Evening Report: March 31, 2022

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Farmers expected to plant less corn, more soybeans... In its annual Prospective Plantings Report, USDA says farmers intend to plant 89.490 million acres of corn, down nearly 3.9 million acres from actual plantings last year and 2.5 million acres shy of the average pre-report estimate. They plan to plant 90.955 million acres to soybeans, up 3.8 million acres from last year and roughly 2.2 million acres more than traders expected. Combined corn and soybean acreage intentions are estimated at 180.445 million acres, which would be down 107,000 acres from last year.

The amount of cotton planted is expected to increase just over 1 million acres from last year to 12.234 million acres, 227,000 acres more than the average pre-report estimate. Farmers intend to plant 11.200 million acres of spring wheat, down 220,000 acres from last year and 601,000 acres below the average pre-report estimate.

USDA estimates total acres planted to principal crops at 317.375 million acres, up 214,000 acres from last year. That would be the highest acreage figure for principal crops since 319.3 million acres in 2018.

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March 1 stocks offers no major surprises for a change... In the Grain Stocks Report, USDA reported March 1 corn stocks at 7.850 billion bu., up 154 million bu. from last year but 27 million bu. below the average pre-report trade estimate. For soybeans, stocks totaled 1.931 billion bu., up 369 million bu. from a year-ago and 29 million bu. above the average pre-report trade estimate. March 1 wheat stocks totaled 1.025 billion bu., down 286 million bu. from last year and 20 million bu. below the average pre-report trade estimate.

More oil to be released from U.S. reserves... President Joe Biden announced the largest release from the U.S. emergency oil reserve and challenged oil companies to drill more to decrease gasoline prices. Starting in May, the U.S. will release 1 million barrels per day (bpd) of crude oil for six months from the Strategic Petroleum Reserve (SPR). The release would total 180 million barrels, about two days’ worth of global demand.

The administration is working with the International Energy Agency (IEA) to coordinate releases from reserves by other oil-consuming nations. Other countries might announce their releases at the IEA meeting on Friday. However, their releases are expected to be smaller than the U.S.

As expected, OPEC+ sticks with production plan... OPEC+, which includes Russia, ratified an existing plan to increase supplies in May by 432,000 barrels a day, according to a statement. The decision to stick with a gradual supply increase plan was in line with expectations. The cartel insists there’s no shortage of oil in the market. Some countries, including the U.S., asked OPEC+ to increase production more than its production plan.

Russia announces sunflower seed export ban, sunflower oil, meal quota... Russian sunflower seed exports will be banned from April 1 until the end of August. From April 15 to Aug. 31, there will be a 1.5 MMT sunflower oil export quota, according to Russia’s agriculture ministry. Sunflower meal will also have a 700,000-MT export quota. Russia is trying to avoid domestic shortages and ease price pressure. An Indian-based dealer said the restrictions will keep prices high but is unlikely to affect Indian buying. Russian crude sunflower oil is offered at $2,150 per metric ton in India for April shipment, compared to $1,767 for soyoil and $1,720 for crude palm oil.

Syngenta expects a 33% reduction in Ukraine crop production... Syngenta hopes to save about two-thirds of Ukraine’s normal crop production, according to a company spokesperson. The company does not expect a total failure in 2022. Syngenta is providing seeds and crop protection products to farmers in the country for food production. Company officials said Ukraine’s business activity is not for profit at the moment. It is providing the inputs on credit with a high risk of default.

“We are taking these high risks consciously and believe it’s the right thing to do,” a company spokesperson said.

The company employs around 730 people in Ukraine and 800 in Russia. It has no plans to withdraw from Russia as crop production is not subject to imposed Russian sanctions.

USDA announces livestock relief program... USDA announced that ranchers who have an approved 2021 Livestock Forage Disaster Program (LFP) application would soon begin receiving emergency relief payments for increases in additional feed costs in 2021 through the Farm Service Agency’s (FSA) new Emergency Livestock Relief Program (ELRP). Agriculture Secretary Tom Vilsack said phase one of the program would use LFP data to allow USDA to distribute payments within days. Producers are not required to apply for payment.

Phase one ELRP payments will equal the eligible livestock producer’s gross 2021 LFP calculated payment multiplied by a payment percentage, to reach a reasonable approximation of increased supplemental feed costs for eligible livestock producers in 2021. The ELRP payment percentage will be 90% for historically underserved producers, including beginning, limited resource and veteran farmers and ranchers, and 75% for all other producers. These payments will be subject to a payment limitation. Payments to eligible producers through phase one of ELRP are estimated to total more than $577 million.

Vilsack asks Surface Transportation Board to improve ag rail service... USDA Secretary Tom Vilsack tweeted he asked the Surface Transportation Board to take urgent action to improve rail service for agricultural commodities. He noted current rail disruptions pose critical threats to agriculture, including domestic meat and poultry production. Last week, the National Grain and Feed Association requested the Surface Transportation Board to take action. Organization members have reported delays with train movements that resulted in either not getting deliveries in or out of their facilities causing livestock feed delivery issues.

Winter wheat drought shows modest improvement... The amount of U.S. winter wheat considered in drought conditions decreased one point to 69% for the week ended March 29, according to the U.S. Drought Monitor. USDA said winter wheat drought was 20% “moderate,” 32% “severe,” 16% “extreme” and 2% “exceptional.” Last week, USDA rated winter wheat drought as 21% “moderate,” 31% “severe,” 16% “extreme” and 2% “exceptional."

For HRW areas, the area considered abnormally dry/drought in Kansas dropped five points to 72%. Oklahoma and Texas each had a one-point drop in the area classified as abnormally dry/drought to 86% and 95%, respectively. The abnormally dry/drought area in South Dakota increased by four points to 86%.

In SRW areas, the abnormally dry/drought area in North Carolina declined by three points to 41%. Missouri had none of its area classified as abnormally dry/drought, a 26-point decrease. Arkansas had a four-point drop in the area listed as abnormally dry/drought to 31%. Michigan had 23% of its area considered abnormally dry/drought, a 31-point decline. Illinois had 19% of its land classified as abnormally dry/drought, a nine-point drop.

Tai: U.S. must shift trade policy focus... U.S. Trade Representative Katherine Tai said the U.S. must shift the focus of its trade policy to rebuilding its domestic manufacturing industries and lessening ties to unfriendly economies. Appearing before the House Ways and Means Committee on Wednesday, Tai said global events such as Russia’s invasion of Ukraine and the supply-chain disruptions triggered by the Covid-19 pandemic point to the need for new priorities. “The problem that we are confronted with today—after two years of Covid and also Russia’s invasion of Ukraine — is that this version of globalization that we are living in has not taken us to a place where we feel more secure,” Tai said.

Both Democrats and Republicans on the House Ways and Means Committee Wednesday prodded Tai about reaching new free trade agreements (FTAs) with several countries like the European Union (EU), U.K. and Kenya, but Tai gave no indication that the administration was going to pursue any such deals. Instead, Tai focused her remarks on the Biden administration push to use Trade and Investment Framework Agreements (TIFAs) to achieve U.S. trade goals. While those types of agreements can address certain areas on trade like sanitary or phytosanitary issues relative to agricultural products, they do not address tariff levels or market access.

As for China, Tai commented that discussions with Chinese Vice Premier Liu He over their Phase 1 trade agreement commitments had been difficult and resulted in little progress on getting China to live up to their commitments — observations that Tai has made in recent weeks relative to the talks that started in October.

While Tai pointed to other actions by the administration on trade to reduce tensions and remove tariffs in certain areas, she did not offer any new update on getting Canada to bring its operation of tariff-rate quotas (TRQs) for dairy in line with a U.S.-Mexico-Canada Agreement (USMCA) ruling which found them in violation of the deal. Tai also did not indicate whether the U.S. was ready to push ahead with retaliation against Canada in the matter.

Bottom line: While Tai offered lawmakers some additional perspective on the administration’s trade agenda, the areas she did not comment on speak louder on their trade policy.

Swine feed facility announced for western Iowa... AMVC and Landus Cooperative will build a 400,000 ton per year swine feed mill at Landus' existing grain facility in Hamlin, Iowa. The mill is expected to generate demand for roughly 8.5 million bu. of corn and 48,000 tons of soybean meal annually. AMVC will own and operate the mill. Landus will originate grain. The project is expected to be completed by summer 2024.

Canada lawsuit alleges meatpacker price-fixing... The four largest beef packers in North America face a possible class-action lawsuit in Québec alleging the companies have colluded to raise the price of beef since 2015. Option consommateurs, a non-profit consumer organization, applied on March 24 to institute the class action against Cargill, Inc., JBS USA Food Company, Tyson Foods Inc. and National Beef Packing Company, alleging they conspired to restrict competition related to the production, supply or sale of beef in Québec. Members of the class action include anyone who purchased beef in Québec on or after Jan. 1, 2015.

The class action is currently at the authorization stage, meaning it may not be approved. The lawsuit seeks a judgment ordering the four companies to pay a financial amount equivalent to the profits made from the artificial inflation of the selling price. The amount is unknown at this time.

A similar ongoing class action is being pursued in British Columbia with the same four beef packers involved in price-fixing. More lawsuits are expected.

Mexican president: Food price controls possible... Mexican President Andres Manuel Lopez Obrador said the country might use food price controls if inflation remains high. He explained in the past, Mexico  controlled inflation with fuel price controls. He said his country would do the same for food if inflation remains high for a prolonged period. Mexico’s inflation rate has been around 7%, the central bank’s target is 3%. The bank raised its benchmark interest rate to 6.5% last week.