Evening Report: Feb. 24, 2022

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U.S. and world respond to Russian invasion of Ukraine... As Russian troops continued their invasion of  Ukraine,  President Joe Biden increased Russian sanctions by including five more Russian banks that represent an estimated $1 trillion in assets, as well as a broad swath of Russian elites and their family members. The U.S. will also prevent other countries from exporting U.S. developed technology, including software, semiconductors and other advanced technology crucial to the military, biotechnology and aerospace industries. The U.S. is working with allies to prevent Russia’s largest state-owned enterprises from raising money in dollars, euros, pounds and yen – some of the most used currencies in the world. However, Russia will not be barred from the Swift international banking network because Europe opposed that action.

Biden is also sending more troops to Eastern Europe to help NATO countries.

Sources: Global strategic crude oil reserve releases being discussed... After Russia invaded Ukraine, the international crude benchmark Brent oil price surged past $105 per barrel. Reuters reported the U.S. and other countries are in the “early stages” of discussions about releasing strategic crude oil supplies. The U.S. is working with the International Energy Agency (IEA). This would be in addition to the coordinated release with Asian countries at the end of 2021. China has not released any reserve oil supplies in that agreement, and it is not certain if it would work with the U.S. on this agreement.  Japan, Australia and other IEA members said they are prepared to release oil supplies. Governments in the IEA hold 1.5 billion barrels in reserves. The U.S. has 582.4 million barrels of oil in its reserve.

Three Fed official signal interest rate hike still likely... Speaking after the Russian invasion of Ukraine, three Federal Reserve officials signal it is expected that the U.S. central bank should increase interest rates next month, Bloomberg reported.

“Barring an unexpected turn in the economy, I believe it will be appropriate to move the funds rate up in March and follow with further increases in the coming months,” Cleveland Fed President Loretta Mester said at an event hosted by Lyons Companies and the University of Delaware.

The Atlanta Fed’s Raphael Bostic also still expects to raise rates in March, provided the economy evolves as he anticipates.

“So if this evolves like 2014, I don’t think you are going to see much change to the underlying logic that I talked about. But this is uncharted territory,” said Richmond Fed chief Thomas Barkin. “So we will have to see where the world goes.”

Those were some of the five Federal Reserve officials that spoke on Thursday. Traders expect the Fed to hike interest rates by 25 basis points at its March meeting. Previously, market indicators predicted a 50-basis point increase.

China approves Russian wheat imports... China’s customs agency approved wheat imports from all regions from Russia, according to the Associated Press. Russia had not exported wheat to China due to concerns about possible fungus and other contamination.

Earlier in February, China and Russia announced an agreement for China to import Russian wheat and barley. Russia said it would take all measures to prevent contamination by wheat smut fungus and would suspend exports to China if it was found.

Bunge suspends Ukraine plants and offices... Bunge closed its company offices in Ukraine. Due to the Russian invasion, the company said it has also suspended operations at oilseed crushing plants in Nikolaev and Dnipro. The company also operates a corn milling plant as part of a joint venture.

Syria restricts public spending as commodity prices spike... As commodity prices spike after the Russian invasion of Ukraine, Syria has limited public spending to “priority” sectors, according to the government news agency SANA. Syria’s government has recognized the same breakaway regions of Ukraine as the Russian government. Russian troops have been backing Syria’s government for more than ten years.

USDA raises fiscal year 2022 ag trade forecast... USDA now predicts an $11.0 billion ag trade surplus for fiscal year (FY) 2022. That is up $500 million from its prior outlook and $2.1 billion above FY  2021. U.S. ag exports are now expected to be a record $183.5 billion in fiscal year (FY) 2022, up $8.0 billion from its November outlook and an increase of $11.3 billion from FY 2021. USDA hiked its FY 2022 ag import forecast by $7.5 billion from November to a record $172.5 billion, which would be a $9.2 billion increase from last year.

Soybean exports are forecast $2.9 billion higher to $31.3 billion on higher prices and lower global supplies. Soybean meal exports are forecast up $1.3 billion on higher unit values. Overall, grain and feed exports are projected to increase by $1.4 billion to $42.9 billion, led by higher wheat and feed and fodder forecasts. Livestock, poultry, and dairy exports are forecast at a record $39.2 billion, $500 million higher than the previous forecast, with gains in beef and dairy more than offsetting declines in pork. The projection for ethanol exports is unchanged at $2.9 billion, although still a record if realized.

China is expected to remain the largest U.S. agricultural market. Mexico is forecast to overtake Canada as the second-largest U.S. agricultural market.

Winter wheat drought area creeps up again... The amount of U.S. winter wheat considered in drought conditions increased one point to 73% for the week ended Feb. 22, according to the U.S. Drought Monitor. USDA rated winter wheat drought as 27% “moderate,” 27% “severe,” 18% “extreme,” and 1% “exceptional." The previous week, USDA said winter wheat drought was 26% “moderate,” 27% “severe,” 18% “extreme,” and 1% “exceptional.”

For HRW areas, Oklahoma had a four-point decrease in land classified as abnormally dry/drought to 93%. Texas had a four-point increase in the area considered abnormally dry/drought to 92%. The amount of land classified as abnormally dry/drought in Kansas (86%), Nebraska (100%), South Dakota (81%), Montana (92%) and Colorado (100%) remained the same.

In SRW areas, North Carolina had a 17-point increase in the amount of land classified as abnormally dry/drought to 61%. Forty-three percent of Arkansas is abnormally dry/drought, down 11 points. Illinois has 25 of its land listed as abnormally dry/drought, a nine-point decrease. The area classified as abnormally dry/drought in Missouri is down four points to 32%. Michigan (60%), Ohio (0%) and Indiana (0%) had the same percentage of areas considered abnormally dry/drought as the previous week.

Iowa Attorney General having Iowa State prepare fertilizer price study...  Iowa Attorney General Tom Miller announced Iowa State University agriculture economist John Crespi, director of ISU’s Center for Agricultural and Rural Development, will conduct an economic summary of fertilizer markets and the rapid prices increases. The study came after the Iowa Corn Growers Association requested Miller investigate the fertilizer price increases. He discussed the investigation with eight different states and USDA. Without naming the states, Miller said the states were primarily, but not exclusively, in the Midwest.

Miller sent letters to the CEOs of the major fertilizer manufacturers: Mosaic, Nutrien, CF Industries, Koch Industries, and OCI N.V. (owner of Iowa Fertilizer Co.) The letters request the manufacturers provide their reasons for the price increases. 

He did not give a timeline for the study to be completed but understood it needed to be done quickly.  Any possible future actions will depend on what the study finds. Miller was aware of the previous research on fertilizer prices by Texas A&M University that noted generally higher fertilizer prices follow years of higher farmer income.

USDA extends SMHPP application deadline... Hog producers who sold hogs through the spot market during the Covid-19 pandemic have until April 15 to submit their applications for USDA’s Spot Market Hog Pandemic Program (SMHPP). The program originally had an application deadline of Feb. 25. SMHPP assists hog producers who sold hogs through a spot market sale from April 16, 2020, through Sept. 1, 2020. Eligible hog producers can apply for SMHPP by completing the FSA-940, Spot Market Hog Pandemic Program application at the local FSA office. Visit www.farmers.gov/smhpp to learn more.