Evening Report: March 16, 2022
Check our advice monitor on ProFarmer.com for updates to our marketing plan.
Wheat producers: Increase new-crop sales… Wheat futures have likely put in a major top and could face more near-term pressure if last week’s lows are violated. As a result, we advise hedgers and cash-only marketers to sell another 10% of expected 2022-crop production for harvest delivery to get to 50% forward-priced. You should view any price rallies from current levels as selling opportunities.
Russia/Ukraine update... Both Russian and Ukrainian negotiators signaled a glimmer of hope to end the Russian invasion. Ukraine President Volodymyr Zelenskyy said negotiations were becoming “more realistic,” while Russian Foreign Minister Sergei Lavrov said proposals now being discussed were “close to an agreement.” Zelenskyy urged patience as officials prepared to return to the negotiating table. However, fighting continued in Ukraine, with the Russian military getting closer to Ukraine’s capital, Kyiv.
Zelenskyy asked members of U.S. Congress for help. President Joe Biden announced the U.S. is sending an additional $800 million in military assistance — including anti-aircraft and anti-armor weapons and drones — to Ukraine. Legislation to revoke normal trade relations with Russia hit a stumbling block in the House over the procedures for potentially reestablishing the relationship in the future. The U.S. announced more sanctions targeting the assets of Russian military officials. The EU imposed sanctions on Chelsea FC owner Roman Abramovich and announced new measures to deny Russian oligarchs high-end luxury goods.
Russian President Vladimir Putin said Russia survived an “economic blitzkrieg” of international sanctions. He warned his country to expect higher unemployment and inflation.
Fed begins fight against inflation with anticipated rate hike... Federal Reserve policymakers voted 8-1 to increase the key interest rate 25 basis points from 0.25% to 0.5%. The only dissenting vote was from St. Louis Fed President James Bullard, who wanted a 50-basis point increase. The move was widely expected and the first interest rate hike since 2018. The committee signaled that another six more hikes totaling 150 basis points are likely this year. In the Fed’s dot plot, the average projection was for the benchmark rate to end 2022 at about 1.9% and increase to 2.8% in 2023. Fed officials estimated a 2.8% rate in 2024.
Fed officials also lowered their forecast for economic growth and now expect U.S. GDP to grow only 2.8% this year, down from a 4% forecast in December.
Canada inflation highest since August 1991... Canada’s inflation rate for February rose 5.7% from last year, according to Statistics Canada. It is the highest annual rate since inflation was 6.0% in August 1991. Economists expected a 5.5% inflation rate. It is the eleventh straight month the inflation rate was above the Bank of Canada’s target. The increase in inflation was driven mainly by energy, food and phone costs.
HRW area to get needed rains... U.S. HRW areas could get significant rainfall from two storm systems within the next week, according to World Weather Inc. Storms are expected Thursday into Friday and early next week. World Weather forecasts the HRW wheat belt will receive a combined 0.50 to 1.5 inches of rain, with some areas likely to get 2 inches. World Weather expects Colorado, southwestern Nebraska, northwestern Kansas and areas from eastern Kansas into north-central Oklahoma to receive the most precipitation. Next week’s storm could shift to the northeast reducing rainfall in the southwestern Plains. World Weather predicts West Texas will get between 0.10-0.60 of an inch from Sunday into Monday, with heavier amounts in southwestern Oklahoma.
French livestock feed group asks to ensure grain supply... French livestock feed producers are requesting the government to guarantee a one-month supply, 800,000 MT to 1 MMT, of feedgrains are available each month to cover their needs during the crisis, according to the head of feed makers' association SNIA. The group also asked the government to provide aid to livestock farmers and raise limits on truck grain shipments on smaller routes. On Wednesday, the French government was scheduled to announce measures to help the economy, including agriculture, due to the Russian invasion of Ukraine. Since the invasion, French grain exports have increased.
SovEcon cuts 2022 Ukraine wheat, corn acres, production... Black Sea ag markets research firm SovEcon reduced its Ukraine grain production forecasts based on the Russian invasion and weather conditions. For wheat, the firm cut planted area by 200,000 hectares from last year to 6.9 million hectares. Farmers planted 6.7 million hectares of winter wheat last fall. SovEcon expects wheat yields to fall well below trendline to 3.8 metric tons (MT) per hectare. Total wheat production is forecast at 26.0 MMT, down from its previous forecast of 28.3 MMT and well below last year’s 32.1 MMT crop.
For corn, planted area is expected to drop 900,000 hectares from last year to 4.6 million hectares and yields are anticipated to fall by 1.5 MT per hectare from last year to 6.1 MT per hectare. SovEcon forecasts total corn production at 27.7 MMT, down sharply from 41.9 MMT last year.
The forecasts assume the majority of Ukrainian farmers will be able to carry out fieldwork in April and Ukraine and Russia will reach a ceasefire agreement in the next several weeks.
CF Industries works to offset Russian fertilizer imports in U.S... C.F. Industries is leasing several vessels to ship mostly liquid nitrogen fertilizer to help offset the decline in Russian fertilizer imports into the U.S., according to CEO Tony Will. Fertilizer from the world’s largest nitrogen complex in Louisiana can be shipped either up the Mississippi River to the Midwest or loaded in cargoes that will travel to either the East or West Coast. Historically most of the Russian fertilizer was imported to the East Coast. About 15% of U.S. fertilizer imports came from Russia. In addition, the company is delaying the closing of one of its plants for maintenance.
Morocco’s fertilizer company to increase production... Morocco’s OCP plans to increase production to 11.9 million metric tons (MMT), up 1.1 MMT from last year. The company is expecting to add another 3 MMT of production in 2023. One of the largest phosphorus companies, OCP has switched to other suppliers for ammonia with the loss of Russian supplies. The firm says higher demand is coming from India, the Americas and Africa. The company will import ammonia from U.S. producers next year under a long-term supply agreement. It will start ammonia production in Nigeria in 2025.
Brazil wheat exports could spur acreage increase... The current surge in Brazilian wheat exports might encourage farmers to expand their wheat acreage, according to some agricultural consultants. From December to March, Brazil has exported 2.5 MMT of wheat. Brazil has a domestic demand of 12.7 MMT per year and imports about half of its wheat.
One consultant says there is room to double the wheat planted area. The consultants note that Rio Grande do Sul farmers could increase wheat acreage by around 30% this year based on the 600,000 metric tons already sold. They explain the state plants 6 million hectares of soybeans in the summer and only 1.16 million hectares of winter wheat. Exports from the state could enter the world market before Argentine wheat since there is idle capacity at the Rio Grande port.
Farmers switching from raising dairy to beef cattle... Higher input prices are causing more farmers to replace raising dairy cattle with beef cattle, according to industry sources. The National Association of Animal Breeders told Bloomberg that dairy semen sales dropped 6.7% last year to a 17-year low. However, producers are purchasing more beef cattle semen as they switch to raising beef cattle. “The number of dairy heifers should be reducing” as farmers breed more beef cows, said Matt Gould, editor of the Dairy Market Analyst.
CFTC Chair: Markets “operating well” ... The chair of the U.S. Commodity Futures Trading Commission, Rostin Benham, said markets are “operating well” and there are no signs of potential defaults. The agency is monitoring markets for manipulative, inappropriate or disruptive conduct. The U.S. Securities and Exchange Commission recently issued a rare public warning that brokers should “remain vigilant” to counterparty risks. U.S. and overseas financial regulators are working together to maintain market resilience and stability. CFTC is working with the U.S. Treasury to ensure market participants could use sanctions waivers to cover their exposures.
World Bank: Some developing countries could suffer grain shortages... Gambia, Lebanon, Moldova, Djibouti, Libya, Tunisia and Pakistan are the most exposed to Ukraine wheat export disruptions, according to the World Bank. The bank explains those countries will have the most trouble switching to other sources from the Black Sea region, leading to short-term shortages. Higher wheat market prices will affect middle-income countries across the globe, the World Bank predicted. The bank cautioned that disruptions caused by the war in Ukraine could challenge the global trade recovery.
