Evening Report: March 4, 2022

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Your Pro Farmer newsletter is now available... Commodity prices continued to surge as Russia’s invasion of Ukraine moved into its second week. The geopolitical uncertainty is causing investors to flee equities in favor of commodities. Wheat futures are leading gains in the ag sector as global end-users scramble to secure supplies since Russia and Ukraine combine for around 30% of global wheat exports. Meanwhile, central banks are working to combat rising inflation. Surging commodity prices and inflation has rekindled the food versus fuel debate, with the White House reportedly studying whether an RFS ban would help tame food prices. There are also now concerns surging prices will eventually lead to a global recession. We cover all this and much more in this week's newsletter, which you can access here.

 


Russia/Ukraine update... On Friday, frequent shelling was reported in Ukraine’s capital, Kyiv. Heavy fighting continued in the outskirts of the port of Mariupol. Electricity, heat, water and most phone service have been knocked out in Mariupol. There was fighting in the cities of Kharkiv and Okhtyrka. Ukrainian defense forces were holding on to the northern city of Chernihiv and have prevented Russian efforts to take the essential southern city of Mykolaiv. NATO is refusing to police a no-fly zone over Ukraine.

The Biden administration is looking at options to cut U.S. imports of Russian oil and weighing possible actions to minimize the impact on global supplies and consumers. Foreign ministers of the Group of Seven (G7) advanced economies agreed to impose further sanctions on Russia if Moscow does not stop attacking Ukraine. More companies are suspending their operations in Russia. EU officials are examining curbing Russia's influence and access to finance at the International Monetary Fund. The U.N. Human Rights Council approved setting up a three-person panel of experts to monitor human rights in Ukraine.

Russia told foreign companies to either stay in the country, exit entirely, or hand over their holdings to local managers until they return. Russia is blocking Facebook and passed a new law criminalizing the intentional spreading of what Russia deems to be “fake” reports about the war.


 


Russia halts fertilizer shipments... Russia's Industry and Trade Ministry has recommended the country's fertilizer producers suspend shipments until carriers can guarantee the freight will be completed in full. This week, major international shipping groups suspended nearly all cargo shipments to and from Russia to comply with Western sanctions. A Russian fertilizer source said they don’t have any containers and ships are not coming in.

Russia is the second-largest producer of ammonia, urea, and potash and the fifth largest producer of processed phosphates. Russia accounts for 23% ammonia, 14% urea, 21% potash, and 10% processed phosphate exports.

 


EU wheat exports surging... Wheat buyers from the Middle East/Mediterranean region and North Africa are switching their wheat purchases to various European countries to replace their supplies from the Black Sea, according to traders.

“It is hard to put a figure on the total, but I think we are talking about hundreds of thousands of tons sold this week,” said a trader.

Traders say wheat export sales came from Romania, Bulgaria, France, Germany and Poland.  Wheat is also being transported to Germany from the Czech Republic, Hungary, and Slovakia. There are concerns about local supplies of wheat being depleted in Bulgaria.

 


EU facing sunflower oil shortage... EU refineries are warning about a possible refined sunflower oil shortage for European consumers due to the lack of Ukraine shipments because of the Russian invasion.

Vegetable oil industry group FEDIOL says they get 40% or 200,000 metric tons of sunflower oil per month from Ukraine. They estimated they have enough stocks for four to six weeks. The group said alternatives include limiting the amount of sunflower used to make biofuels or switching to other oils such as rapeseed and soybean.

 


Avian flu found on Missouri commercial chicken farm... A commercial chicken farm in Stoddard County, Missouri, tested positive for the H5N1 strain of the highly pathogenic avian influenza (HPAI), according to the USDA and Missouri Department of Agriculture. The flock of 240,000 broiler chickens has been depopulated and will not enter the food chain. The farm is located in southeast Missouri, about 65 miles from Fulton County, Kentucky, that had an HPAI outbreak confirmed last month.

 


FAO: World food prices hit record high in February... Food and Agriculture Organization's (FAO) Food Price Index hit a record 140.7 points in February 2022, up 5.3 points (3.9%) from January and up 20.7 points (24.1%) above a year ago. The new record is 3.1 points higher than the previous record in February 2011. The vegetable oil, dairy, cereals and meat price sub-indices were higher. The Sugar index dropped for the third straight month.

The Vegetable Oil Price Index averaged 201.7 points in February, up 15.8 points (8.5%) from last month and marking a new record high. The Dairy Price Index was up for the sixth successive month as it was up 8.5 points (6.4%) from January to 141.1 points in February. Up 4.2 points (3.0%) from January and 18.7 points (14.8%) from one year ago, the Cereal Price Index averaged 144.8 points in February. The  Meat Price Index averaged 112.8 points in February, up 1.2 points (1.1%) from January and 15.0 points (15.3%) from a year ago. Reaching its lowest level since July, the Sugar Price Index averaged 110.6 points in February, down 2.1 points (1.9%) from January.

The organization estimated 2022 global cereal production at 790 million metric tons (MMT), up from the 775.4 MMT production in 2021. 

 


U.S. jobs increase... U.S. non-farm payrolls increased by 678,000 in February and the unemployment rate fell to 3.8% from 4.0%, according to the Labor Department. In pre-report estimates, 467,000 jobs were expected to be added and the unemployment rate was predicted at 3.9%. February wages increased less than previous months. The department revised the January report to increase 14,000 jobs to 481,000.

 


Canadian beef industry raises concerns about potential rail strike...The Canadian Cattlemen’s Association (CCA) and the National Feeders’ Association (NCFA) are asking the labor group and Canadian Pacific to prevent a potential strike and keep importing livestock feed imported to Alberta and Saskatchewan. They explain one rail car can feed 8,000 head of cattle for one week. They estimate beef producers need nine to ten trains per week of feed. They note that it would take over 1,000 trucks per week to replace the trains and there is no available truck capacity.

 


Car company planning ethanol/electric hybrid in Brazil... Stellaris, a Dutch car company, is developing an ethanol/electric hybrid that it intends to sell in Brazil in 2025, according to company officials. The official noted that ethanol was very relevant in Brazil and becoming more relevant in other countries such as India. The company is a merger of Fiat Chrysler Automobiles and the French PSA Group. It ranks as the sixth-largest car maker globally and has 15 brands. 

 

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