Evening Report: Feb. 17, 2022

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Russia/Ukraine update... U.S. President Joe Biden said Russia was preparing a pretext to justify a Ukraine invasion within the next few days. This comes after Ukraine forces and Russian-backed rebels exchanged gunfire in eastern Ukraine. The U.S. believes Russia is “engaged in a false-flag operation to have an excuse to go in” to Ukraine.

Russia, who is presiding over the UN Security Council this month, wants a meeting to investigate “war crimes” committed in southeast Ukraine. Experts said there were previous allegations from the 2014 Ukraine/Russian conflict. Both Ukraine and Russia have accused each other of breaking cease-fire rules.

Separately, Russia said the U.S. response to its demands was unsatisfactory and the country might have to use “military-technical measures.” Russia “isn’t slamming the door” on more talks with the United States. U.S. Secretary of State Antony Blinken is proposing he meet his Russian counterpart Sergei Lavrov in Europe next week.

China cancels 10 Brazil soybean cargoes... Chinese soybean processors have canceled 10 Brazilian soybean cargoes since last week, according to sources cited by Bloomberg. Chinese processors are reportedly losing $20 per metric ton crushing imported soybeans, while Brazil’s soybean prices increased.

“Margins are bad, hog prices are awful and people don’t want to be long a bunch of meal,” said Darin Friedrichs, co-founder and market research director of Sitonia Consulting, a China-based agricultural information service provider.

Chinese live hog prices have been halved over the past year. The Chinese government is planning on purchasing pork to increase state stocks and boost prices for domestic producers.

International Grains Council cuts 2021-22 world soybean, corn production... The International Grains Council (IGC) slashed its 2021-22 world soybean production estimate to 353 million metric tons (MMT), down 15 MMT from its January forecast amid “evidence of dwindling yield potential in South America.”  World 2021-22 soybean ending stocks are estimated at 43 MMT, down 9 MMT from January and 10 MMT from the 2020-21 marketing year.

IGC estimates global corn production at 1.203 MMT, down 4 MMT from last month but up from 71 MMT from 2020-21. World corn carryout stocks for 2021-22 are expected to be 281 MMT, down 6 MMT from January but still up 4 MMT from 2020-21.

Overall, IGC trimmed 2021-22 world grain production by 5 MMT from January to 2.281 MMT. That would be 61 MMT higher than 2020-21. Total grain carryout stocks at 596 MMT, would be down 5 MMT from last month’s estimate and 2020-21.

No respite for HRW wheat country... The National Weather Service (NWS) 90-day forecast continues to give elevated odds of above-normal temps across HRW areas of the Southern Plains through May. Below-normal precip also is likely over all but the far eastern HRW areas of the Central and Southern Plains during the period. As a result, drought conditions are expected to persist across all major HRW production areas through the end of May. Without any meaningful weather relief, timing of any spring rainfall will be critical to the development of the HRW crop, much of which is already rated poorly.

Above-normal temps are also expected across the entire eastern half of the country, including much of the western Corn Belt through May. A bubble of above-normal precip is forecast for the eastern Corn Belt, much of Missouri and the Ohio River Basin during the 90-day period. There are “equal chances” for normal, above-normal and below-normal precip across the central and northwestern Corn Belt through May.

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Winter wheat drought area inches higher... The amount of U.S. winter wheat considered in drought conditions increased by one point to 72% for the week ended Feb. 15, according to the U.S. Drought Monitor. USDA rated winter wheat drought as 26% “moderate,” 27% “severe,” 18% “extreme,” and 1% “exceptional.” Last week, USDA said winter wheat drought was 30% “moderate,” 24% “severe,” 17% “extreme,” and 2% “exceptional

For HRW areas, Oklahoma saw its area classified as abnormally dry/drought increase by six points to 98%. Nebraska had a two-point increase to 100%. South Dakota has 81% of its area considered abnormally dry/drought, up three points. The amount of land classified as abnormally dry/drought in Kansas (86%), Texas (88%), Montana (92%) and Colorado (100%) remained the same.

In SRW areas, fifty-five percent of Arkansas is listed as abnormally dry/drought, up 13 points. The area classified as abnormally dry/drought in Michigan increased by three points to 60%. Missouri had 36% of its area considered abnormally dry/drought, up two points. North Carolina (43%), Illinois (33%), Ohio (0%) and Indiana (0%) had the same percentage of abnormally dry/drought area as the previous week.

India expects a record grain harvest... India is likely to produce a record 316.06 MMT of grain in the current crop year, Reuters reported, citing government estimates released by the country’s farm ministry. The total would be up from 310.74 MMT harvested the previous year.

Wheat output is estimated to be up 1.73 MMT to 111.32 MMT. Farmers are expected to harvest 127.93 MMT of rice, up 3.56 MMT from last year.

Total oilseeds production is forecast at 37.1 MMT, up 1.2 MMT from last year. India’s farmers are expected to harvest 11.4 MMT of rapeseed, up 1.2 MMT from last year.

Nutrien cautious on potash production increase, raises profit outlook... The world’s largest fertilizer company, Nutrien, is raising potash production but will wait before increasing more, its interim CEO Ken Seitz said during its earnings call. He explained Nutrien would need to see “prolonged challenges” facing Belarus to expand production further. Belarus, one of the largest potash producers, faces sanctions from the U.S. and other countries limiting its shipping options.

The company expects to sell 13.7 MMT to 14.3 MMT of potash this year, up from its record of 13.6 MMT last year. Nutrien can add capacity of 500,000 MT in the second half of the year, if needed.

The company posted a fourfold profit jump in the fourth quarter of last year and increased its profit outlook for 2022 above traders’ expectations.

Russia, Brazil leaders strengthen agriculture ties... During Brazil President Jair Bolsonaro’s recent visit with Russian President Vladimir Putin, the leaders “reaffirmed their mutual interest in expanding and diversifying bilateral trade,” according to Russian news agency TASS.

In the joint statement, the leaders intend to scale up mutual trade, including agricultural products. They released a statement encouraging government officials to interact more and simplify customs procedures to make it easier for companies to trade agricultural products. They also “praised the increase in supplies of Russian fertilizers to Brazil.”

Before the visit, some Russian and Brazilian business leaders met to work together on carbon. Russia and Brazil account for 32% of the world’s forests.

Shell delivers the first SAF to Singapore... Shell has delivered the first shipment of sustainable aviation fuel (SAF) to Singapore. The company announced at the Singapore Airshow that it plans to start blending the fuel at the aviation hub to test the SAF supply chain in Asia. Last week, Singapore Airlines announced its plans to purchase SAF from Exxon Mobil in its flights.