Evening Report: March 1, 2022

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Russia/Ukraine update... Russia has warned Kyiv residents to flee their homes as rockets hit the Ukraine’s second-largest city, Kharkiv. The 40-mile-long military convoy heading to Kyiv has slowed. Some experts say it was due to troops running out of fuel, food and maybe low morale. A tall TV antennae in Kyiv was shown in flames after being hit by a rocket. Russia said it was planning on striking communications and intelligence sites.

On the reaction side, major shippers MSC and Maersk suspended container shipping to and from Russia.  Europe and others were shutting their ports to Russian ships. Glencore said it is reviewing all business activities in Russia. Major investors were cutting their positions in Russia. Visa and Mastercard blocked multiple Russian financial institutions from their networks. France declared an “all-out economic and financial war” against Russia, saying it would collapse the Russian economy. The Swiss-based company that built the Nord Stream 2 gas pipeline from Russia to Germany is filing for insolvency. The World Bank is working to “fast-track” approval of an additional $350 million loan for Ukraine.

Russia pledged to retaliate over the U.S. expulsion of 12 of its diplomats at the United Nations. Russia was placing limits on foreign investors trying to exit their Russian investments.

IEA members agree to release 60 million barrels of oil... International Energy Agency (IEA) members agreed to release 60 million barrels of oil from reserves, according to Japanese trade minister Koichi Hagiuda. Half of the release will come from U.S. reserves. IEA noted that the “initial” 60-million-barrel release is 4% of members’ combined stockpiles and would represent 2 million barrels per day for 30 days. Russia currently exports about 5 million barrels daily, with over half going to Europe. IEA estimated world oil use at 100.6 million barrels per day in its February consumption estimate.
 

Corn buyers switching from Ukraine to EU...  Corn buyers, especially those in Benelux, Iberia, the Middle East and North Africa, are changing their purchases to the EU from Ukraine due to the Russian invasion, according to traders. Romania, Bulgaria and France have been some of the first options for importers to replace Ukrainian supplies. This has sent European corn prices to record highs. Every day the Ukrainian ports are blocked, it takes 100,000 MT of corn off the world market, according to a trader.

Some vessels sitting at Ukrainian ports are either partly loaded or lacked complete documentation. Importers are working with governments to see what can be done with these shipments.

Since the EU is generally a net corn importer, some traders think corn importers will need to find other sources beyond the EU. China has reportedly booked several million tons of Ukrainian corn for shipment in the coming months. Market talk this week signaled China booked at least 10 cargoes of U.S. corn to replace shipments from Ukraine.

 

January soy crush a little stronger than expected... U.S. soy processors crushed 194.3 million bu. of soybeans in January, according to USDA, which was 600,000 bu. more than traders expected, but down 3.9 million bu. (2.0%) from December’s record and 2.2 million bu. (1.1%) less than last year.

Soyoil stocks increased 34 million lbs. from December to 2.5 billion lbs., despite the lower crush. Soyoil stocks increased 194 million lbs. from January 2021.

Corn-for-ethanol use a little stronger than anticipated, too... U.S. corn-for-ethanol use totaled 474 million bu. in January, according to USDA. That was 2 million bu. more than traders expected but down 3.8 million bu. (0.8%) from December. January corn-for-ethanol use increased 57 million bu. (13.7%) from year-ago. Total corn use at 526.9 million bu. dropped 4.4 million bu. (0.8%) from December but rose 60 million bu. (12.9%) from last year.

The U.S. produced 1.929 million tons of dried distiller grains with solubles, down from 144,000 tons from December but up 176,000 tons from last year.

Palm oil prices surge due to Russian invasion... Palm oil has become the most expensive of the four major edible oils, Reuters reported. Crude palm oil (CPO) is being offered at about $1,925 per metric ton (MT), including cost, insurance and freight (CIF), in India for March shipments, compared with $1,865 for crude soybean oil. Crude rapeseed oil was offered at around $1,900, while traders were not offering crude sunflower oil as ports were closed due to the Ukraine crisis. However, the price for palm oil could drop as buyers switch to soyoil in April.

Asian countries are switching to palm oil from sunflower oil, as Ukraine had 60% of the sunflower production and 76% of exports and shipping ports are closed. They have traditionally purchased palm oil because of its low price and quick shipping times. Because Indonesia has put in palm oil export restrictions, Malaysia supplies most of the new palm oil shipments. Oil refiners say Malaysia’s palm oil supplies are declining.

Egypt extends wheat import specifications... Egypt, the world’s largest wheat importer, extended higher moisture limits for wheat until April 2023, according to its trade ministry. Typically, the moisture content for wheat was 13.0%, the country raised it to 13.5% to diversify its sources. Russia and Ukraine have traditionally been significant sources of wheat for Egypt.

Attaché cuts Argentina soybean production... USDA’s attaché in Argentina lowered its estimate for the country’s soybean production to 41 MMT. USDA’s February World Agricultural Supply and Demand Estimates (WASDE) Report forecast Argentine soybean production at 45 MMT.

Floods in eastern Australia might affect crops... Floods over the weekend in Queensland and northern New South Wales Australia might hurt sorghum, wheat and barley in eastern Australia, according to industry sources. The quality and value of the sorghum crop near harvest could be affected. Wheat and barley plantings were also hurt. Farmers relocated their cattle herds to higher ground due to a deluge of rain over the weekend. Overall, the effect on beef was expected to be localized and short-term.

Farmer sentiment rises during commodity price rally... Farmer sentiment in the Purdue University/CME Group Ag Economy Barometer climbed 6 points to a reading of 125 in February, a mirror image of the previous month. The Index of Current Conditions dropped one point to a reading of 132, while the Index of Future Expectations improved 10 points to a reading of 122. This month's survey was conducted between Feb. 14-18, before Russia invaded Ukraine. The Farm Financial Performance Index remained unchanged in February at a reading of 83.

Higher input costs have consistently been the number one concern identified by farmers over the past six months. In February, over 40% of producers stated that low farm machinery inventories are holding back their investment plans. In this month's survey, 30% of corn and soybean producers say they’ve had difficulty purchasing crop inputs from their suppliers.

Farm groups push for revised farm bill reference prices... Several farm groups pushed to update prices for farm programs such as ARC, PLC and marketing assistance loans during Tuesday’s House Agriculture Committee hearing. They explained higher market prices and higher input prices mean the current reference prices do not provide an adequate safety net for farmers. For marketing loans, the low loan rate means they are no longer relevant for some commodities.

Brad Doyle, American Soybean Association president, advocated to allow farmers to update soybean base acres. In 2021, American farmers planted 87.2 million acres of soybeans, but there were only 52.5 million soybean base acres. He explained more soybean acres are planted due to no-till, farmers switching from tobacco and dairy farmers switching to crop farming.

Several groups pushed for increased funding for FSA to implement farm bill programs.

USTR plans to monitor U.S. ag exports... In its 2022 President’s Trade Policy Agenda and 2021 Annual Report, the Office of the United States Trade Representative (USTR) said agriculture would be a priority by using existing Trade and Investment Framework Agreements (TIFAs) and Free Trade Agreements (FTAs) to support U.S. ag exports. USTR plans to continue leveling the playing field for U.S. farmers by monitoring the treatment of U.S. agriculture biotechnology products and advocating for fair and science-based treatment of these products by our trading partners. USTR will also monitor the practices of other trading partners to ensure that U.S. ag products are not subject to unfair, unjustified, or discriminatory restrictions.

Overall, some priorities for 2022 include promoting confidence in trade policy through enforcement, re-aligning the U.S.-China trade relationship, engaging with key trading partners and multilateral institutions and bolstering supply chain resiliency.

Groups challenge EPA vehicle rules... Corn growers and ethanol producers say proposed new EPA rules requiring about 40 mpg in 2026 “effectively mandate the production and sale of electric cars rather than cars powered by internal combustion engines.” President Joe Biden wants 50% of all new vehicles sold in 2030 to be EV or plug-in hybrid models. He has not endorsed phasing out new gas-powered light-duty vehicles by 2035.

Soybean groups and businesses say the final rule exceeds “EPA’s authority by favoring one technology, electric vehicles, over others, including” ethanol produced by the farmers. The groups say EPA did not give renewable fuels credit to reduce greenhouse gases. 

Other organizations contend EPA does not have the legal authority to establish credit trading and credits for electric vehicles.

Union votes for Canadian Pacific Railway strike mandate... More than 96% of the over 3,000 Teamster union members that work for the Canadian Pacific Railway voted for a strike mandate, reported RealAgriculture. The union will continue with the mediation process with meetings scheduled for March 11-16 with a federally appointed mediator. A work stoppage can only happen 21 days after completing the conciliation process.