Evening Report: April 26, 2022
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Livestock producers: Extend soybean meal coverage… May soybean meal futures dropped below our target at $450.00. We advise livestock producers to cover all soybean meal needs in the cash market through May. Be prepared to extend coverage on further price weakness.
Concerns raised about two controversial cattle market proposals... During a review of two controversial cattle market proposals – the Cattle Price Discovery and Transparency Act of 2022 and the Meat and Poultry Special Investigator Act of 2022 – Sen. John Boozman (R-Ark.), Senate Agriculture Committee ranking member, raised concerns about how the focus on large meatpackers would affect the thousand small packers across the country. He also raised concerns about the impact on the pork, poultry and lamb industries that would be subjected to the same law but did not testify. Boozman noted his concern about the Meat and Poultry Special Investigator Act, sponsored by Sen. Jon Tester (D-Mont.). Boozman was also concerned about not getting an opinion on the bill from USDA’s Office of Chief Economist. The North American Meat Institute, in a statement, urged members of the Senate Ag Committee to reject the Grassley-Fischer bill’s mandates and federal intrusion in the beef and cattle markets. Some producers testified on their differing opinions of the bill and whether it would help or hurt them. Click here for more details on today’s hearings.
U.S. consumer confidence dips in April... U.S. consumer confidence edged down in April, though households planned to buy automobiles and many appliances, which should help to underpin consumer spending in the second quarter. The Conference Board reported its consumer confidence index nudged down to a reading of 107.3 this month from a slightly upwardly revised 107.6 in March. Economists polled by Reuters had forecast the index rising to 108.0 from the initially reported reading of 107.2 in March. The Present Situation Index declined but remains relatively high, suggesting the economy continued to expand in the early second quarter. The Expectations Index, while weak, did not deteriorate further amid high prices.
Canadian farmers plan to plant more wheat, less canola... Canadian farmers are expected to plant 25.0 million acres of wheat in 2022, up 1.6 million acres from last year and 800,000 acres more than traders expected, according to Statistics Canada. Mike Jubinville of MarketsFarm says, “The gain in wheat acres is more than I anticipated... likely attributable to strong prices and high worldwide demand.”
Canadian canola acres are expected to total 20.9 million acres, down 1.6 million acres from last year and 1.2 million acres less than traders’ average estimate. Jubinville says, “This is a bit shocking to me. With demand for canola still very strong, and old-crop carryout likely to be drawn down to dust, without an exceptional yield in 2022, Canadian canola supply will remain quite constrained for the coming 2022-23 marketing year.”
Indonesia’s RBD palm oil export ban details released... Indonesia will ban the export of refined, bleached and deodorized (RBD) palm olein until prices drop below 97 cents per liter. Currently, cooking oil sells for $1.18 to $1.39 per liter. However, the government is prepared to widen its ban if there are shortages. RBD palm olein accounts for about 40% of Indonesia’s total shipments of palm oil products. Crude palm oil exports will be allowed. The policy will be evaluated periodically and will continue to be adjusted as needed. However, some industry officials don’t expect the palm oil export ban to last more than one month as the country has limited storage capacity and buyers are pressuring the government to resume exports. The Indonesian president announced the export ban last Friday without any details. He is facing declining poll numbers and over 60% of the country’s population favored a cooking oil export ban before it was announced.
ADM forecasts tight crop supplies until 2024... Demand will likely continue to outpace supplies for key crops for at least two years, said ADM CEO Juan Luciano during the company’s quarterly earnings call. He expects demand to continue to grow and noted the world needs two “very good” crops in North and South America to become more comfortable with the supply-demand imbalances. Higher crop prices will draw down grain stocks and encourage more South American acres to be planted.
World Bank: Ukraine war commodity price shock to last three years... Global food and fuel price shocks linked to the Russia/Ukraine war are likely to last until at least the end of 2024 and raise the risk of stagflation, the World Bank said in its latest Commodities Market Outlook report. The world faces the biggest commodity price shock since the 1970s the bank said in its first comprehensive analysis of impacts on commodity markets. The World Bank expects energy prices to rise more than 50% in 2022 before easing in 2023 and 2024, while non-energy prices, including agriculture and metals, are seen climbing by almost 20% in 2022 before moderating. Commodity prices will only retreat slightly and stay well above the most recent five-year average for the medium term.
German company organizing ‘grain bridge’ from Ukraine... DB Cargo, a German international transport and logistics company, is organizing a “grain bridge” from the Ukraine to ship grain out of the country and prevent a global famine, reported Handelsblatt. Railways in Germany, Poland, the Czech Republic, Slovakia and Romania are negotiating about how to implement the plan that would likely involve 20,000 trains, each with 52 containers or several thousand tons of cargo. DB Cargo has also offered to transport grain by rail to Adriatic or North Sea coast ports to be shipped to regions most in need, such as Ethiopia, Lebanon and Indonesia.
Romania seeks to revive Soviet-era rail line to boost Ukraine shipments... Romania has issued a tender seeking to rehabilitate a Soviet-era train line connecting its port of Galati on the Danube River to Ukraine to help boost grain exports. The deadline for the tender is May 19 and the work will likely take two months. The rail line to Ukraine via Moldova uses a wider gauge that would allow Ukrainian goods to be shipped easily to the Romanian port. The difference in gauges between Ukraine and Europe has been an issue in moving grain via rail since the war started.
Crop storage could be an issue this fall in Ukraine... Ukraine farmers are likely to face storage issues later this year despite the likely reduction in total production. Due to reduced exports resulting from Russia’s invasion of the country, grain storage facilities will likely be full during this year’s fall harvest. Kyiv-based analyst UkrAgroConsult explained the attack halted corn exports during the country’s peak shipping season. Exports are being done via truck and rail and will likely take at least ten months to ship excess corn supplies. Additionally, 5% of the country’s grain elevators have suffered damage from the war and another 15% can’t be accessed. Earlier harvested crops such as wheat and barley are less likely to be affected than later harvested ones like corn. If the Black Sea ports continue to be blocked into September, some Ukraine farmers might leave their corn in the field until next spring.
Two million children at risk of starvation in the Horn of Africa... Close to 2 million children are at risk of starving to death as the Horn of Africa faces one of its worst droughts in decades, according to U.N. aid chief Martin Griffiths. Parts of Kenya, Ethiopia and Somalia are suffering their driest conditions in more than 40 years. Aid agencies are seeking to avoid the repeat of a famine a decade ago that killed hundreds of thousands of people. A fourth failed rainy season in the region is now a growing probability of making the situation worse. More than 15 million people in the area are already experiencing high hunger levels, and 3 million animals have been lost due to drought.
