crop Progress | Food prices | Farm income | Export Sales weekly | ERP dashboard | California phase-out of gas-powered vehicles | RFS | IRA: Biofuels | IRA: Ag | Student loan forgiveness | Russia/Ukraine war, lessons learned | Russia/Ukraine war timeline | Election predictions: Split-ticket | Congress to-do list | SCOTUS on WOTUS | SCOTUS on Prop 12 | New farm bill primer | China outlook | Omnibus spending package | Gov’t payments to farmers by program | Farmer working capital | USDA ag outlook forum |