Evening Report: April 1, 2022

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Your Pro Farmer newsletter is now available... USDA shocked traders by estimating farmers would plant more acres to soybeans than corn in 2022. That triggered a bearish reaction in soybean futures that may lead to a shift in momentum. Focus will now turn to spring weather and price action as traders add and subtract acres from USDA's March benchmarks. Meanwhile, March 1 grain stocks surprisingly didn’t have any real surprises for a change. USDA’s Hogs & Pigs Report showed the U.S. hog herd contracted more than traders expected and there are no signs of expansion. But the market had a bearish reaction to bullish data, which typically isn’t a good sign. High gas prices are hurting consumers, so the Biden administration is planning the largest-ever release of emergency oil reserves and may lift summer sales restrictions on E15. But high gas prices aren’t as much of a concern as tight diesel supplies, especially for farmers. We cover all of these items and much more in this week's newsletter, which you can access here.



February corn-for-ethanol use well above last year... USDA reported February corn-for-ethanol use totaled 405.2 million bu., down 58.3 million bu. (12.6%) from the downwardly revised January figure but up 72.3 million bu. (21.7%) from last year. Over the first half of the marketing year, corn-for-ethanol use at 2.689 billion bu. increased 9.8% from the same period last year. Over the final six months of 2021-22, corn-for-ethanol use must run 3% above the same period last year to hit USDA’s forecast of 5.350 billion bushels.

 

USDA reports higher soybean crush... February’s soybean crush totaled 174.4 million bu., according to USDA. That was down 19.9 million bu. (10.2%) from January but up 10.1 million bu. (6.1%) from last year. The February soy crush was just shy of the record for the month of 175.3 million bu. in 2020, but this year’s per-day rate was a record.

Soyoil stocks totaled 2.566 billion lbs. at the end of February, about 40 million lbs. more than expected. Stocks increased 66 million lbs. from January and were 260 million lbs. above year-ago.

 

IEA members agree on oil release, more details to come... Members of the International Energy Agency (IEA) agreed to a second coordinated oil release from reserves. However, the countries did not agree on the total volume or how much each country would release. President Joe Biden said U.S. allies and partners could release an additional 30 million to 50 million barrels of oil. The agency said that more details about the release would be announced early next week.

 

IMF: U.S. economy strong enough to avoid recession... U.S. economic growth will likely slow down but remain positive, the new chief economist at the International Monetary Fund (IMF) said. Bloomberg reported, Pierre-Olivier Gourinchas said it was too early to talk about the U.S. recession risk and he does not see a recessionary environment in the U.S. at least in the near future. IMF is updating its forecasts issued in January and will publish the results at the World Economic Outlook scheduled for April 19 during its spring meetings. The organization is still working on how much the Russian invasion will cut its growth estimates. Gourinchas said European economies are more vulnerable to impacts from the Russian invasion. IMF is also monitoring how pandemic lockdowns in China will affect the economy.
 


March jobs growth slows more than expected... The U.S. economy added 431,000 non-farm jobs in March, the Labor Department reported on Friday. Economists polled by Reuters expected the report to show the U.S. economy added 490,000 jobs. The unemployment rate fell to 3.6% and the labor force participation rate ticked up. Economists predicted the unemployment rate would decline 0.1 points to 3.7%. February’s job growth was revised to 750,000 jobs, up from the previously reported 678,000 jobs. The report also showed average hourly earnings rose 0.4% from February and 5.6% from a year ago, the most since May 2020.

The bond market is pricing in a series of 50-basis-point interest rate hikes by the Fed amid the strong jobs market and surging inflation.

 

Higher fuel efficiency requirements announced... The National Highway Traffic Safety Administration (NHTSA) announced fuel efficiency requirements that will increase fuel efficiency 8% annually for model years 2024-2025 and 10% annually for the model year 2026. NHTSA will also increase the estimated fleetwide average by nearly 10 miles per gallon for the model year 2026. The new standard is slightly raised from its August proposal but close to the EPA’s proposal. EPA and NHTSA are expected to write fuel efficiency rules for model year 2027 and beyond that would require automakers to produce electric vehicles to meet them.

 

Ocean Shipping Reform Act passes Senate, heads to conference committee... The U.S. Senate passed the Ocean Shipping Reform Act. Under the Senate bill, carriers would have to prove they are acting reasonably when they levy late fees for cargo. The bill would also prohibit carriers from unreasonably refusing to load cargo at U.S. ports and authorize the Federal Maritime Commission to launch investigations on its own of a carrier’s business practices. Co-sponsor Sen. John Thune (R-S.D.) said the bill would help consumers by “promoting fluidity and efficiency of the supply chain.” The House had already passed a similar bill. The bill will now head to one of the first conference committees between the House and Senate during this session to iron out differences in the two versions of the legislation.


Two more senators joined the call to plant some CRP land... Sens. Marco Rubio (R-Fla.)  and Cynthia Lummis (R-Wyo.) sent a letter to USDA Secretary Tom Vilsack calling on USDA to allow farmers to plant acres enrolled in the Conservation Reserve Program (CRP) without penalty. They join farm groups and other politicians asking USDA to tap CRP acres to boost grain supplies in the aftermath of Russia’s invasion of Ukraine.



Panama Canal proposes toll restructuring and increases... The Panama Canal Authority proposed a comprehensive restructuring of its toll system, which would increase the rates charged for crossing the waterway. The restructuring would reduce the structure to less than 60 tariffs from the current 430. It would also focus on vessel capacity and fixed tariffs per transit. The toll would also be different based on the set of locks used. Car carriers, chemical and LNG tankers and vessels carrying bulk such as grains and coal would also see higher tariffs, affecting market prices by roughly 0.1% to 0.7%. The most affected segments would be passenger vessels and container ships. The canal authority will hold a public hearing on the changes on May 20 in Panama and consider feedback sent via email by May 17. Once approved, the new toll structure would be gradually implemented from January 2023 to 2025.

 

Russian agricultural exports increased in March... Russia exported about 1.7 MMT of wheat last month, according to consultant ProZerno. That would be 600,000 MT more than last year, but nearly half of the amount shipped in March 2020. March 2021 exports were reduced due to government grain export tax shifts. Geneva-based crop data company Agflow reported Russian agricultural exports that included corn, barley and sunflower oil totaled about 2.5 MMT during March, a 15% increase from last year.

 

Russia threatens ag exports only to ‘friendly’ countries... Russia could limit agricultural exports to only “friendly” countries, warned Dmitry Medvedev on social media. Medvedev is now deputy chairman of Russia’s security council and a close ally of Russian President Vladimir Putin. Reuters reported that countries importing Russian ag exports would pay in a combination of rubles and the importing country’s currency. Medvedev said Russia had plenty of “friendly” countries, and none of them were in Europe or North America. Putin recently threatened to stop exporting oil to “unfriendly” countries unless they paid in rubles.

 

SovEcon increases Russian wheat export forecast... Black Sea region consulting firm SovEcon increased 2021-22 Russian wheat exports by 400,000 MT to 33.9 MMT despite the war in the Black Sea. USDA projects Russian 2021-22 wheat exports at 32 MMT. The consultancy expects the country to reach the 8-MMT wheat export quota through June if no additional restrictions affect shipments. Most vessel availability and payment problems have been resolved, SovEcon reported. Other factors in its forecast include high wheat world prices, the weak ruble, demand switching from Ukraine to Russia and strong shipments in the last half of March.

 

China calls for efforts to ensure stable corn and rice production, supply... Chinese Vice Premier Hu Chunhua called for efforts to boost corn and rice production to stabilize the output and supply of the crops. The country needs to close the gap between production and demand, Xinhua news reported. Speaking at a video conference on advancing the production of corn and rice, he emphasized that efforts should be made to ensure corn planting areas and output in the corn regions stabilize at last year's levels. Hu called for more regulation of corn processing demand and strict control of the use of corn for fuel. He added more efforts should be made to stabilize and increase rice production.


Attaché increases Brazil’s beef production, exports... USDA’s attaché in Brazil raised its estimate for the country’s 2022 beef production and exports. Brazilian beef production is forecast at 9.85 MMT, 3.7% higher than 2021. The attaché says higher Brazilian and global beef prices, more cattle available for slaughter and higher slaughter weights in the first half of 2022 are the main factors driving higher production. The post forecasts Brazilian beef exports will increase 12% from 2021. In 2021, Brazil exported 1.67 MMT of beef and veal, which was 8.9% lower than 2020. Brazilian beef exports are expected to be 26.4% of total production, up two percentage points from 2021.

 

Argentine corn, soybean shipment arrives in Lebanon... A ship carrying 33,400 MT of Argentine corn and soybean arrived in Lebanon's Tripoli port to ease the market shortages caused by the Ukraine/Russia crisis, the National News Agency reported. The port is the only one in Lebanon capable of receiving large dry bulk ships. Lebanon is currently looking for alternative markets for the import of wheat, corn, oil and other grains and products previously imported from Ukraine and Russia.

 

2022-23 Brazil cotton acres might drop... With input costs increasing more than prices, Brazilian farmers might plant less cotton, according to Brazilian Association of Cotton Producers (Abrapa) president Julio Busato. He told Reuters the reduced cotton acres would likely be switched to corn or soybeans. Brazil, the world’s second-largest cotton exporter, produced a record 3 MMT in 2019-20. Production dropped to 2.35 MMT in 2020-21. Production in 2021-22 returned closer to the record high. Busato hopes 2022-23 total output will not decline below 2.5 MMT. He added that the cotton industry is worried about a possible economic downturn affecting demand.

 

Australia and India to sign interim trade deal... Australian and Indian officials will sign the interim Australia-India Economic Cooperation and Trade Agreement on Saturday as they continue working toward a complete free-trade agreement. Under the deal, 96% of Indian goods would enter Australia duty-free and 85% of Australian exports into India would be duty-free. Australia has been working to reduce its reliance on its largest trading partner, China. Australia Prime Minister Scott Morrison wanted to sign the deal before calling a national election.

 

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