Evening Report: March 11, 2022
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Your Pro Farmer newsletter is now available... The war between Russia and Ukraine moved into its third week with no signs of it ending anytime soon. The initial shock has faded and been replaced with extreme market volatility, especially in wheat and crude oil, as traders try to determine the “right” price for the situation. While supply/demand fundamentals are still a concern, money flow is the overwhelming price driver in wheat and crude oil. The corn and soybean markets are also volatile, but not nearly to the degree as those other markets. USDA’s March Supply & Demand Report reflected “an initial assessment of the short-term impacts” of the war, though the agency warned of the significant uncertainty the situation creates. USDA raised its U.S. corn export forecast to reflect a reduction in Ukraine exports, but it lowered the wheat export figure. While the wheat export pace has been lagging, we expect the U.S. to pick up some lost business out of the Black Sea region. USDA also raised its soybean export forecast due to reduced production and exports in South America. We cover all this and much more in this week’s newsletter, which you can access here.
Fill out our acreage survey… You should have received our spring acreage survey via email on Thursday. Please fill it out accurately with your current planting intentions for this year. We’ll share our acreage estimates based on survey results ahead of USDA’s Prospective Plantings Report on March 31.
Russia/Ukraine update... More shelling and airstrikes pummeled Mariupol on Friday. Russia appeared to be pushing its offensive westward, with airstrikes hitting near western Ukraine airports. Satellite images show a vast Russian convoy stuck outside the capital, Kyiv, has fanned out into towns and forests. More Russian airstrikes hit the industrial city of Dnipro in eastern Ukraine. Russian President Vladimir Putin has approved recruiting “volunteers” from Syria and elsewhere to fight in Ukraine.
Putin said talks between Moscow and Ukraine were held practically every day and cited "certain positive shifts" without elaborating.
Ukraine said Belarus could be planning to invade its territory and accused Russia of dragging its ally into the war by staging air attacks on Belarus from Ukrainian air space.
Ukrainian authorities said there are plans for several evacuations and humanitarian aid deliveries. Russia promised another ceasefire to allow evacuations.
The UN has not received information to back up Russia’s claims that the United States is conducting “military biological activities” in Ukraine.
More Russian sanctions announced... President Joe Biden announced an import ban on Russian alcohol, seafood and diamonds. The U.S. will halt exports of luxury goods including some spirits, tobacco, clothing, jewelry, vehicles, and antiques to Russia.
Joining fellow Group of Seven (G7) leaders, Biden asked U.S. lawmakers to remove Russia’s "most favored nation" trade status. Speaker of the House Nancy Pelosi (D-Calif.) said the House of Representatives would act on the trade bill next week. House and Senate leaders pushed for the repeal of the preferential trade relations. However, earlier this week, the provision was removed from a House bill banning Russian energy imports. Russia would join Cuba and North Korea as the only countries in the world without preferential trade status in the U.S. The change in Russia’s status would allow higher tariffs on Russian products.
Biden is also banning U.S. investment in Russia beyond the energy sector.
Cargill scales back Russian business... Cargill plans to scale down its Russian business and investments. However, the company will continue to operate its essential Russian food and feed facilities.
“Food is a basic human right and should never be used as a weapon,” the company said in a statement.
Earlier this week, Russian and Ukrainian business details were removed from the company’s website. The website previously said it had $1.1 billion invested in agricultural processing and employs 2,500 people in Russia.
Agriculture ministers plead against export bans... Meeting in Germany, the G7 agricultural ministers ask all countries to keep their food and agricultural markets open. They warned higher food prices and volatility in international markets could threaten food security and nutrition on a global scale.
The group recognized the vital importance of export bans by Ukraine to preserve food availability.
Ministers are working together to “closely” monitor futures markets and fight speculation that may threaten food supplies.
“We will not tolerate artificially inflated prices that could diminish the availability of food and agricultural products,” the group said in a statement.
Goldman Sachs raises recession risk, cuts growth... The chances of a recession in the coming year are “broadly in line with the 20%-35% odds currently implied by models based on the slope of the yield curve,” according to Goldman Sachs economists. The investment bank cut its annualized growth forecast to 2.9% against a previous expectation of 3.1%. It expects fourth-quarter real gross domestic product growth of 1.75% against an earlier forecast of 2%.
U.S. consumer sentiment lowest since 2011... The University of Michigan’s Consumer Sentiment Index dropped to 59.7, from 62.8 in February. Economists expected a reading of 61, according to a Bloomberg survey.
The current condition index decreased from 68.2 in February to a 67.8 reading, the lowest since 2009. The future expectations index dropped 3.0 points from February to 54.4, the weakest since 2011. Inflation expectations over the next five to 10 years held at 3%.
Brazil updates fertilizer plans... Brazil announced a national fertilizer plan to reduce imports by 40% by 2050. The program will introduce new fiscal rules and support private companies to expand local output capacity. The country imports 85% of its fertilizer needs. The government has been improving its fertilizer import logistics in the short term.
Brazil will also present a proposal to the UN’s Food and Agriculture Organization (FAO) on March 16 to exclude fertilizer products from any Russian sanctions. Brazil's Agriculture Minister Tereza Cristina Dias said Argentina, Bolivia, Brazil, Chile, Paraguay and Uruguay supported the proposal.
Dias recently met with Middle East nations seeking more fertilizer imports. Currently, Brazil purchases 26% of its fertilizer from the Middle East.
USDA announces funds for American fertilizer production... USDA announced a new grant program that would provide $250 million to support independent, innovative and sustainable American fertilizer production to supply American farmers. USDA will use funds from the Commodity Credit Corporation (CCC) set aside in September for market disruptions for the program that provides ‘gap’ financing to bring new, independent domestic production capacity on-line. Details on the application process will be announced this summer, with the first awards expected before the end of the year.
Fertilizer duty waiver bill introduced... Sen. Roger Marshall (R-Kan.) and Rep. Tracey Mann (R-Kan.) introduced the Emergency Relief From Duties Act aimed at creating emergency waivers for duties levied on fertilizers by the U.S. International Trade Commission (USITC). This bill creates a pathway to establish a waiver of Countervailing Duty (CVD) or Anti-dumping Duty (AD) for a year if there is an emergency situation including natural disasters, war, epidemics, labor disputes or major accidents. Some political insiders say there is less than a 50% chance of this bill passing.
French soft wheat condition declines slightly... Ninety-two percent of the French soft wheat crop condition was rated in the good or excellent condition, down one point from last week, by FranceAgriMer, part of France’s department of agriculture. The crop remains four points better than last year. FranceAgriMer said dryness has started to develop in France. Rains are forecasted in the coming days. Spring barley planting is 76% planted, up 40 points from the previous week, but eight points below a year-ago.
