Evening Report: Feb. 11, 2022

Click here to view weekly livestock slaughter/meat production charts.

Check our advice monitor on ProFarmer.com for updates to our marketing plan.
 

Your Pro Farmer newsletter is now available... Soybean prices surged above $16 amid shrinking Brazilian production, a flurry of export sales to China and “unknown” and a rush of fund buying. Soybeans (and corn) futures haven’t been at these levels many times in the past and haven’t been able to maintain the elevated prices for long. Can price rallies continue?... yes. Will markets continue higher?... probably. When and at what price will markets top?... no one “knows” for sure. Is this a historic selling opportunity?... absolutely. While there is more upside potential, history suggests the eventual price drop will be sudden and dramatic. It might not take anything more than funds, who hold record or near-record long positions in soybeans and corn, deciding to liquidate to top markets. Livestock markets also remain bullish, with cattle and hog futures rallying to new highs. But much like the grains, money flow probably means more to near-term price action than fundamentals. USDA’s February Supply & Demand Report offered no real surprises, though U.S. ending stocks were disappointing (not bearish) compared to pre-report expectations. We cover all of these items and much more in this week's newsletter, which you can access here.

Russia invasion could happen anytime... U.S. officials believe Russian President Vladimir Putin has decided to invade Ukraine and an attack could take place as soon as next week.

PBS foreign affairs correspondent Nick Schifrin tweeted that U.S. officials believe Putin has communicated an invasion order to members of the Russian military and that Washington expects a “horrific, bloody” campaign. According to the report, a Russian attack would be preceded by two days of aerial bombardment and electronic warfare, followed by a ground assault with the potential goal of overthrowing the Kyiv government.

U.S. President Joe Biden and Secretary of State Antony Blinken said a Russian invasion could happen “anytime,” including before the end of the Olympics on Feb. 20.

Meanwhile, the Kyiv Post newspaper reported Friday the U.S. was evacuating all its staff from the Organization for Security and Cooperation in Europe’s Special Monitoring Mission in Ukraine. The AP reported Americans in Ukraine were told to leave in the next “24 to 48 hours.” Biden warned the U.S. military will not rescue them.

Biden met overnight Thursday with his national security advisers as the crisis worsened. The U.S. reported more Russian troops and military equipment were being shipped to the area.

Nine-hour talks between Ukraine and Russia with France and Germany in Berlin yielded no results on Friday morning. Any possible breakthrough between the two countries remained unclear. Meanwhile, British Defense Secretary Ben Wallace said he had had a “constructive, frank” discussion with Russian counterpart Sergei Shoigu. Biden was scheduled to hold a phone call on Friday with leaders of Britain, Canada, France, Germany, Poland and Romania, as well as the heads of NATO and the EU., to discuss concerns and ways to de-escalate the situation.

Ag consultancy slashes Brazil soybean crop... Brazil-based consultancy Safras & Mercado lowered its forecast for Brazil’s soybean crop to 127 MMT, down 5 MMT from its January estimate. Corn production was unchanged at 115.7 MMT as the firm expects a good Brazil safrinha corn crop.

Luiz Fernando Gutierrez Roque, Safras & Mercado consultant, said as harvest started in Parana and Mato Grosso do Sul, the firm got a better idea of how much yields were damaged. Crops are stressed in the southern states and parts of Mato Grosso do Sul. Better yields in Mato Grosso are helping to offset some of the yield losses in other areas.

Paraguay's soybean production estimated half of last year... Due to drought in the country, Paraguay’s soybean production could drop to 5 MMT this year from 10 MMT last year, according to Agriculture and Livestock Minister Santiago Bertoni. Yields in most areas fell to 1 MT per hectare, compared to the average of 2.8 MT per hectare. According to industry figures, Paraguay had produced over a 5 MMT soybean since 2011-12 when it produced just over a 4 MMT crop.

Bertoni said the entire sector is renegotiating contracts due to a lack of supply. Some mills are looking at importing soybeans from other South American countries.

Cargill Trading Head: Record soybean prices are possible... Soybean prices have a chance of hitting the all-time high of $17.94 3/4 a bushel set in 2012 said Alex Sanfeliu, head of Cargill’s World Trading Group, in a telephone interview with Bloomberg. “We are in an environment where I think beans -- if the end of the crop weather pans out as expected -- we have the chance to reach all-time highs,” he said.

According to Cargill estimates, a total of 27 MMT to 28 MMT of soybean production in South America has been lost. As a result, he said prices need to go higher to reduce demand, get soybeans out of storage and buy acres for 2022. Sanfeliu said Cargill’s U.S. carryout stocks are “significantly lower” than USDA’s estimate.

He expects the higher soybean prices to help support other crops.

IEA: OPEC+ undersupply could push oil higher... Oil prices and volatility will likely increase if OPEC+ continues to produce less oil than it has targeted, according to the International Energy Agency (IEA). The agency said the OPEC+ gap between production targets and actual production was as much as 900,000 barrels per day (bpd) in January. IEA expects world oil demand to increase 3.2 million bpd to 100.6 million bpd, virtually unchanged from its prior forecast. Global oil supply rose by 560,000 bpd to 98.7 million bpd in January, mostly from countries outside OPEC+. OECD industry oil stocks declined by 60 million barrels in December. Oil inventories in developed economies are at the lowest levels in seven years and 355 million barrels less than a year ago. Preliminary data for January show OECD industry stocks declined by another 13.5 million barrels.

The agency said among OPEC+ countries, only Saudi Arabia and the United Arab Emirates (UAE) have spare capacity to add to production. They said Iran could also add to world oil production if U.S. oil export sanctions were lifted.

U.S. consumer sentiment lowest since October 2011... The University of Michigan’s Consumer Sentiment Index dropped to 61.7, from 67.2 in January and down from a 76.8 reading in February 2021. Economists expected a reading of 67, according to a Bloomberg survey. The future expectations index plunged 6.7 points from January to 57.4, the lowest reading in more than a decade. The current condition index decreased from 72.0 in January to a 68.5 reading, the lowest since 2011.

The report noted among households with incomes of $100,000 or more, their sentiment index fell by 16.1% from last month and 27.5% from last year. Consumers expect inflation to be 5.0% for the next year, up 0.1 points from last month.

Reasons for the recent declines in the index have been driven by weakening personal financial prospects, primarily due to rising inflation and less confidence in the government’s economic policies.

Chicago Fed: 2021 Farmland values up 22%... The Chicago Federal Reserve Bank reported values for “good” farmland in its district increased 7% from the third quarter to the fourth quarter of 2021, according to a survey of agricultural bankers. That pushed the yearly farmland values up 22% for the year. All the states in the district reported a quarterly and annual increase in farmland values.  Iowa farmland values surged 10% for the quarter and 30% for the year. Farmland values in Illinois increased 8% in the fourth quarter and 18% for the year. Indiana’s farmland values rose 6% for the quarter and 22% for the year. A 5% quarterly increase in Michigan drove a 19% annual jump in farmland values. Wisconsin farmland values were up 12% for the year and 4% for the quarter.

Fifty-six percent of the survey respondents expected farmland values to increase during the January through March period of 2022, 1% expected them to drop and 43% expected them to remain steady.

India aims for zero farm diesel use by 2024... By 2024, the Indian government wants its farmers to be using renewable energy and not diesel, according to its power ministry. Transition details were not released. The country did provide financial incentives for farmers to switch to solar from diesel-powered irrigation pumps in February 2020. Diesel is 40% of the overall refined fuel consumption for the world’s third-largest oil importer, with farms one of the country’s largest consumers.