Evening Report | May 27, 2022
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Your Pro Farmer newsletter is now available... Global grain supplies remain a concern for leaders around the world, with an increased focus on trying to restart Ukrainian grain exports. Russia says it’s willing to do so – if sanctions against the country are lifted. With a focus on trying to increase plantings for next year to help alleviate inflation, USDA announced changes to the CRP program, though they are unlikely to have much impact. Meanwhile, U.S. gas prices are reaching record highs daily and diesel fuel is even pricier. Washington is mulling several policy actions, including potentially waiving environmental rules for refiners during the summer driving season. However, that would likely have limited impact on ethanol. We cover these issues and much more in this week’s newsletter, which you can access here.
Memorial Day schedule... Grain and livestock markets will trade normal hours today ahead of the extended holiday weekend. All markets and government offices are closed for Memorial Day on Monday, May 30. Therefore, there will be no Pro Farmer market commentary next Monday. Grain markets reopen at 7:00 p.m. CT on Monday for the overnight session, while livestock markets will resume trade at 8:30 a.m. CT on Tuesday, May 31.
Pro Farmer salutes all those who died serving our great country and their family members. Have a safe holiday weekend.
Key EPA decision on RFS next week... Surging gas and food costs are weighing on EPA as it must set biofuels blending levels for 2022 and 2021, and retroactively revise 2020 quotas by June 3. Yearly biofuel quota-setting is fraught, as EPA navigates dueling refining and rural interests. This year, the war in Ukraine and inflation are amplifying the challenges.
Lawmakers want crop insurance adjustments to late planting rules... Senators John Hoeven (R-N.D.), Kevin Cramer (R-N.D.) and Amy Klobuchar, (D-Minn.) urged USDA Secretary Tom Vilsack to consider offsetting penalties facing farmers who claim insurance benefits for prevented planting and then plant a crop later. Under existing rules, those farmers will get only 35% of their prevent-plant benefit. Storms “have created significant challenges for farmers who are already behind on grain planting,” Klobuchar said. Vilsack said eliminating the penalty would put crop insurers at risk. In a letter (link) to Vilsack ahead of the hearing, Hoeven, Klobuchar and other Minnesota and North Dakota lawmakers asked to offset the penalties outside of the crop insurance program “to maintain the actuarial soundness of crop insurance while shielding” crop insurance companies from risk. Vilsack said USDA “will certainly take a look at the correspondence we received yesterday and make a decision as quickly as we can.”
Bottom line: Lawmakers want any reduction due to 1% per day reduction after final plant date to be filled by USDA’s Commodity Credit Corporation so both the producer and crop insurance are whole.
Russia to extend sunflower seed export ban but raises quota for sunflower oil exports... Russia will not remove its ban on exports of sunflower seeds at the end of August, Interfax news agency reported, citing the first deputy agriculture minister Oksana Lut. The ban “will not be removed until there is enough raw material to fulfil our processing capacity,” Interfax quoted Lut as saying. Russia banned exports of sunflower seeds from April 1 to Aug. 31 to protect the domestic supply for sunflower oil producers.
But Russia plans to increase its sunflower oil export quota by 400,000 MT through Aug. 31, a government regulation document showed.
SovEcon cuts Ukraine wheat crop estimate, raises corn crop forecast... SovEcon cut its 2022 Ukrainian wheat crop estimate by 900,000 MT to 22.2 MMT due to lower plantings in the regions heavily affected by the war and challenging weather conditions threatening yields. The Russia-based consulting firm cut total wheat area by 100,000 hectares to 6.4 million hectares amid heavy fighting in southeastern Ukraine. The wheat yield is estimated at 3.48 MT per hectare, down from 3.55 MT per hectare a month ago due to lack of precipitation. The majority of country’s wheat-growing regions received only 60% to 80% of the normal rainfall during May.
SovEcon raised its Ukraine corn crop estimate by 1.2 MMT to 27 MMT amid an increase in planted area. It estimates corn planting at 4.6 million hectares, up 200,000 hectares from last month, as 4.4 million hectares already have been seeded. Its corn yield estimate is unchanged from last month at 5.86 MT per hectare.
Last year, Ukraine produced 32.2 MMT of wheat and 42.1 MMT of corn.
Andrey Sizov, head of SovEcon said: “Ukraine is likely to produce a crop substantially above many market estimates. However, all main sea terminals remain blocked and exports are weak. We don’t expect them to increase above 1.5 MMT per month near term, which is below 20% of maximum export capacity during peaceful times.
Ukrainian spring planting almost done... Ukrainian farmers have almost completed spring planting but the acreage is 22% lower than the 2021 level, the ag ministry said in Friday, without providing an exact figure. Ukraine plans to sow 14.2 million hectares of spring crops this year, down from 16.9 million hectares in 2021 due to the Russian invasion, the ministry said.
The official data showed that farmers had sown 189,300 hectares of spring wheat, 928,400 hectares of spring barley and 4.405 million hectares of corn, along with some other minor crops.
U.S. inflation likely peaked, but still high... The personal consumption expenditures (PCE) price index increased 6.3% annually in April, down from a 6.6% rise in March. The core PCE price index excluding food and fuel prices increased 4.9%, down from a 5.2% increase in March.
CBO inflation forecast ‘too low,’ director says... Congressional Budget Office (CBO) Director Phillip Swagel tried to deflect criticism from Republican lawmakers over his office’s baseline budget projections for 2022, acknowledging that inflation has continued at a pace faster than CBO projected. “We know our inflation forecast is too low,” Swagel told members of the House Budget Committee yesterday. “We locked it in at the beginning of March. Subsequent events showed it was higher. We’re still going to keep the baseline economic projection constant so there’s a consistent benchmark to evaluate all proposals.”
CBO projected 4% growth in the PCE price index in fiscal 2022. Ranking member Jason Smith (R-Mo.) pressed Swagel for an estimate of how much higher inflation will be, compared to the CBO’s forecast. Swagel didn’t provide a specific answer, saying CBO had to lock its numbers in place much earlier in the Russian invasion of Ukraine. Smith said if CBO officials think its inflation projections will hold true, he has “some oceanfront property in Arizona to sell you.”
Newhouse Introduces bill to block China from purchasing American farmland... Rep. Dan Newhouse (R-Wash.) introduced legislation that would prohibit the purchase of public or private agricultural land in the U.S. by foreign nationals associated with the Government of the People’s Republic of China. Additionally, the legislation would prohibit the same associations from participating in any USDA programs except food safety inspections.
A report by the U.S./China Economic and Security Review Commission warns China could gain further leverage over U.S. supply chains by purchasing agribusinesses and land in the United States, reduce U.S. competitiveness by stealing intellectual property and create bioweapons using DNA from genetically modified American crops.
USDA to use CCC funding to address HPAI... USDA will use another $400 million from the Commodity Credit Corp. (CCC) to address the outbreak of highly pathogenic avian influenza, which has now been found in 35 states, affecting nearly 38 million birds. The money will be used to “to address indemnity, diagnostics, field activities and other emergency response costs,” USDA’s Animal and Plant Health Inspection Service said. The funds will go directly to APHIS and “allow APHIS personnel to continue to deploy and support the emergency wherever they are needed,” USDA Undersecretary for Marketing and Regulatory Programs Jenny Lester Moffitt said.
JBS reaches settlement with OSHA on infectious disease preparedness plan... Four JBS Foods USA subsidiaries and affiliates have agreed to assemble a team of company and third-party experts to develop and implement an infectious disease preparedness plan for seven of its meat processing facilities to protect its workers. The team will include subject-matter experts recommended by the U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) and the United Food and Commercial Workers Union, who represent the workers at the covered facilities.
The agreement will affect workers at the following seven plants:
- Swift Beef Co. Greeley, Colorado
- JBS Souderton Inc. Souderton, Pennsylvania
- Swift Pork Co. Beardstown, Illinois
- Swift Beef Co. Cactus, Texas
- Swift Beef Co. Grand Island, Nebraska
- JBS Green Bay Inc. Green Bay, Wisconsin
- Swift Beef Co. Omaha, Nebraska
