First Thing Today | March 25, 2022
Light followthrough selling overnight... Grain and soybean futures mildly extended Thursday’s losses in relatively quiet overnight trade. As of 6:30 a.m. CT, corn is trading 1 to 3 cents lower, soybeans are 2 to 6 cents lower, winter wheat is 4 to 9 cents lower and spring wheat is 2 to 4 cents lower. Front-month U.S. crude oil futures are around $2 lower and the U.S. dollar index is down around 225 points.
U.S., EU announce energy security task force... President Joe Biden and European Commission President Ursula von der Leyen announced formation of a joint task force to bolster energy security for Ukraine and the EU for next winter and the following one. The primary goals of the task force would be to diversify LNG supplies in alignment with climate objectives and reduce demand for natural gas. The U.S. said Friday it will work with international partners to provide at least 15 billion cubic meters more of liquified natural gas to Europe this year, seeking to end the bloc’s dependence on Russian energy exports following the Kremlin’s invasion of Ukraine. These additional volumes of LNG are expected to increase going forward, the White House said in a statement. The EU said would work toward the goal of ensuring, until at least 2030, demand for approximately 50 billion cubic meters per year of extra U.S. LNG. This is “consistent with our shared net-zero goals,” it added.
Russian fertilizer exports plunge, shooting prices higher... Fertilizer exports from Russia have tumbled sharply and prices are skyrocketing, the Wall Street Journal reports – the impact is reaching farmers from South America to Asia. Fertilizer prices were already high before the war, and the commodity is about three to four times costlier now than in 2020. That has far-reaching consequences for farmer incomes, agricultural yields and food prices. One West African corn and rice farmer says he’s sought to replace missing Russian shipments but was told order books are full until the end of the year. The shortage will roll across global agriculture markets. Farmers are forecasting reduced yields, and smaller harvests will hit developing countries hard, forcing their cash-strapped governments to import large quantities of staples such as wheat at high prices.
Biden: Expect ‘real’ food shortages due to Russia/Ukraine war... Biden said the world will experience food shortages because of Russia’s invasion of Ukraine, and production increases were a subject of discussions at a Group of Seven meeting on Thursday. “It’s going to be real,” Biden said at a news conference in Brussels. “The price of the sanctions is not just imposed upon Russia. It’s imposed upon an awful lot of countries as well, including European countries and our country as well.” Ukraine and Russia are both major producers of wheat, in particular, and Kyiv’s government has already warned the country’s planting and harvest have been severely disrupted by the war. Biden said he and Canadian Prime Minister Justin Trudeau both discussed increasing their nation’s agricultural production to try to make up for shortfalls. Biden said he’s also urging all nations including those in Europe to drop trade restrictions that could restrict exports of food.
Canadian canola crush slows... Canada, the world’s top canola grower and exporter, is crushing the smallest amount of the oilseed in more than four years, in another sign that vegetable oil prices may keep rising. In February, the processing of canola in Canada dropped 21% from a year ago to 629,153 metric tons, according to Statistics Canada data released Thursday. That’s the smallest monthly crush since 2017. The decline comes as canola prices soared to an all-time high after drought slashed the nation’s harvest by over a third.
Rapeseed replacing sunflower oil in Europe... European oilseed crushers and vegoil refiners and bottlers are replacing sunflower oil with the rapeseed variety to make up for the loss of Ukrainian oil-crop exports, industry group FEDIOL said. Processors are also using palm, soybean and rapeseed as replacements in frying oil. More rapeseed intended for biodiesel is now being allocated toward food uses. “This confirms the critical role of crop-based biofuels that are functioning as buffer for the food market to cover the shortfall of commodities in exceptional circumstances,” said FEDIOL. The group advocates against government intervention in biodiesel markets to prevent worsening the energy market situation. Meanwhile, FEDIOL is seeking looser food labeling rules to enable manufacturers to quickly adapt their vegetable oil mixes.
EIA: U.S. renewable diesel supply to surpass biodiesel this year... Renewable diesel supply will exceed biodiesel in the near term as tax and credit incentives drive production of the fuel with greater compatibility with existing distribution infrastructure and engines, the Energy Information Agency (EIA) said. Renewable diesel supply will rise to 130,000 barrels per day (bpd) this year and reach 145,000 bpd by 2050. Higher renewable diesel production will displace biodiesel production as they compete for the same feedstocks of fats, oil and greases. Both biomass-based diesel fuels will account for less than 8% of U.S. diesel production in 2050. Although renewable diesel has no blend restrictions, it is relatively more expensive than biodiesel to produce. By contrast, biodiesel needs to be blended with another diesel fuel to be consumed.
U.S. diesel prices pull back but still historically high... Prices for diesel shot up by more than $1.10 a gallon in the two weeks immediately following Russia’s invasion of Ukraine. The average national price of $5.25 a gallon the week of March 14 was the highest in EIA records dating to 1994, and the jump of nearly 75 cents a gallon earlier in the month was the steepest one-week gain ever. Even a pullback to $5.13 a gallon for the week of March 21 left the national average price up more than $1.50 since the start of the year.
USDA: U.S. barge shipments of grain rose 22% last week... Shipments along the Mississippi, Illinois, Ohio and Arkansas rivers increased 22% in the week ended March 19 from the previous week, according to USDA’s weekly grain transportation report. Barge shipments of corn rose 19% from the previous week; soybean shipments jumped 23%.
Two major groups will soon introduce bill to address cash cattle market participation... The National Cattleman’s Beef Association (NCBA) and the American Farm Bureau Federation, industry sources advise, have adopted a draft legislation to increase market transparency, strengthen enforcement of the Packers and Stockyards Act, and incentivize the expansion of regional beef packing capacity. The groups will hold a virtual meeting next Monday to provide details of the bill, its content and their strategy for its rollout.
Hog diseases result in Mexico buying U.S. pork at an unprecedented pace... The U.S. is shipping record amounts of pork to Mexico as hog diseases are shrinking the Mexican hog herd. Outbreaks of porcine epidemic diarrhea virus (PEDV) and porcine reproductive and respiratory syndrome (PRRS) have been killing pigs in Mexico. Some Mexican farmers are also shrinking herds because of high feed costs.
Cattle on Feed Report expect to show record March 1 feedlot inventories... USDA’s Cattle on Feed Report this afternoon is expected to show March 1 inventories up 1.1% from year-ago levels, which if realized, would top last year’s record for the date by 132,000 head. Traders expect February placements to be up 6.1% and marketings to be up 4.2% from year-ago levels.
Cash hog fundamentals firm... The pork cutout value firmed $1.62 on Thursday as strong gains in hams ($11.43) and loins ($2.31) more than offset losses in the other cuts. At $108.01, the cutout value is the highest since the end of February. The CME lean hog index snapped two days of declines and is up 29 cents today (as of March 23).
See ‘Policy Updates’ for late-breaking morning news updates... For updates to items in “First Thing Today” or any late-breaking morning news stories, check “Policy Updates” on www.profarmer.com.
Today’s reports
- 8:00 a.m. Food Price Outlook — ERS
- 2:00 p.m. Oil Crops Yearbook — ERS
- 2:00 p.m. Cattle on Feed — NASS
- 2:00 p.m. Peanut Prices — NASS
- 2:00 p.m. Peanut Stocks and Processing — NASS
- 2:00 p.m. Poultry Slaughter — NASS
- 2:30 p.m. Commitments of Traders — CFTC
