Evening Report: Jan. 24, 2022
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Brazil's soybean harvest reaches 5%... As of Jan. 20, Brazilian farmers had harvested 5% of the country’s soybean crop, up from 0.7% on that date last year, according to ag consultancy AgRural. Most of the harvest progress was in Mato Grosso, the top producing soybean state with “satisfactory” yields.
AgRural says yields in Parana remain low due to drought in the state. Farmers have not started harvesting soybeans in Rio Grande do Sul.
“In the rest of the country, crops are developing well and the harvest is beginning in several states. Despite some losses due to excessive rains in Matopiba (a five-state area located mainly in northeastern Brazil) and Minas Gerais, expectations point to a great crop in all of these states,” AgRural noted.
The firm reported 5% of the safrinha corn crop had been planted, mainly in the Mato Grosso area. Some of the safrinha corn in Parana might need to be replanted due to the lack of soil moisture.
Good growing conditions for European crops but frost tolerance a concern... Most of Europe’s winter crops have benefited from slightly warmer-than-usual temps and average to above-average precip, the EU’s crop monitoring service MARS said on Monday. Winter crops are generally fair to good (or very good). Weather conditions have allowed lagging crop stands to get caught up in their development.
Crops are mostly hardened in northern and east-central Europe. The service reported that hardiness in other areas is a concern, especially in the Black Sea region. Precip has been above average and a cold snap could potentially lead to frost damage.
Dry conditions were noted along the Mediterranean from southern Spain to northern Italy. However, crops yields have not been affected yet. Drought conditions have reduced crop development in northern Africa, including Morocco. MARS said rain is needed in western and central Algeria.
Update on what Vilsack said last week regarding WHIP+... Payouts initially are coming in April or May via the Wildfire and Hurricane Indemnity Program-Plus (WHIP+) program. Congress authorized $10 billion over four months ago with instructions to make the program less complex and to implement accelerated payments versus the lengthy payment process for eligible 2018 and 2019 ag disasters. The coming program impacts eligible 2020 and 2021 crops, livestock and dairy.
Payments will likely be split in two tranches. The first tranche will be “based on information we already have,” Vilsack said. They would be pre-filled applications for grain producers (and) livestock forage data. Then there will be a second tranche to basically make up for whatever the first tranche didn’t cover, or for those who didn’t have Noninsured Crop Disaster Assistance Program (NAP) information or crop insurance information. USDA would then leverage the data it already has on file to calculate the benefit.
The program will still be administered by FSA but the Risk Management Agency (RMA) would calculate the payment for insured producers and pass that dollar amount to FSA to pre-fill an application and apply payment limitations and eligibility provisions, etc.
The second tranche would include opportunities for shallow losses and quality. A producer that receives a pre-filled application under the first tranche could be eligible to apply under the second.
On the livestock side, under the first phase, USDA would leverage LFP data and this would not require a producer to file an application; rather, FSA would just generate a payment based on the information submitted for LFP. Under the second tranche for livestock, USDA would be looking at what other gaps there may be to close them. This approach, meant to avoid FSA having to manually key in information already held by RMA, will save time in getting help out to producers.
Cold Storage Report: Beef stocks build, pork stocks decline... It’s typical for frozen beef stocks to rise during December, though the increase was slightly greater than normal. It’s also normal for pork stocks to decline in December, though the drop was less than average.
As of Dec. 31, USDA reported frozen beef stocks at 503.8 million lbs., up 13.4 million lbs. from November, whereas the previous five-year average was an 8.8-million-lb. increase during the month. However, beef stocks dropped 32.1 million lbs. from December 2020 and were 9.4 million lbs. below the five-year average.
Pork stocks at 398.9 million lbs. dropped 3.2 million lbs. from November versus the five-year average of a 12.8-million-lb. decline during December. Pork stocks fell 17.0 million lbs. from December 2020 and were 93.0 million lbs. below the five-year average.
Total poultry stocks increased 27.8 million lbs. from November to 915.2 million lbs., though that was down 174.1 million lbs. from last year. Chicken breast meat inventories dropped 104.5 million lbs. (40.6%) from last year’s record to 152.6 million pounds.
U.S. oil CEOs differ on output growth... ConocoPhillips CEO Ryan Lance predicted oil output would likely eclipse the record 13 million barrels per day (bpd) reached in late 2019. Occidental CEO Vicki Hollub was more measured in her forecast, saying the U.S. would likely surpass 12 million bpd at some point – but fall short of the all-time record. While speaking at the Argus Americas Crude Summit in Houston, Lance was bullish about markets as high oil prices “will persist for a while.”
The U.S. Energy Information Administration predicts annual crude production will average 11.8 million barrels per day (bpd) this year and 12.4 million bpd in 2023. That average would be a record for a full year, even though it is less than the monthly record of 12.97 million bpd set in November 2019.
Traders watching Fed meeting for interest rate hints... Investors expect the Fed to signal on Wednesday that it plans to raise rates in March, tightening monetary policy for the first time since it slashed borrowing costs to near-zero. Fed funds futures, which track short-term rate expectations, have priced in a total of four rate increases this year, as the U.S. central bank fights to stem soaring inflation.
The Fed will not update its formal outlook after the Jan. 25-26 meeting. However, investors will be listening to the news conference by Fed Chair Jerome Powell after the release of the policy statement for more details about Fed’s plans, current view of the economy and equity markets.
If history is any indication, the Fed will likely try to avoid rattling markets further and raise rates in 25 basis-point increments. The Fed has not raised interest rates by more than 25 basis points in one policy move since May 2000, when it hiked by 50 basis points to 6.5%.
Canadian trucker convoy fights vaccine mandate... A trucker convoy protesting the government’s Covid-19 vaccine mandate for truckers started on Sunday in Vancouver and is expected to reach the Canadian capital city of Ottawa on Jan. 29.
Under the vaccine mandate, the Canadian Trucking Alliance (CTA) estimates as many as 32,000, or 20%, of the 160,000 Canadian and American cross-border truck drivers may be taken off the roads. However, the organization does not support any protests on public roadways and the only way to cross the border on a commercial truck is by getting vaccinated.
