Evening Report: April 14, 2022
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Happy Easter! Good Friday trading schedule... Government offices are open tomorrow, but markets are closed for Good Friday. As a result, there will be no Pro Farmer updates. We’ll resume our normal market commentary on Monday, April 18. Happy Easter from Pro Farmer!
Your Pro Farmer newsletter is now available... Rising food and energy costs are some of the biggest reasons for surging inflation, which surged to a 40-plus year high in March. Russia’s war on Ukraine is behind food security concerns of some outside the United States... and mounting political concerns in this country. We look at concerns with global food shortages on News page 4 this week. The Biden administration issued an emergency declaration to allow E15 fuel to be sold from June 1 to Sept. 15 as a means of saving consumers at the gas pump. But it won't likely have a major impact on gas prices - or produce as much additional ethanol demand as some believe (hope). We had an opportunity to talk to hog producers about reasons they aren't expanding their herds this week. We also highlight changes to USDA's meat and poultry forecasts. We cover all of these items and much more in this week's newsletter, which you can access here.
Record March soybean crush report expected... Analysts expect the National Oilseed Processors Association (NOPA) on Friday to report a record March soybean crush of 182.0 million bu., according to a Reuters survey. In February, NOPA members processed 165.1 million bu. of soybeans in February and 178.0 million bu. in March 2021. The record NOPA March soybean crush is 181.4 million bu. in 2020.
Average estimate for soyoil stocks is 2.2 billion lbs. based on the Reuters survey. There were 2.1 billion lbs. of soyoil stocks at the end of February and 1.8 billion lbs. at the end of March 2021.
Pork exports could be affected by Mexican border crossing blockage... The U.S. Meat Export Federation is monitoring the crossing delays at the Texas/Mexico border. In a Meat+Poultry interview, Travis Arp, U.S. Meat Export Federation assistant vice president of export services, explained that crossing delays could affect U.S. meat exports, especially pork. While both beef and pork exports to Mexico are chilled, there are larger volumes of pork and it has a shorter shelf-life. He noted if the product arrives in Mexico in off condition, the exports could be rejected by the government and the exporting plants could also be suspended from shipping to Mexico. Blockades entered its fourth day even after an agreement was reached to open up one border crossing as local media reported truckers shifted their focus to other crossing sites. Agriculture producers hope the issue gets resolved soon. Meanwhile, experts say the first Mexican produce shortages due to the blockades will likely occur in the Midwest and the East Coast.
CF Industries warns of fertilizer shipping issues... CF Industries is warning customers that fertilizer shipments might be delayed or may not reach farmers after Union Pacific (UP) railroad mandated certain shippers to reduce the volume of private cars on its railroad. CF ships fertilizer from its Donaldsonville Complex in Louisiana and its Port Neal Complex in Iowa via UP railroads. The railroad asked CF Industries to reduce its shipments by 20%. The company said it might not have available shipping capacity to take new rail orders involving UP rail lines to meet late-season demand for fertilizer. “The timing of this action by Union Pacific could not come at a worse time for farmers,” CF's Chief Executive Officer Tony Will said on Thursday. CF Industries had previously announced it planned to increase fertilizer shipments from the world’s largest nitrogen plant to both U.S. coasts to help offset some of the decline in fertilizer supply due to Russia’s invasion of Ukraine.
Crops in drought remain steady... The amount of U.S. winter wheat considered in drought conditions remained at 69% for the week ended April 12, according to the U.S. Drought Monitor. USDA said winter wheat drought was 17% “moderate,” 31% “severe,” 18% “extreme” and 2% “exceptional.” Last week, USDA rated winter wheat drought as 18% “moderate,” 34% “severe,” 16% “extreme” and 2% “exceptional.”
For HRW areas, the area considered abnormally dry/drought in Oklahoma declined one point to 85%. Texas’s abnormally dry/drought area increased by two points to 97%. South Dakota had 84% of its land classified as abnormally dry/drought, a two-point drop. Other HRW states were unchanged on the week.
The percent of U.S. corn (30%), cotton (40%) and spring wheat (46%) acres listed in drought remained the same as the previous week.
EU's 2021-22 wheat exports trimmed... Strategie Grains cut its estimate of 2021-22 EU soft wheat exports to 31.4 MMT, down 1.1 MMT from last month. The firm cited significant shipments from Russia despite Western sanctions and its war with Ukraine. In March, Strategie Grains increased EU soft wheat export as it expected more EU exports as demand shifted from the Ukrainian and Russian supplies. The firm raised its projection of EU soft wheat exports in 2022-23 by 500,000 MT to 30.3 MMT, factoring in a protracted conflict in Ukraine and poor crop weather in the United States. It also lowered the EU’s 2022-23 production by 200,000 MT to 126.7 MMT, more than 3 MMT below this season’s output. However, the consultancy reduced animal feed demand by 1.5 MMT. Animal feed demand for corn and barley was cut by 1 MMT each.
Attaché forecasts higher 2022-23 Brazil soybean acreage... USDA’s attaché in Brazil is expecting farmers to plant 42.5 million hectares (ha) in 2022-23, up from the estimated 40.7 million ha planted in the 2021-22 season. The forecast is based on current market conditions and trends – including strong demand, high prices and a favorable exchange rate. However, the Russia/Ukraine war and resulting fertilizer supply concerns may constrain expansion. Assuming a return to normal weather conditions, the post predicts Brazil’s soybean production at 139 MMT, up from the estimated 124.8 MMT harvest this season. The post expects soybean exports from Brazil to rebound to 87 MMT for 2022-23, compared to the estimated 77 MMT for 2021-22.
Consumer sentiment unexpectedly jumps... U.S. consumer sentiment unexpectedly rose to a three-month high in early April, according to the University of Michigan’s Index of Consumer Sentiment. The index rose from 59.4 reading in March to 65.7 reading in April. The figure exceeded all estimates in a Bloomberg survey of economists, with a median forecast of 59.
The survey’s measure of future expectations climbed to 64.1, the highest since January. The monthly increase of almost 10 points was the largest since 2006. A gauge of current conditions increased to 68.1, compared to a reading of 67.2 in March.
Consumers still expect inflation to rise 5.4% over the next year, and their expectations for price increases in the next five to 10 years remained at 3%.
U.S. export and import prices surged in March... U.S. export prices surged 4.5% in March to their highest since the report started in January 1989 and followed a 3.0% increase in February, according to the Department of Labor reported. Export prices jumped a record 18.8% year-over-year in March and followed a 16.5% increase in February. Agricultural export prices soared by 4.7%. Nonagricultural export prices vaulted 4.5%.
Import prices jumped 2.6% last month, the largest rise since April 2011, after increasing 1.6% in February. In the 12 months through March, prices raced 12.5%, the largest gain since September 2011, after advancing 11.3% in February. Economists polled by Reuters had forecast import prices, which exclude tariffs, would increase 2.3%. Last month, imported fuel prices jumped 14.6% after rising 10.0% in February. Petroleum prices shot up 16.1%, while the cost of imported food edged up 0.1%.
European Central Bank keeps unwinding schedule... The European Central Bank (ECB) confirmed it would keep its plans to end its bond-buying program in the third quarter. As expected, ECB did not raise interest rates. However, ECB President Christine Lagarde expressed more concerns about inflation. She did not discuss interest rate hikes, though she said that could start after the end of the bond purchasing program. Timing of interest rate hikes could be addressed in the bank’s July meeting. The ECB last raised interest rates over a decade ago and has kept its deposit rate in negative territory since 2014. Markets now price in 63 basis points of rate hikes before the end of the year, a modest retreat compared with 70 basis points priced in before the meeting.
IMF to trim global growth forecast... The International Monetary Fund (IMF) will cut its global growth estimates for 2022 and 2023, managing director Kristalina Georgieva said. The global lender will downgrade its growth outlooks for 143 economies representing 86% of global economic output. However, most countries will maintain positive growth. IMF will release its new forecast at next week's IMF and World Bank spring meetings. Georgieva did not give a specific global growth target, but it will be lower than the January forecast of 4.4%, which was reduced 0.5%. She noted economies face the “clear and present danger” of inflation that is expected to remain longer than previously expected. Georgieva warned the world was in “a very dangerous time.” She also mentioned higher food and energy prices driving food security concerns.
