Evening Report: Feb. 28, 2022
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Talks lead to no end to Russia/Ukraine fighting... The Russian attack on Ukraine continues as the world reacts. The first round of high-stakes peace talks between Russia and Ukraine ended Monday with no clear resolution after the Ukrainian president’s office called for an immediate ceasefire and the withdrawal of Russian forces. Both countries’ officials held the face-to-face talks at the Belarusian/Ukrainian border as Moscow’s assault entered its fifth day. The delegations will hold a second round of negotiations at a later date, a top adviser to Ukrainian President Volodymyr Zelenskyy said, according to the Russian RIA news agency. A three-mile-long Russian military convoy is heading to Kyiv, Ukraine’s capital.
On Monday, Zelenskiyy signed an official request for Ukraine to join the European Union, a possible bargaining chip with Russia. European leaders are expected to discuss the application in the next few weeks. Two Russian billionaires are calling for an end of the war.
Belarus supported Russia and changed its language about nuclear weapons that might allow Russia to place nuclear weapons in the country. U.S. shut its embassy in Belarus. The U.S. warned Belarus would also face the consequences for aiding Russia with the attack as Washington and its allies escalated severe economic sanctions on Moscow. The EU also warned it would impose new sanctions on Belarus this week.
Switzerland, which is typically neutral in conflicts, said it favors sanctions on Russia and will freeze Russian assets. Meanwhile, the New York Stock Exchange (NYSE) and Nasdaq Inc have temporarily halted trading stocks of Russia-based companies listed on their exchanges.
Still no sanctions on Russian oil... World sanctions have not targeted any of Russia’s energy supplies. However, Bloomberg reported that some customers have stopped purchasing Russia’s Urals grade oil. Some Asian countries are attempting to switch their supplies to the Middle East crude oil. Traders note there are tight worldwide oil supplies and the Russian invasion increases the risk of tighter supplies. The U.S. and its allies have been discussing releasing about 60 million barrels of crude from emergency stockpiles to quell supply fears.
On Wednesday, OPEC+ meets to discuss its April supply policy. Despite the invasion, the cartel is expected to stick to its plan of gradually increasing oil production, according to delegates. The group will also have to consider the halt of some Iraqi output.
Ukraine’s ports closed until the Russian invasion ends... Ukrainian ports will remain closed until the Russian attack is over, according to the head of Ukraine’s Maritime Administration Vitaliy Kindrativ. Reuters reported navigation in the Azov Sea was stopped last week, and many shipping companies have ceased operations on the Black Sea with higher insurance premiums. Russian Black Sea terminals continue to load and ship grain. Kindrativ reported about 100 foreign-flagged ships are “blocked in Ukrainian seaports by the Russian navy.” Bombs have hit at least three commercial vessels. Mariupol and Berdiansk, both Sea of Azov ports, have been hit during the fighting. Other ports have had damage, but not as critical, he said.
Egypt seeks other sources for wheat... After getting limited offers for its tender to purchase wheat, Egypt canceled the tender. Egyptian officials say they have enough wheat stockpiles to last four months. And when combined with what they can procure domestically, they are covered for nine months. Egypt is one of the world’s largest wheat importers, with Russia and Ukraine as the primary sources. The country is working outside of the two countries, including some outside of Europe, said Nader Saad, a government spokesman.
Asian countries might switch to Indian wheat... With the Russian invasion of Ukraine, some Asian countries might shift their wheat purchases from Russia and Ukraine to India, according to Vijay Iyengar, chairman and managing director of Singapore-based Agrocorp International Pte. Bloomberg reports if the conflict drags on, India’s wheat exports for 2021-22 could be a record of over 7 MMT. The trader said most Asian markets have ample supplies for April and May. However, from July on, supplies are low. One of the largest buyers of Ukrainian wheat, Indonesia, is looking for alternative wheat sources.
U.S. oil demand highest since August 2019... U.S. oil demand rose to 20.8 barrels per day (bpd) or 10% higher year-on-year for December, according to the U.S. Energy Information Administration (EIA). In its monthly Petroleum Supply Monthly report, EIA reported U.S. crude oil production dropped to 11.57 million barrels per day (bpd) in December, down 206,000 bpd. U.S. crude oil exports increased to 3.45 million bpd.
AgRural: Brazil’s soybean harvest just under half done... Brazil’s soybean harvest was 44% complete as of Feb. 24, according to ag consultancy AgRural. That was up 11 points from last week and 19 points ahead of year ago. Mato Grosso do Sul and Goias are now over half done with harvest. Farmers in Mato Grosso have combined 79% of the soybean area. There are quality concerns for soybeans in Mato Grosso, Minas Gerais, Bahia, Piaui and Rondonia due to excessive moisture. Low yields are still being reported in Rio Grande do Sul and Parana.
AgRural reported that 64% of the safrinha corn crop was planted in the center and southerm areas. That was up nine points from the previous week and 25 points from last year.
Soyoil use for biofuel sets record... The U.S. used a record 937 million lbs. of soyoil to make biofuels in December, according to EIA. The previous record was 842 million lbs. of soyoil used for biofuels in July 2020. December 2021 use was up 119 million lbs. from November and 123 million lbs. from the previous year.
Chevron buying Renewable Energy Group... Chevron Corp is purchasing Ames, Iowa-based renewable and biodiesel producer Renewable Energy Group Inc. (REG) for $3.15 billion or $61.50 per share. The deal is expected to close in the second half of the year. After REG’s Geismar expansion in Louisiana starts, the deal could add to Chevron’s free cash flow in the first year. Chevron aims to grow its renewable fuels production capacity to 100,000 barrels per day by 2030. They will not separate the renewable business in its financials. REG operates 11 biorefineries and a feedstock processing facility and produced 519 million gallons of biodiesel and renewable diesel in 2020.
Goldman Sachs forecasts more interest rate hikes in 2023... Goldman Sachs Group Inc. predicts the Fed’s preferred inflation measure will reach 3.7% by the end of the year, compared to their previous forecast of 3.1%, reported Bloomberg. They expect price growth to slow to 2.4% by the end of 2023 compared with an earlier view of 2.2%. In a client report, the bank expects the Fed to raise interest rates four times in 2022 and four times in 2023. They expect the funds rate to be increased to 2.75-3%.
U.S. trade deficit, wholesale and retail inventories increased in January... The U.S. January trade deficit was $107.6 billion, up $7.2 billion from December, according to U.S. Census Bureau Monthly Advance Economic Indicators Report. January’s goods exports totaled $154.8 billion, down $2.8 billion from December. Imports of goods for January were $262.5 billion, $4.4 billion more than December.
Wholesale inventories for January were estimated at an end-of-month level of $798.2 billion, up 0.8% from December 2021 and 17.8% from January 2021. Retail inventories for January were estimated at an end-of-month level of $658.1 billion, up 1.9% from December 2021 and 6.0% from January 2021.
Britain and New Zealand sign free trade deal... New Zealand and Britain signed a free trade agreement on Monday. The agreement was agreed in principle in October. The deal cuts tariffs and red tape and allows professionals to move easier between the two countries. Britain already has a trade deal with Australia as it works on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership - an 11-country trade pact.
