Evening Report: Feb. 18, 2022

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Your Pro Farmer newsletter is now available... South American crop estimates continue to be slashed amid persistent drought. Besides the production losses, crop quality is also poor in areas of Brazil. The crop losses have prompted China and “unknown” (also China?) to book old- and new-crop U.S. soybeans, though there were reports last week China may try to reduce its soybean consumption. India also made unusual purchases of U.S. soyoil due to South American crop losses and geopolitical uncertainties in the Black Sea region. Meanwhile, the extended weather outlook through May signals no respite for HRW wheat areas saddled with drought. Our page 4 feature this week gives our assessments to a host of volatile issues ag is facing. We cover all these items and much more in this week's newsletter, which you can access here.

Presidents Day schedule...  Markets and government offices are closed on Monday, Feb. 21 for Presidents Day, so there will be no Pro Farmer market reports or commentary. Grain markets will resume trade with the overnight session starting at 7:00 p.m. CT on Monday, Feb. 21, while livestock markets will reopen at 8:30 a.m. CT on Tuesday, Feb. 22.

Russia/Ukraine update...  Russia/Ukraine tensions continue to increase as pro-Russian rebels evacuate civilians from the conflict zone. There have been more reports of gunfire and explosions between Ukrainian forces and pro-Russia rebels in eastern Ukraine. Over the weekend, Russian President Vladimir Putin plans on watching military exercises that include multiple practice launches of intercontinental ballistic missiles and cruise missiles to show the country’s military might. The U.S. has increased its estimate of the number of Russian troops in the area. U.S. Vice President Kamala Harris and Secretary of State Antony Blinken attended the Munich Security Conference in Germany, an annual forum for discussion, though Moscow sent no delegates. Blinken and Russia Foreign Minister Sergei Lavrov have agreed to meet for talks next week.

Some Chinese soybean crushing plants suspending operations... Due to negative crush margins, some soybean crushing plants in China are suspending operations, according to industry sources. Bunge, Louis Dreyfus Company (LDC), Cargill and other plants have or plan to suspend operations. The market is waiting for the Chinese government to sell about 5 MMT of soybeans from its reserves to cover demand from March to May. Over the past week, an estimated 10 to 12 cargoes of soybeans have been canceled from South America due to high soybean prices and low Chinese soymeal prices.

India makes record U.S. soyoil purchases... India has recently booked a record 100,000 metric tons of U.S. soyoil, three traders told Reuters. The head of an Indian global trading firm said another two vessels of U.S. soyoil might be purchased in the near term, as South American supplies will be limited by drought and palm oil prices are record-high. Geopolitical tensions also make Indian traders wary about booking Black Sea sunflower oil.

Argentina grain inspectors plan to strike... Argentina’s grain inspectors say they will strike on Monday, Feb. 21. The UGARA grain inspectors union is fighting for higher wages and unpaid bonuses for their members. The strike is scheduled to be only one day, but could be expanded if their demands are met.

Rural Mainstreet Index increases... The Rural Mainstreet Index (RMI) rose to 61.5 in February from January’s 61.1 reading. It remained above growth-neutral for the 15th straight month, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and energy.

The region’s farmland price index remained strong but decreased to 78.8 from January’s 88.5 reading and December’s record high of 90.0. February’s reading represented the 17th straight month the index has been above growth-neutral.

On average, bank CEOs expect corn prices to fall by 2.6% and soybean prices to drop by 2.3% over the next six months. Bank CEOs expect the Federal Reserve to raise short-term interest rates in 2022 by one percentage point, up from their expectations of a 70-basis-point increase last month. Over the last several months, the surveys have showed the fastest pace of ag equipment sales since spring 2011.

Third Indiana turkey farm depopulated... A farm in Greene County, Indiana has depopulated 48,000 turkeys, according to the Indiana Board of Animal Health. It is the third farm in the second county to depopulate turkeys in Indiana due to possible highly pathogenic avian influenza. The farm is waiting for test results. Two farms in Dubois County have tested positive for avian flu and depopulated their flocks.  So far, a total of 103,473 turkeys have been depopulated in the state.

Brazil farmers look to expand Iran corn trade... Mato Grosso farmers are in talks to export 5 MMT of corn to Iran, according to Aprosoja, a soybean and corn farmers group. In exchange, Iran would sell fertilizers to Brazilian farmers. Iran is the second-largest buyer of Brazilian corn. It purchased 3.1 MMT in 2021 and 430,000 MT so far this year.

China allows some beef and mutton imports from Chile... China will allow frozen or chilled deboned or bone-in bovine skeletal muscles along with cattle by-products from Chile, effective Feb. 17, according to the China General Administration of Customs.

Russia to build a port to ship Belarus potash exports... After meeting with Russian President Vladimir Putin, Belarus President Alexander Lukashenko said Russia would construct a new Baltic Sea port to export Belarusian potash. He said the construction should start immediately and take up to a year and a half to complete. Belarus had its access to ports blocked due to U.S. sanctions against the country. The country is landlocked, and potash is one of its most significant exports.

Morocco to increase grain imports due to drought...  Due to the worst drought in 30 years, Morocco will likely import 10 MMT of cereal grains, up 2 MMT from last year, according to Rachid Benali, vice president of the Morocco farmers’ lobby group Comader.

To keep bread prices stable, the government has increased the amount of soft wheat subsidies by 500 million dirhams ($136 million) to 3.8 billion dirhams ($1 billion). Typically, the Moroccan government spends 1.3 billion dirhams ($350 million) on soft wheat subsidies.

Due to the drought, the government announced a $1 billion program, including animal feed subsidies, farmers’ financial help, and making irrigation more efficient.