Evening Report | May 25, 2022

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Check our advice monitor on ProFarmer.com for updates to our marketing plan.

 

Wheat producers: Make initial 2023-crop sales… A lot can change from now until the 2023 wheat crop is harvested, but current price levels offered by the market are too good to pass up. We advise all wheat hedgers and cash-only marketers to sell an initial 10% of expected 2023-crop production for harvest delivery next year.

 

Russia to open two corridors for exiting Ukrainian ports... Russia’s defense ministry announced it is opening two corridors for the exit of foreign ships from Ukrainian ports on the Black and Azov Seas, Interfax news agency reported. “The Russian armed forces open two maritime humanitarian corridors daily from 08:00 to 19:00 Moscow time [0500-1600 GMT], which are safe lanes for the movement of ships,” said Mikhail Mizintsev, the head of the Russian National Defense Control Center, told Interfax.

“In the Black Sea – for exiting the ports of Kherson, Mykolaiv, Chornomorsk, Ochakiv, Odesa and Yuzhnyi in the southwest direction from the territorial sea of Ukraine with a length of 80 miles and a width of 3 miles,” Mizintsev said. “In the Sea of Azov – for exiting the port of Mariupol with a length of 115 miles and a width of 2 miles in the direction of the Black Sea,” he continued.

 

UN talks with Russia about reviving fertilizer exports... A senior United Nations (UN) official is due to visit Moscow in the coming days to discuss reviving fertilizer exports, Russia’s UN Ambassador Vassily Nebenzia said on Wednesday, stressing the talks were not linked to a resumption of Ukrainian grain shipments. Nebenzia said “formally fertilizers and grain are not under sanctions, but there are logistical, transport, insurance, bank transfer problems” created by Western sanctions that “prevent us from exporting freely.” He added, “We are prepared to export fertilizers and grain from our ports to the world market,” adding that when it came to Ukrainian grain exports – “I think that should be negotiated with the Ukrainians, not with Russians.”

 

Britain: Russia should ‘do the right thing’ regarding Ukraine grain exports... Britain’s Defense Secretary Ben Wallace on Wednesday called on Russia to let Ukraine export its grain to help countries where grain scarcity could trigger hunger. Russia must “do the right thing,” Wallace told reporters in Madrid where he met his Spanish counterpart Margarita Robles, and open a grain corridor from Ukraine’s Black Sea ports. As we reported in “First Thing Today,” Russian Deputy Foreign Minister Andrei Rudenko said the country was ready to provide a humanitarian corridor for vessels carrying food to leave Ukraine, in return for the lifting of some sanctions.

Wallace rejected the idea of lifting sanctions, and welcomed the suggestion of Black Sea nations, such as Turkey, escorting the Ukraine grain shipments after Moscow ruled out the involvement of Western forces. “That grain is for everyone, Libya, Yemen, people around the world are relying on that grain to feed themselves,” Wallace said. “I call on Russia to do the right thing in the spirit of humanity and let the grain of Ukraine out, stop stealing the grain for its own means. Let’s not talk about sanctions, let’s do the right thing.”

 

Bangladesh to import wheat from India... Bangladesh has a plan to import up to 10 lakh tonnes (1 MMT) of wheat from India under a government-to-government contract, according to the country’s food minister. He said, “We are trying to make correspondence with seven to eight Indian Wheat export companies and to seek clearance from the Indian government.” After clearance from the Indian government, negotiations on prices will be held, the minister said.

 

India has no immediate plans to lift its wheat export ban... India has no immediate plans to lift a ban on wheat exports but will continue with deals which are done directly with other governments, Commerce Minister Piyush Goyal told Reuters. “Currently there’s instability in the world, if we were to do that (lift the ban), it would only help black marketeers, hoarders and speculators. Neither will it help the really vulnerable and needy countries,” Goyal said when asked if New Delhi had any plans to allow private exports to resume. “The smarter way to do it is through the government-to-government route, by which we can give affordable wheat grain to the most vulnerable poor,” he said in an interview at the World Economic Forum in Davos.

Goyal also said he had been in contact with the World Trade Organization and the International Monetary Fund to explain the rationale behind India’s wheat export ban.

 

USDA raises food inflation forecasts for fourth consecutive month... USDA raised its food price outlook to 6.5% to 7.5% above year-ago, up from April’s forecast for a rise of 5% to 6%. The midpoint of that range would be the biggest rise in food prices since they jumped 7.8% in 1981. USDA now forecasts food away from home (restaurant) prices will rise 6% to 7% this year, up from its April forecast for a 5.5% to 6.5% increase. That would be the biggest rise in restaurant prices since 1981 when they increased 9%. Food at home (grocery store) prices are now forecast to increase 7% to 8%, up from the April outlook for a 5% to 6% rise. That would be the highest grocery store price rise since 1980 when prices jumped 8.1%.

Click here for more details.

 

U.S. ports stressed as key import season nears... America’s seaports are stretched to their limit just as retailers and manufacturers are set to begin their seasonal rush of importing ahead of the fall and end-of-year holidays, the Wall Street Journal reports. With shippers seeking to avoid the risk of delays, this year’s peak shipping season is expected to start weeks earlier than usual, at the end of June, just as back-to-school and other seasonal products flood in. “That will create high stakes for importers and for the White House as goods arrive against the backdrop of a fragile economy, racing inflation and fresh memories of last year’s massive container-ship backups,” the article observes.

 

FOMC minutes signal rate hikes may go further than anticipated... Minutes from the May 3-4 Federal Open Market Committee (FOMC) meeting stressed the need to raise interest rates quickly and possibly more than markets anticipate to tackle inflation. Not only did policymakers see the need to increase rates by 50 basis points at this month’s meeting, but they also said similar hikes likely would be necessary at the next several meetings. “Most participants judged that 50 basis point increases in the target range would likely be appropriate at the next couple of meetings,” the minutes said. In addition, Federal Open Market Committee members indicated that “a restrictive stance of policy may well become appropriate depending on the evolving economic outlook and the risks to the outlook.”

“All participants reaffirmed their strong commitment and determination to take the measures necessary to restore price stability,” the FOMC minutes stated. “To this end, participants agreed that the Committee should expeditiously move the stance of monetary policy toward a neutral posture, through both increases in the target range for the federal funds rate and reductions in the size of the Federal Reserve’s balance sheet.”

Officials expressed concern that tighter policy could cause instability in both the Treasury and commodity markets. Specifically, the minutes cautioned about “the trading and risk-management practices of some key participants in commodities markets [that] were not fully visible to regulatory authorities.” The minutes stated risk management issues “could give rise to significant liquidity demands for large banks, broker-dealers, and their clients.”

 

U.S. again initiates USMCA dispute regarding Canada dairy policy... USDA Secretary Tom Vilsack a few days ago said “stay tuned” relative to the now lengthy Canadian dairy policy dispute with the U.S. via the U.S.-Mexico-Canada (USMCA) trade agreement. But rather than retaliation called for by some in the U.S., including lawmakers, the U.S. is again demanding official consultations with Canada over complaints the country manipulates its dairy import quotas to curtail U.S. exports, the Office of the U.S. Trade Representative said Wednesday. Those consultations could lead to the U.S. calling for a second dispute panel under the U.S.-Mexico-Canada Agreement.

 Canadian restrictions on the quotas for milk, cheese, cream, skim milk powder, butter, ice cream and whey have only worsened since the original panel ruled mostly in the favor of the U.S., USTR Katherine Tai said. “I am deeply troubled by Canada’s decision to expand its dairy tariff-rate quota restrictions,” Tai said. “We communicated clearly to Canada that its new policies are not consistent with the USMCA and prevent U.S. workers, producers, farmers, and exporters from getting the full benefit of the market access that Canada committed to under the USMCA.”

 The U.S. has consistently said Canada allows its large processors to control the quota allocations while retailers and food service operators are denied access. U.S. dairy processors want to sell more cheese and other high-value products to Canadian retailers and importers.

Here are the disputed issues:

  • Retailers, food service operators and some other eligible applicants are excluded from the TRQs. Instead, Canada is allocating the TRQs to entities that have little incentive to import, like processors.
  • Applicants are required to be active during all 12 months of a 12-month reference period, potentially excluding otherwise eligible applicants, in particular new entrants.
  • Canada has allocated only part of its dairy TRQs for the calendar year 2022 despite USMCA requirements that full allocation be done at the beginning of the year, and commitments to administer the TRQs in a transparent manner.

The initial dairy dispute saw the U.S. request the panel be established last May 25 with a final report issued on Dec. 20. Under USMCA rules, Canada had 45 days from the date of the final report to comply with the ruling.

 

CBO releases long-term budget baselines... Following are key highlights of the Congressional Budget Office (CBO) long-term baselines for ag:

  • CBO has a $7.65 price for 2022 wheat. That is the crop’s 10-year high in the baseline. CBO has wheat price returning below the reference price (to $5.40) as soon as 2024… and falling to $5.10 by 2032. High crop prices mean it is less costly, not more costly, to raise reference prices and loan rates. If CBO assumes much lower prices, then it would be more expensive.
  • SNAP:  $1.1 Trillion over 10 years alone.
  • All ARC/PLC/Marketing Loan Benefits:  $45 Billion over 10 years.


Click here to view CBO’s full list of baseline estimates.

 

China cuts forecast for domestic sugar output... The reduction comes as other countries limit exports of the sweetener because of food security fears stoked by the war in Ukraine, the South China Morning Post reports. Pakistan imposed a “complete ban” on sugar exports earlier this month, worried about high inflation. Russia in March also banned sugar exports until the end of August following Western sanctions over its invasion of Ukraine. Various sugar cane mills in Brazil, the world’s top producer and exporter, are reported to be cancelling some export contracts and shifting production to ethanol to cash in on high energy prices, which have also been pushed up by the war in Ukraine. Some 20 countries and regions have food export bans in place, including for wheat, soybean, beef, butter and sugar, according to the data from the International Food Policy Research Institute.

 

China temporarily bans four Brazilian beef plants... China has temporarily suspended beef imports from four Brazilian slaughterhouses, two operated by JBS SA and two by Marfrig. The Chinese government did not detail the reasons for the beef plants it banned. Beijing’s decision came shortly  after authorities from Brazil and China agreed on advancing the bilateral trade agenda, in talks that included an agreement on a protocol to export Brazilian corn to China.

 

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