Evening Report: March 17, 2022

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Russia/Ukraine update... The Russian/Ukraine fighting has entered its fourth week with Russian forces largely bogged down outside significant cities and shelling them from a distance. The war has settled into a grinding pattern of sieges of cities. But the Russians have failed to capture a major city. British military intelligence said the Russian invasion had "largely stalled on all fronts,” and Russian troops suffered heavy losses. Ukrainian officials think Russia is running out of troops to keep fighting and could soon come to terms with its failure.

For a fourth straight day, Russian and Ukrainian negotiators talked via videolink. No agreement has been reached.  They said their positions remained far apart. The main subject under discussion was whether Russian troops would stay in separatist regions in eastern Ukraine after the war and where the borders would be.

U.S. President Joe Biden is scheduled to hold a call on Friday with Chinese leader Xi Jinping as Washington tries to persuade Beijing not to provide support to Russia, the White House said.

International Grains Council cuts Ukraine and Russian grain exports... The International Grains Council (IGC) reduced its forecast for grain exports from Ukraine and Russia. For Ukraine, the IGC expects Ukraine grain exports to be 47.8 million metric tons (MMT), down 15 MMT from a month ago. Ukraine’s corn exports were slashed by 10.9 MMT to 21.0 MMT and wheat exports were cut by 3.7 MMT to 20.8 MMT. Russia’s wheat exports were trimmed 600,000 metric tons to 37.1 MMT. The organization noted the projections were tentative and subject to significant uncertainty.

Global corn, wheat carryout stocks increased... The International Grains Council raised its corn ending stocks for 2021-22 to 287 million metric tons (MMT), up 6 MMT from its February estimate and 10 MMT from last year. World corn production was raised 4 MMT from last month to 1.207 billion metric tons due to higher production in Ukraine, India and the EU. Up 3 MMT from last month and the previous year, wheat carryout stocks were increased to 281 MMT. World wheat production was unchanged at 781 MMT.  Based on lower South American production, global soybean production was cut 3 MMT from last month to 350 MMT. Soybean ending stocks were trimmed to 42 MMT, down 1 MMT from last month and 12 MMT from last year.

Agroconsult trims Brazil’s soybean production... Agroconsult cuts its Brazilian soybean crop forecast to 124.6 MMT, down 1.2 MMT from its previous estimate. The Brazil-based consultancy has reduced Brazil’s soybean production for three straight months. Based on its crop tour, the firm cut the national average yields to 50.9 60-kilo bags per hectare, down 0.8 60-kilo bags per hectare from its February estimate.

Winter wheat drought area remains steady... The amount of U.S. winter wheat considered in drought conditions stayed at 73% for the week ended March 15, according to the U.S. Drought Monitor. USDA said winter wheat drought was 18% “moderate,” 32% “severe,” 20% “extreme,” and 3% “exceptional.” Last week, USDA rated winter wheat drought as 19% “moderate,” 33% “severe,” 18% “extreme,” and 3% “exceptional."

For HRW areas, the area considered abnormally dry/drought in Kansas (99%), Oklahoma (92%), Texas (96%), Nebraska (100%), Montana (89%), South Dakota (82%) and Colorado (100%) remained the same.

In SRW areas, the abnormally dry/drought area in North Carolina decreased by 8 points to 58%. Illinois (28%), Missouri (36%), Michigan (53%), Arkansas (41%), Ohio (0%) and Indiana (0%) had the same percentage of area considered abnormally dry/drought as the previous week.

NWS: Warm spring, varied precip outlook... The National Weather Service 90-day forecast continues to give elevated odds of above-normal temps and below-normal precip across the Southern Plains through June. As a result, drought conditions are expected to persist across HRW production areas. The highest probability of hot, dry conditions is centered over the panhandles of Texas and Oklahoma and southwestern Kansas.

With the extended forecast dashing any hope of meaningful drought relief for HRW areas, spring rains will need to be timely.

Above-normal temps are also expected across all but the northwestern portion of the country through June. A bubble of above-normal precip is forecast for the eastern Corn Belt. There are “equal chances” for precip across the central and northwestern Corn Belt.

The extended forecast suggests spring planting should be rather rapid, especially in the western Corn Belt and South, though moisture shortages could leave crops in need of timely summer rainfall.

Click here to view related maps.

Indonesia reverses course on export limits, to hike export levy instead... Indonesia will shift from volume restrictions on exports of palm oil products and will instead use higher export levies, according to Trade Minister Muhammad Lutfi. Indonesia recently announced that companies would be required to sell 30% of planned export volumes of palm oil products into the domestic market, up from 20% in January, under their domestic market obligation (DMO) effort. Lutfi told a parliamentary hearing that the DMO effort would be scrapped and the ceiling on the combined palm export tax and levy would be raised to $675 per MT from a current $375 per MT. He noted the maximum crude palm oil tax would be applied when prices reach $1,500 per MT.

“This is the market mechanism, and hopefully this can maintain supply stability for the people,” Lutfi said, noting the DMO was being withdrawn after creating tight supplies and that it had created a price disparity between the DMO and market price.

This marks the sixth policy shift in Indonesia on cooking oils since January.

Nutrien to increase potash production... The world's biggest fertilizer producer, Nutrien, will increase potash production by 1 million metric tons (MMT) to 15 MMT for the year. The company plans to increase potash production in the second half of the year.

As expected, Bank of England raises interest rate... The Bank of England raised interest rates on Thursday 25 basis points from 0.5% to 0.75%. Economists had expected the rate increase that takes rates to their pre-pandemic level. It is the third straight increase for England’s central bank and the first major central bank to bring rates back to the pre-pandemic level. The bank tempered its outlook language by saying more interest rate hikes “might be” appropriate in the upcoming months. Previously, the bank said higher interest rates were “likely.”

USDA clarifies SMHPP eligibility, extends deadline... The use of third-party intermediaries, including sale barns or brokers, is now included in USDA’s Spot Market Hog Pandemic Program (SMHPP). USDA clarified that the only direct to packer sales eligible for SMHPP are those through a negotiated sale. Hogs sold through a contract that includes a premium above the spot-market price or another formula such as the wholesale cut-out price remains ineligible. Hogs must be suitable and intended for slaughter to be eligible. Immature swine (pigs) are ineligible.

Hog producers will also now be required to submit documentation, including the number of hogs sold through a spot market sale and how the price was determined. USDA extended the application deadline for the program until April 29. The previous deadline was April 15. USDA will issue payments after the application deadline. SMHPP payments will be calculated by multiplying the number of head of eligible hogs, not to exceed 10,000 head, by the payment rate of $54 per head. USDA said if payments are more than the funding, payments will be factored. The program assists producers who sold hogs through the spot market from April 16-September 1, 2020.