Russian Invasion Continues to Impact Markets & Policy. Next: USDA’s March 9 WASDE

Appropriators ‘rush’ to get agreement on third attempt at Fiscal Year 2022 budget

Washington Focus

Russia’s invasion (war, pummeling, etc.) of Ukraine has turned markets and policy into a frenzy. Politics was already fractious for years. This week add USDA’s March 9 supply and demand (WASDE) report to the mix and let’s hope the World Board is more adept at looking ahead than their last report which was way too high on Brazil’s soybean production. And let’s not even talk about the pre-invasion USDA Ag Outlook Forum which now seems a distant memory, which it should be. Wars have a way of doing that. And what about USDA’s baseline estimates? Ditto for USDA’s recently released food price forecast which like so many things in Washington are several months behind reality. We should also mention USDA’s farm income forecast. Sure, input prices are very high, but so are values for several important crops. Cash receipts will easily exceed USDA’s most recent forecasts, and net income will likely be better than USDA and a litany of private forecasters predicted early this year (as they erringly did early in 2021). Some things, it seems, are predictable, including continued wailing about what all this means about budget scoring the next farm bill.

A former USDA official emails: “We need some reporting on input cost increases vs price increases…and projected net income. Many commodity groups are focused on increasing marketing loan rates and reference prices…given skyrocketing prices…problem is how CBO scores such increases…they use probability scoring…and such proposed increases will likely carry a big budget score.” Another email from a prior congressional staffer said: “I don’t know that it makes a lot of sense to make five-year policy decisions based off of the last two-year stretch which has included a pandemic and Europe’s largest invasion in 80 years.”

And for those people who say crop insurance doesn’t at least impact plantings some, just look at the levels of protection which should signal more soybean acres. The spring crop insurance price for corn jumped $1.32 (28.8%) from last year to $5.90 — the second highest behind $6.01 in 2011. The spring soybean insurance price surged $2.46 (20.7%) to the highest ever at $14.33. At a 2.43 ratio, Pro Farmer analysis indicates it would imply a 3% increase in soybean acres and a 1% to 2% decline in corn acres this year.

The spring insurance price jumped $2.66 (40.7%) to $9.19 for spring wheat.

The cotton insurance price ranges from 93 cents to 102 cents, depending on closing date, up from 75 cents to 83 cents last year.

Appropriators worked all weekend… even though they have had a year to come up with a budget for fiscal year 2022, which began Oct. 1. The latest (third) continuing resolution deadline is March 11. No blow-by-blow on this because most readers are simply not interested in something they see will eventually happen, even if it will be nearly six months into the fiscal year.

The White House wants to add $22 billion in Covid aid to the legislation besides supplemental funding for Ukraine. There are political party differences on the Covid request, largely because Republicans want to know what the White House is doing with the billions of Covid-related aid authorized last year about this time. President Biden during his State of the Union address revealed it was going to backstop ObamaCare… a guaranteed headache for Republicans.

I have a proposition for you: If you heard this before, you have, and you are hearing it again: The Supreme Court will again consider whether to hear what’s called the Proposition 12 case. In brief, the NPPC/American Farm Bureau Federation (AFBF) legal challenge to California’s Prop 12, which bans the sale in the state of pork from hogs born to sows raised anywhere in housing that does not meet California’s arbitrary standards, is again on the U.S. Supreme Court’s weekly conference agenda for the justices to consider. The only thing consistent about this year is that the high court at each of its previous conferences held this year has put off making a decision about reviewing the NPPC/AFBF case, which argues that Prop. 12 violates the Constitution’s Commerce Clause limiting states’ ability to regulate commerce outside their borders.

In things only Californians understand, Prop. 12 took effect Jan. 1, but thankfully a California Superior Court recently delayed its effective date until 180 days after final implementing regulations are issued (that process has taken years). The California Department of Food and Agriculture is now writing those rules.

Ready, set, go? An announcement on the Supreme Court’s decision to review the case may come Monday. A parlor game in Washington is who will decide first: The Supreme Court on Prop 12 or EPA on final details of the RFS.

USDA webinar Monday on grants for expanding meatpacking capacity. USDA on Monday at 2 p.m. ET will hold a webinar on its program for expanding meatpacking capacity for those interested in applying for grants. USDA recently announced a first tranche of funding — $150 million of $375 million total — available to increase packing capacity, with individual grants of up to $25 million for construction or expansion of packing facilities and for equipment purchases. Applications for the grants are due by April 11.

A second tranche of grant funds — the remaining $225 million — will be made available this summer, along with $275 million in lending capital.

Russian Invasion of Ukraine Update, Impacts

What a year… last week! That about sums up the subtractions of so many things that used to be before Russia invaded Ukraine. Russian President Vladimir Putin destroyed any hope Saturday of immediate de-escalation of his invasion of Ukraine, threatening in a televised speech to strip Ukraine of its statehood and likening a series of sweeping Western sanctions to a “declaration of war.” Ukrainian President Volodymyr Zelenskyy pleaded for international assistance, including during a virtual event with U.S. lawmakers. On Saturday night, President Biden spoke with Zelenskyy. As for the war, Russian forces have pressed the attack in Ukraine’s south, the one area of the country where their campaign appears to be making gains. Mariupol, a southeastern port city of nearly 450,000 people, has suffered a relentless Russian barrage for days and appears to be surrounded. (Source of map: New York Post)
National average for a gallon of gas topped $4, the highest price at the pump since 2008.
Can Europe wean itself from Russian oil? This past week, as the West sought to hobble Russia with sanctions, the EU was paying as much as 660 million euros — roughly $722 million —a day to Russia, according to the Bruegel think tank. That is triple the level before Russia invaded Ukraine. Link for details via the WSJ.
Zelenskyy made an emotional pitch to more than 300 members of Congress during a Zoom meeting on Saturday morning. He pressed the U.S. to do more to help his country stop Putin, including by providing more weapons and fighter planes (will happen), banning Russian oil imports (may happen, see next item) and creating a no-fly zone (will not happen). He warned that nuclear disaster could be around the corner if they don’t do more, and he said that this might be the last time they see him alive.
Russian oil ban coming? Secretary of State Antony Blinken on CNN said, “We are now in very active discussions with our European partners about banning the import of Russian oil to our countries.”
Blinken also talked to China, who told him China opposes actions that “add fuel to the flames.” Of note: The annual government work report delivered to China’s National People’s Congress by Premier Li Keqiang on Saturday did not even mention Russia’s invasion of Ukraine, and it took a steady-as-it-goes tone on China’s economic outlook. Translation: China thinks it can weather the storm (invasion). Meanwhile, China “must” intervene to mediate between Russia and Ukraine, given the inability of the United States and European allies to stop the fighting, according to a senior European Union official.
The exodus of Ukrainians now marks Europe’s largest displacement of people since World War II, as the U.N. said Saturday the number of refugees has swelled to more than 1.45 million.
Putin threatened Ukraine could lose its statehood/sovereignty and warned that Russia would consider countries that created a no-fly zone over Ukraine to be enemy combatants.
U.K. Prime Minister Boris Johnson via commentary in the NYT detailed a six-point plan in response to Russian aggression in Ukraine. “We must go further on economic sanctions, expelling every Russian bank from SWIFT.” Link for details.
Russian banks will begin issuing cards using the Chinese UnionPay system, in conjunction with Russia’s Mir network, after Visa and Mastercard announced they would be the latest payment services to suspend operations in Russia amid the invasion of Ukraine.
More than 30 countries have so far closed their airspace to Russia — with Moscow reacting in kind — and multiple companies are suspending major operations. Russia's largest airline, Aeroflot, was also yanked from global reservation systems and travel websites, crippling the carrier’s ability to sell seats.
U.S. officials travel to Venezuela, a Russia Ally, as the West isolates Putin. The trip is the highest-level visit by American officials to Caracas in years, driven by a desire to separate Russia from its remaining Latin American allies. Also, think oil. Link for details via the NYT.

Calendar of Events

A quick glance at some key events this week outside of economic, ag and energy reports is the focus on the Russian invasion of Ukraine.

Monday, March 7

• Russian invasion of Ukraine. Senate Foreign Relations Committee closed briefing on “Update on the Russian Invasion of Ukraine” from Undersecretary of State for Political Affairs Victoria Nuland.

• Ukraine situation. Jewish Institute for National Security of America virtual discussion on “Back in the Fold: Turkey and the Ukraine Conflict.”

• FTC rules. American Bar Association virtual discussion on “FTC Competition Rulemaking: Policy and Authority Considerations.”

• Korea presidential election. Korea Society virtual discussion on “Korea's Presidential Election: Forecasts and Impact Analysis.”

• U.S./Japan alliance. Henry L Stimson Center holds a virtual discussion on “U.S./Japan Alliance Cooperation in the Post-Pandemic World.”

• Banking meeting. American Bankers Association Washington Summit; runs through Wednesday.

• International bankers’ meeting. Institute of International Bankers 2022 annual Washington Conference, with remarks from Treasury Undersecretary for Domestic Finance Nellie Liang and Rostin Behnam, chair of the Commodity Futures Trading Commission; runs through Tuesday.

• School Nutrition Association annual legislative action conference, through Tuesday.

Tuesday, March 8

• Russia invasion of Ukraine: U.S. and international response. Senate Foreign Relations Committee hearing on “Russia's Invasion of Ukraine: Assessing the U.S. and International Response,” with Undersecretary of State for Political Affairs Victoria Nuland.

• Russian invasion of Ukraine: Israel implications. Jewish Institute for National Security of America (virtual discussion on “Russia, the Ukraine war, the moral imperative of a strong and united West, and the implications for Israel.”

• Russian Invasion of Ukraine: Human rights issues. Tom Lantos Human Rights Commission virtual hearing on “Accountability for Russia’s War Crimes and Aggression against Ukraine”

• Russian invasion of Ukraine: Global, Latin America impacts. Atlantic Council holds a virtual discussion on “Global and Latin American Implications of Russia's Invasion.”

• Russia invasion of Ukraine: Intelligence issues. Carnegie Endowment for International Peace “Carnegie Connects” virtual discussion on “Ukraine, Putin, and Intelligence.”

• Russian invasion of Ukraine: French military. Center for a New American Security virtual discussion with French Chief of Defense Gen. Thierry Burkhard, on “the current and future strategy of the French Armed Forces and the challenges of maintaining a global posture in a time of shifting geopolitics, particularly in regard to the war in Ukraine.”

• Rural development and the farm bill. House Agriculture Commodity Exchanges, Energy, and Credit Subcommittee hearing on “A 2022 Review of the Farm Bill: Rural Development.”

• Climate-smart agriculture. Business Council for International Understanding virtual discussion closed to the press on “Innovation to Drive Climate Smart Agriculture.”

• Corporate profiteering and inflation. House Financial Services Committee hearing on “The Inflation Equation: Corporate Profiteering, Supply Chain Bottlenecks, and Covid-19.”

• India opportunities. Center for Strategic and International Studies virtual discussion on “Rating India 2022: Key Opportunities and Risks,” focusing on economic trends.

• U.S. bankers’ meeting. American Bankers Association Washington Summit, runs through Wednesday.

• International bankers’ meeting. Final day of the Institute of International Bankers 2022 annual Washington Conference.

• Defense spending. Senate Armed Services Committee hearing on “United States Strategic Command and United States Space Command in review of the Defense Authorization Request for FY 2023 and the Future Years Defense Program.”

• Trade and environmental issues. International Trade Administration virtual meeting of the Environmental Technologies Trade Advisory Committee to review draft recommendations and conduct subcommittee breakouts under the themes of Trade Policy and Export Competitiveness, Climate Change Mitigation and Resilience Technologies, and Waste Management and Circular Economy.

• STB reauthorization. House Transportation and Infrastructure Railroads, Pipelines and Hazardous Materials Subcommittee hearing on “Stakeholder Views on Surface Transportation Board Reauthorization.”

• Global threats. House Select Intelligence Committee hearing on “Worldwide Threats.”

• Climate issues. House Science, Space and Technology Committee hearing on “Federal Climate Adaptation and Resilience for the 21st Century.”

• Public safety and Covid. House Judiciary Crime, Terrorism and Homeland Security Subcommittee hearing on “Reimagining Public Safety in the Covid-19 Era.”

• EVs. House Energy and Commerce Energy Subcommittee hearing on “Charging Forward: Securing American Manufacturing and Our EV (electric vehicle) Future.”

• Japan influence in Indo-Pacific region. East-West Center in Washington virtual book discussion on “The Courteous Power: Japan and Southeast Asia in the Indo-Pacific Era.”

• Addressing climate change. World Resources Institute virtual discussion on “Addressing Climate Damages: A Call to Action from the IPCC (Intergovernmental Panel on Climate Change) Report.”

• Covid and travel. Woodrow Wilson Center's Mexico Institute virtual discussion on “Getting Accustomed to the New Normal: Border Customs in the Age of Covid-19.”

• Klamath Basin. House Natural Resources Water, Oceans and Wildlife Subcommittee hearing on “Klamath River Basin Conditions and Opportunities.”

• Global impacts of climate change. American Security Project virtual discussion on “Global Implications of Climate Change.”

Wednesday, March 9

• Food tech and climate issues. Center for Strategic and International Studies virtual discussion on “Food Tech and Climate-Smart Agriculture.”

• Russian invasion of Ukraine: Closed briefing. House Foreign Affairs Committee closed briefing on Russia and Ukraine.

• Russian invasion of Ukraine: Cyberattacks. Henry L. Stimson Center and the Washington Foreign Law Society virtual discussion on “Acts of War? Accountability for Cyberattacks in Ukraine.”

• Russian invasion of Ukraine. American Security Project virtual discussion on “Crisis in Ukraine.”

• Russian invasion of Ukraine: Oligarchs. Washington Post Live virtual discussion on “The Future of Russia: The Oligarchs,” focusing on Ukraine and Western sanctions.

• Taiwan and global supply chains. Brookings Institution virtual discussion on “Taiwan's Role in Global Supply Chains.”

• American bankers’ meeting. American Bankers Association Washington Summit, with remarks from Sen. Jon Tester (D-Mont.) and Acting Comptroller of the Currency Michael Hsu.

• Central bank digital currencies. Peterson Institute for International Economics virtual discussion on “The trade-offs of central bank digital currencies and the digital euro project.”

• U.S. climate change actions. House Select Climate Crisis Committee hearing on “Confronting Climate Impacts: Federal Strategies for Equitable Adaptation and Resilience.”

• Pandemic detection. Atlantic Council virtual roundtable discussion on “Pandemic detection and surveillance data.”

• Infrastructure law. Bipartisan Policy Center (virtual discussion on “Overcoming Challenges and Seizing Opportunities: Implementing the Bipartisan Infrastructure Law.”

• EVs. Our Energy Policy virtual discussion on “Electrifying Transport: The State of Electric Vehicles.”

• Ocean shipping fees. Federal Maritime Commission virtual meeting of the National Shipper Advisory Committee to hear from its subcommittees on data sharing and visibility and fees and surcharges.

• Sustainable energy. Environmental and Energy Study Institute virtual forum to release the 2022 Sustainable Energy in America Factbook.

• Energy issues. American Council on Renewable Energy virtual discussion on “The Implications of West Virginia v. EPA for Renewable Growth,” focusing on the pending Supreme Court case that could upend established interpretations of the Clean Air Act.

Thursday, March 10

• President Joe Biden addresses the Democratic National Committee Winter Meeting.

• Agriculture and emerging technologies. Atlantic Council virtual discussion on “Revolutionizing Agriculture Through Emerging Technologies.”

• Global agtech. Foreign Policy webinar on “AgTech: Global Deployment for Sustainable Development.”

• Russian invasion of Ukraine issues. Johns Hopkins University Paul H. Nitze School of Advanced International Studies virtual discussion on “Ukraine Today.”

• Yellen views. Washington Post Live virtual event on “The Path Forward,” with Treasury Secretary Janet Yellen.

• Russian sanctions. Washington International Trade Association virtual discussion on “Russia Sanctions: From Jackson-Vanik to Today.”

• Farm Credit System. Farm Credit Administration meeting to discuss the Spring 2022 Unified Agenda and Funding Conditions for the Farm Credit System.

• Korea presidential elections. Center for Strategic and International Studies virtual discussion on “The South Korean presidential election.”

• Korea elections. Center for American Progress virtual discussion on “South Korea Chooses a New President.”

• Carbon pricing. Resources for the Future virtual discussion on “The Future of Carbon Pricing: Policy in Action.”

• Energy security. Senate Energy and Natural Resources Committee hearing on “The Use of Energy As A Tool And A Weapon,” focusing on energy security for the United States and its allies.

• Energy issues. Department of Energy virtual meeting of the Electricity Advisory Committee. Agenda includes: a briefing on Cyber-Informed Engineering Strategy; to discuss DOE Recommendations to the White House on the Energy Sector Industrial Base, to hear subcommittee updates on Section 8008 Voluntary Model Pathways Development, Grid Resilience for National Security, Energy Storage, and the Smart Grid

• EV investments. Third Way virtual discussion on “Making the Most of Our Electric Vehicle Investments.”

• Commodity Classic through Saturday, New Orleans.

Friday, March 11

• Russian invasion of Ukraine: U.S. security issues. Institute for Corean-American Studies virtual winter symposium on “The Ukraine Crisis, Indo-Pacific, Northeast Asia and U.S. National Security.”

• 2022 congressional agenda. Washington International Trade Association virtual 2022 Congressional Trade Agenda.

Economic Reports for the Week

The effects from the invasion of Ukraine by Russia will continue to dominate market discussion again this week even as traders start to prep for the Federal Reserve meeting that follows later in the month. While FOMC members will be in a blackout period from tipping their hands with speeches, speculation over the magnitude and pace of rate increases will continue. The biggest economic report to watch this week will be the monthly read on consumer prices due on March 10. Economists expect a 0.5% month-over-month rise in the core CPI mark and 7.5% year-over-year increase in consumer prices. Energy prices and food prices will be watched closely, while prices for travel-related categories like lodging, airline fares and car/truck rentals are also expected to show strength after moderating during the Omicron spike. "The risk is to the upside. It will be a shocker if we get an 8% handle,” said Bannockburn Global Forex Chief Market Strategist Marc Chandler.

Monday, March 7

Consumer Credit: The Federal Reserve reports consumer credit data for January. Total consumer debt is expected to rise $20 billion to a record $4.44 trillion. Following a slight decline in 2020, consumer credit increased 5.9% last year.

Tuesday, March 8

National Federation of Independent Business releases its Small Business Optimism Index for February. Consensus estimate is for a 97.4 reading, roughly even with the January data. The net percentage of small-business owners raising selling prices reached the highest level since 1974 as they try to pass on higher materials costs and compensation to employees.
International Trade
Wholesale Trade

Wednesday, March 9

MBA Mortgage Applications
Bureau of Labor Statistics (BLS) releases the Job Openings and Labor Turnover Survey (JOLTS). Economists forecast 11.1 million job openings on the last business day of January, nearly 200,000 more than in December. If that estimate proves correct, it would match the record level of job openings from this past July and October.

Thursday, March 10

Jobless Claims
BLS reports the consumer price index for February. Consensus estimate is for a 7.8% year-over-year spike for the CPI, after a 7.5% increase in January. The core CPI, which excludes volatile food and energy prices, is expected to jump 6.3%, compared with 6% previously. The estimates for both indexes would surpass recent peaks and mark 40-year highs. Russia’s invasion of Ukraine has sparked a big jump in many commodities, including wheat and oil, so a relief from higher prices doesn’t seem to be in the cards in the near future.
Treasury Budget
Fed Balance Sheet
Money Supply

Friday, March 11

University of Michigan releases its Consumer Sentiment Survey for March. Expectations are for a 64 reading, about one point higher than the February figure.

Key USDA & international Ag & Energy Reports and Events

WASDE time, Wed., March 9. Usually, the March WASDE is a report one can snooze through. Not this year. The watch is on to see how USDA analysts account for the war in Ukraine, since it is impacting the breadbasket of Europe, both in the short and long run. And USDA will/should likely get more realistic about Brazil’s soybean crop forecast. Easy predictions: increased demand, tighter carryovers. Those equal higher prices.

Monday, March 7

Ag reports and events:

Export Inspections
Amber Waves (ERS)
Bursa Malaysia Palm Oil Conference, day 1
Holiday: Russia