Evening Report: Feb. 23, 2022

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Russia/Ukraine situation continues to escalate... One witness told Reuters there are Russian military equipment convoys, including nine tanks, heading to the eastern Ukraine border. Ukraine’s President Volodymyr Zelenskiy called up military reservists and announced compulsory military service for all fighting-age men. While there has not been any clear indication that Russia would launch a mass assault on Ukraine, one U.S. defense official said Russian forces are “as prepared as they can be.” Russia has taken down its flags at its Ukraine embassy and ordered staff home.

The U.S. and Europe have ramped up sanctions against Russia. The EU will add all Russian lawmakers that voted in favor of the Ukraine separatist regions to its blacklist and freeze their assets. The EU is also expected to put export controls on Russia. President Joe Biden said on Wednesday the U.S. would impose sanctions on the company in charge of building Russia’s Nord Stream 2 gas pipeline.
 

Investments in commodity markets highest since 2007... Retail and institutional investors have invested close to $700 billion, the most since 2007, in commodity markets, according to Citigroup. Bloomberg has compiled data showing that commodity-based exchange-traded funds (ETFs) hold more than $21 billion, also the most since 2007. Many investors are interested in commodity markets as a hedge against inflation as other investing options have negative returns during an inflation market.

“We’re nowhere near what we consider to be concerned about capacity,” said Jason Bloom, head of fixed income and alternatives ETF strategy at Invesco. “I hope we have that problem in a year or two.”

There are some risks as the money movements could disrupt prices due to the number of futures contracts the investors hold when the markets drop and investors pull their money from the markets.

More U.S. avian flu cases confirmed...  A commercial chicken flock in New Castle County, Delaware, has tested positive for the H5 version of highly pathogenic avian influenza (HPAI), according to USDA’s Animal and Plant Health Inspection Service (APHIS) and Delaware Department of Agriculture. This finding is the first case of HPAI in commercial poultry in Delaware since 2004. USDA’s APHIS is working closely with state animal health officials in Delaware on a joint incident response. State officials quarantined the affected premises, and birds on the property will be depopulated to prevent the spread of the disease. Birds from the flock will not enter the food system.

Florida officials have confirmed more HPAI cases in lesser scaup, black vultures and other wild bird species. The Florida Fish and Wildlife Conservation Commission (FWC) is currently investigating bird mortalities in Brevard, Indian River and Volusia counties believed to be caused by HPAI. The strain was first detected in Florida in a hunter-harvested blue-winged teal in Palm Beach County in January.

Analysts predict fewer corn, more soybean acres... USDA will release its 2022-23 projections on Thursday morning at its Outlook Forum, including its 2022 acreage forecasts. In a pre-report poll by Reuters, analysts are expecting USDA to cut U.S. corn acres by 1.6 million acres or 1.7% from last year. Soybean acres are predicted to increase by 2 million acres or 2.3%. Experts note the switch is mostly due to fertilizer, seed and herbicide supply issues for corn and wheat.

While wheat prices have increased due the Russia/Ukraine tensions and bad weather in winter wheat areas, it might not entice growers to plant more spring wheat. One seed dealer noted it is sold out of wheat seed and only had 20% of normal.

Higher prices for other crops such as oats, barley, canola and sorghum could also limit some of the spring wheat acres in the Northern Plains.
 

Feb. 1 feedlot supplies expected to be up fractionally from year-ago... Traders expect USDA’s Cattle on Feed Report on Friday afternoon to show Feb. 1 feedlot supplies up 0.8% from year-ago at roughly 12.2 million head. After bigger-than-year-ago placements the three previous months, the figure for January is expected to be down 0.8% from year-ago. But traders expect last month’s marketings to have fallen 2.7% from last year.

Brazil soybean shipments delayed...  Some ships are waiting more than 40 days to load soybeans in Brazil, industry sources told Bloomberg. Typically ships wait seven to 15 days to load. The longer load time is because there are not enough soybeans ready to load. Mato Grosso’s harvest is running ahead of normal. However, due to recent rains, farmers have to dry soybeans before being shipped. Some trading companies are switching ports as trains can only be loaded at 60% of the expected shipment.

Grain exporter group Anec now forecasts Brazil will export 7.2 MMT in February, down from 9 MMT in January.

Paraguay soy crushers lobby for duty-free soybean imports... Industry group Cappro, whose members include Archer-Daniels-Midland Co. and Cargill Inc., met with the Paraguay government to lobby for duty-free soybean imports, according to the organization.

In January, the group had proposed for the government to waive soybean import duties. As of now, there has not been a decision. There have been recent reports that Paraguay soybean crushers will need to import soybeans from other countries. The organization said soybean crush plants might need to suspend operations in early 2023 if they can’t import soybeans.
 

Wildfires threaten major Argentine cattle area... Due to heat and dryness, wildfires have already burnt about 2 million acres or 9% in Corrientes providence in Argentina, according to Bloomberg. The fires are burning 30,000 hectares per day. Farmers in the providence raise about 5 million head of cattle or 10% of the nation’s total. The Coninagro producers’ association has estimated that at least 70,000 head of cattle have been killed, $44.2 million worth of rice and $4.2 million worth of yerba mate has been destroyed due to the fires.

The area is also known for its unique wetland and ecosystems. Corrientes has already lost 60% of its wetlands, 40% of its grasslands and some 23,000 hectares of native forests.
 

EPA reaches agreement to set 2021, 2022 RFS levels... A proposed decree between Growth Energy and EPA would require them to set the final Renewable Fuel Standard (RFS) levels for 2021 and 2022 by June 3, 2022. EPA said in the proposed decree, it would finalize the 2020 revised RFS levels in the same rule. The consent decree was published in the Federal Register today. Comments on the proposed consent decree are due March 25. EPA would need to send its 2020, 2021, and 2022 RFS levels soon to the Office of Management and Budget for review to meet the June 3 deadline.

Growth Energy sued EPA for failing to set the 2021 RFS levels by Nov. 30, 2020, and the 2022 levels by Nov. 30, 2021, as required by law. EPA proposed the 2021 and 2022 levels on Dec. 7, 2021.

EPA expected to release RFS levels for 2023 and beyond in late spring, early summer... At the National Ethanol Conference in New Orleans, Renewable Fuels Association (RFA) President and CEO Geoff Cooper reported EPA advised his organization it plans to release RFS levels for 2023 and beyond in late spring or early summer. He said it would be logical for EPA to increase the volume requirements to drive carbon reduction. Separately, Cooper told reporters the group was hopeful EPA could propose more than 2023 levels when it unveils the plan for 2023 and beyond, a move he said would add certainty to the RFS.

Cooper welcomed EPA’s plan to include bio-intermediates (feedstocks partially processed at one site and moved to separate site for final refining) in the RFS. “More can be done to facilitate innovation and open the door to new pathways and processes,” he said.