Evening Report: March 29, 2022

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H&P Report to show further hog herd contraction... Analysts expect Wednesday’s Hogs & Pigs Report to show the U.S. hog herd contracted 1.2% from year-ago as of March 1. Based on the average pre-report estimate, the March 1 hog herd is expected to total just over 73 million head, including a market hog inventory of 66.8 million head (down 1.3%) and breeding herd of 6.2 million head (up 0.1%). If realized, that would be the smallest March 1 hog inventory since 2018 when it was 72.1 million head.

Analysts expect USDA to show the winter pig crop expanded 1.3% from last year amid a 0.4% increase in farrowings and a 1.0% rise in the number of pigs saved per litter. Looking forward, traders expect spring farrowing intentions to be down 0.3%, but to rise 0.6% during the summer months.

Fewer corn acres, more soybean seedings expected... USDA’s Prospective Plantings Report at 11 a.m. CT on Thursday is widely expected to show farmers intend to plant fewer acres to corn this year and more soybean seedings. Based on the average pre-report estimates from a Reuters survey, corn acres are expected to decline about 1.4 million acres to 92.0 million acres and soybean area is likely to expand by about 1.5 million acres to 88.7 million acres. But the range of estimates is wide for both. Traders also expect all wheat acres to rise to nearly 47.8 million acres, including 34.4 million acres of winter wheat, 11.8 million acres of other spring wheat and 1.7 million acres of durum. Cotton seedings are expected to decline modestly from last year to 12.0 million acres.

Huge range of estimates for March 1 grain stocks... Plantings intentions are getting much of the attention ahead of Thursday’s USDA reports. But it could be March 1 stocks that end up moving markets. The corn market has a history of major misses on quarterly stocks and the pre-report range of estimates is wide for corn, soybeans and wheat.

Another bond yield inversion signals potential recession... On Tuesday, for the first time since 2019, the U.S. two-year Treasury bond yield exceeded the 10-year Treasury bond yield, inverting yet another segment of the Treasury curve and strengthening the view that interest rate increases may cause a recession, Bloomberg reported. It is the latest inversion that started in October when 20-year yields topped 30-year yields. In the past month, inversion has come to the 7- to 10-year and the 5- to 7-year segments and others. Ben Emons, global macro strategist with Medley Global Advisors LLC, explained there has not been a recession without an inversion. However, he cautioned timing of the economic downturn is unknown and can take up to two years.

U.S. consumer confidence rebounds... The Conference Board Consumer Confidence Index rose to a reading of 107.2 this month from a downwardly revised 105.7 in February. Economists polled by Reuters expected the index to decline to 107.0 from the initially reported reading of 110.5 in February. The Present Situation Index — based on consumers’ assessment of current business and labor market conditions — improved to 153.0 from 143.0 last month. However, the Expectations Index — based on consumers’ short-term outlook for income, business, and labor market conditions — declined to 76.6 from 80.8. Consumers’ one-year inflation expectations shot up to the highest since 1987.

Investors expect Bank of Canada interest rate hikes to be more aggressive... The Bank of Canada will likely start raising interest rates in half-percentage-point increments, according to investors. Chances of a larger-sized move on April 13, when the central bank will make its next interest rate announcement, have increased to 70%. Investors expect the central bank to raise interest rates between 200 and 225 basis points in the six remaining interest rate announcements in 2022, up from about 140 basis points previously expected. That implies that up to three of those meetings could result in hikes greater than the quarter-percentage-point increments usually favored by the central bank. The last time it pushed through a half-percentage-point hike was in May 2000. The central bank raised rates earlier this month for the first time since October 2018, lifting its policy rate to 0.50%.  Investors see the Bank of Canada’s policy rate peaking at about 3% next year.

EU wheat exports trail last year... As of March 27, the EU has exported 19.87 MMT of wheat during the 2021-22 marketing year, down 610,000 MT from the same period last year. Barley exports are down 220,000 MT from a year ago to 5.79 MMT. Corn imports are also down to 12.05 MMT, down 50,000 from last year.


Egypt wheat imports could hit a nine-year low... Egypt’s imports could fall to 11 MMT for the marketing year that starts in July, according to a report from USDA’s attaché in Egypt. That would be the lowest in nine years. The attaché reduced its estimate for the current year to 12 MMT, 4% below USDA’s official forecast. Egyptian corn imports were also cut to 9.2 MMT in the current marketing year, 500,000 MT below the official USDA estimate.

Revised cattle market transparency bill released.. A bipartisan group of senators released an updated version of the Cattle Price Discovery and Transparency Act. Under the revised version, there would still be a requirement for minimum purchase levels by packers, a key concern point among many in the cattle industry. Under the revamped version, USDA would establish five to seven regions in the continental U.S. and set “minimum levels of fed cattle purchases made through approved pricing mechanisms.” The legislation identifies those mechanisms as cattle purchases made through negotiated cash, negotiated grid, at a stockyard and through trading systems that multiple buyers and sellers regularly can make and accept bids. The package would create a publicly available library of marketing contracts, mandating boxed beef reporting to ensure transparency, expediting the reporting of cattle carcass weights and requiring a packer to report the number of cattle scheduled to be delivered for slaughter each day for the next 14 days. The lawmakers worked with USDA to develop the current version. It is not clear if the revisions will win any additional supporters. The North American Meat Institute opposes the revised cattle market transparency bill.

Argentine farmers warned about possible diesel shortages during harvest... The Argentine Federation of Gasoline Dispensers in the Interior warns farmers that if diesel is not imported quickly, it will lead to shortages when farmers harvest their corn and soybean crops and ship them. Any diesel shortage would be felt most in the country and not in large cities. The country is working to replace Russian diesel imports. The group says there is more demand this year for diesel than in the previous two years.

Argentine corn ethanol group demands a price increase... Argentine corn ethanol companies are threatening to quit producing if they don’t get a price increase. The group asks for corn ethanol prices to be raised from 59 cents per liter to 90 cents per liter. The group says the price of corn has increased 80% since September 2021, while ethanol prices have only increased 10%. The organization says several ethanol producers are looking at bankruptcy. The country will need to replace 6% of the nation’s gasoline supply if corn ethanol production is halted.

Bangladesh cotton industry wants direct shipping of U.S. cotton... Bangladesh Textile Mills Association (BTMA) leaders want to establish a direct shipping line from the U.S. to Bangladesh to make it easier and cheaper to import U.S. cotton and export products to the United States. The group wants to diversify to include more U.S. cotton. However, they explain many shipping lines will not ship to Chattogram port because of congestion and the extended loading and unloading times. The group will propose a direct shipping line from the U.S. to the Bangladesh government. USDA predicts Bangladesh will import 8.3 million bales of cotton for 2021-22 and is the second-largest import market for cotton.

Rabobank: Ukraine conflict could push wheat prices to record highs... For the 2022-23 crop marketing year, RaboResearch estimates the average on-farm cash price will be $5.77 for corn and $10.50 for wheat. Andrick Payen, grain and oilseed analyst with Rabo AgriFinance, said the firm projected U.S. farm prices to be strong this year, but the Ukrainian conflict could push wheat prices to record highs. According to RaboResearch analysis, a 200-million-bu. increase in exports for each commodity would increase the 2022-23 average on-farm price for corn by approximately 13% and wheat by about 50%.

Brazil’s soybean acreage growth to slow... Brazil’s 2022-23 soybean area will expand by 0.5%, the slowest pace of growth in more than 15 years, according to investment bank Itau BBA agricultural specialists. They explained farmers face higher costs to convert pasture to field crops. Brazil farmers increased their soybean area by 3.8% to 40.7 million hectares (100.5 million acres) in 2021-22. The bankers predicted Brazil’s 2022-23 crop at 141 MMT.