Evening Report: Jan. 31, 2022

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Officials meet this week on Russia/Ukraine... This week is full of international meetings on the Russian threat to invade Ukraine. Today, U.S. President Joe Biden met Sheikh Tamim bin Hamad Al Thani, Emir of Qatar, to discuss how the Middle East country could help the economic fallout of a possible Russian invasion of Ukraine, including assisting the EU with its gas needs.

The U.N. Security Council held a public meeting to have Russia explain itself with the troop buildup near the Ukraine border.  Any formal action from the Security Council is improbable given Russia’s veto power and its ties with others on the council, including China.

British Prime Minister Boris Johnson was scheduled to speak to Putin by telephone Monday and travel to Ukraine on Tuesday.

Biden administration officials will brief the U.S. Senate on Thursday about the situation. There has been a request to have administration officials meet with all U.S. House members.

U.S. and allies prepare Russian sanctions over Ukraine... U.S. senators are nearing a deal that would put immediate sanctions on Russia for cyberattacks and efforts to undermine the Ukrainian government. The agreement will likely contain more financial sanctions if Russia invades Ukraine.

The Biden administration is preparing sanctions on Russian financial institutions. U.S. export controls that would prevent Russia from getting access to crucial U.S. technologies that would hurt Russian areas of defense, aviation and artificial intelligence could also be some of the sanctions on Russia.

The Biden administration has been consulting with European allies on possible sanctions. Britain is working to broaden the scope of measures it can apply to Russia to try to deter aggression towards Ukraine, according to British Foreign Secretary Liz Truss. That includes hitting some Russian elites in or near President Vladimir Putin’s inner circle with more and tougher sanctions.

Cattle Inventory Report: Bullish... USDA estimates there were 91.9 million head of cattle in the U.S. as of Jan. 1, down 1.9 million head (2.0%) from year-ago and 762,000 head less than the average pre-report estimate implied. The beef cow herd at 30.1 million head dropped 719,000 head (2.3%) from year-ago and will continue to decline amid ongoing contraction. The number of beef heifers expected to calve dropped 98,000 head (2.8%) and beef replacement heifers fell 192,000 head (3.3%). That was the fewest number of beef heifers held back for breeding since 2012, likely reflective of the sparse pasture conditions across the Plains due to drought. More heifers are moving into feedlots, which USDA’s Cattle on Feed data has signaled.

USDA estimated the 2021 calf crop at 35.1 million head, down 410,000 head (1.2%) from last year and the smallest figure since 2016.

The dairy cow herd at 9.4 million head declined 67,000 head (0.7%) from last year. Milk replacement heifers dropped 158,000 head (3.4%), signaling the U.S. dairy herd will also continue to shrink.

With every category coming in below the average pre-report estimates, the report data is fully bullish and should support continued strength in cattle futures.

SovEcon increases Russian wheat export forecast increased; Ukraine conflict poses little risk...  Black Sea region consulting firm SovEcon raised its 2021-22 Russian wheat export forecast by 200,000 MT to 34.2 MMT. In the Jan. 12 WASDE Report, USDA projected 2021-22 Russian wheat exports at 35 MMT. The current export pace is stronger due to higher world prices and the weaker ruble, SovEcon said. The firm expects the Russian wheat export quota of 8 MMT from Feb. 15 to June 30 to be filled.

SovEcon expects the potential conflict between Russia and Ukraine to pose little risk to Black Sea wheat exports. “Even in Spring-2014 after Russia began to control Crimea there was no disruption of grain exports from the Black Sea,” said Andrey Sizov, head of SovEcon.

Consumers willing to pay less for most beef and pork as market share drops... Consumers are willing to pay less for most retail and food service meats, according to the monthly Kansas State University Meat Demand Monitor. For January, what consumers are willing to pay dropped for retail meats of hamburger, pork chops, bacon and chicken breast. Consumers were only willing to pay more for four retail protein sources (ribeye steak, plant-based patty, shrimp and beans and rice) at grocery stores. Retail beef market share dropped from 32% in December to 29% in January. Retail pork market share fell from 23% to 20%.

Consumers are willing to pay less for hamburger, pork chops, baby back ribs, chicken breast, shrimp and salmon at restaurants. Consumers were willing to more for ribeye steak and a plant-based patty. The restaurant market share for beef dropped from 39% to 37%. The restaurant pork market share decreased from 16% to 14%.

Philippines lifts Canadian beef import suspension... The Philippines lifted its suspension of Canadian beef imports, Canadian Agriculture Minister Marie-Claude Bibeau said over the weekend. After Canada detected an “atypical” case of BSE on an Alberta farm in December, South Korea, the Philippines and China suspended Canadian beef imports. South Korea lifted its suspension of Canadian beef imports earlier this month.

AGP announces Nebraska soybean processing plant... Ag Processing Inc (AGP) announced plans to build a soybean processing plant near David City, Nebraska. The plant would put the coop’s processing capacity to over 50 million bu. per year. AGP expects operations to begin in 2025 and plans to export soybean meal from the location to the Pacific Rim through AGP’s export terminal in Aberdeen, Washington.

Lithuanian railways votes down Belarus potash shipping extension... Lithuanian Railways, a state-owned railroad, voted not to extend Belarus’ potash hauling. Last month, the railroad terminated its transport agreement that would end on Feb. 1. However, six companies from Belarus and Lithuania asked the railroad to continue hauling the fertilizer. The requests were sent to the government to see if the contracts would go against national security. The Belarus president said his government would respond “within days” if Lithuania prevented the cargoes from reaching its port.

Belarus uses Lithuania’s Klaipeda port to export potash to customers including India, China and Brazil. Russia, which remains Belarus’ ally, does not have enough spare port capacity to handle the 12.5 MMT per year of potash shipments.

Butcher shortage delays Britain pig slaughter... A backlog of more than 170,000 pigs due to a labor shortage threatens Britain’s pork industry, according to the National Pig Association (NPA) and National Farmers Union (NFU). Some farmers reported only half of the contracted pigs were taken by processors in the first week of 2022. The combination of record feed costs and falling prices mean farmers have been losing $34 per head for a year. About 10% of the English herd, or 30,000 sows, have been lost over the past six months.

In October, the British government offered visas to 800 foreign butchers for six months. However, it is estimated that only 105 butchers are traveling to Britain to help ease the labor shortage.



Low Rhine river levels slow Germany shipping... Cargo vessels in the southern section of the Rhine River are prevented from being fully loaded due to low water levels, according to traders. The Rhine is an important shipping route for commodities including grains and minerals. The low water levels are a result of recent dry weather in the area. However, rains forecast for this week in southern Germany could improve the situation. The northern part of the river is shipping under normal conditions.