Evening Report | August 16, 2022

( )

Click here to view weekly Commitments of Traders charts.

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

 

Ukraine’s winter grain acreage could fall up to 60% without aid... The area sown to winter grains in Ukraine could fall by 30% to 60% in 2023 without state assistance and an increase in grain exports, UABC agriculture union director Roman Slastyon said. “There are great hopes that the government... will find an opportunity to finance the sowing campaign. If this is not done now, then we will have serious problems ... without these programs and without increasing exports, it is expected that winter crops can be unsown on 30% to 60% of the area,” he said.

Planting of winter rapeseed has already begun and sowing of winter wheat in Ukraine is expected to get started in two to three weeks.

 

First Ukraine grain shipment reaches Syria... The first ship to depart Ukraine under a deal to resume grain exports from the country two weeks ago docked in the Syrian port city of Tartous on Tuesday, Reuters reported, citing a shipping source and satellite data. The Sierra Leone-flagged Razoni set sail from Ukraine's Odesa port on Aug. 1, carrying 26,000 MT of corn that was originally destined for Lebanon but rejected by the initial buyer.

 

What would a Chinese blockade of Taiwan mean for global business?... Beijing claims Taiwan as part of its territory and has vowed to take control of it, by force if necessary. A Chinese blockade would cripple global supply chains and raise freight prices in Asia and potentially beyond, because of the outsize role that the island of roughly 23 million people plays in global business, the Wall Street Journal reports. Taiwan accounts for roughly 70% of the world’s microchip supply. It serves as an important part of the production chain for goods including smartphones, computers and cars. And it sits next to Pacific shipping lanes that channel trillions of dollars worth of trade flowing in and out of East Asia.

 

Gov’t announces water restrictions for two states, Mexico... U.S. officials announced two U.S. states reliant on water from the Colorado River, along with Mexico, will face more water cuts next year. Federal officials declared a Tier 2 shortage of water for the Colorado River System. Under Tier 2 shortage conditions, Arizona’s annual water apportionment will be reduced by 21%, Nevada’s by 8% and Mexico’s by 7%. There is no required water savings contribution for California at this time.

The move affecting reduced water usage requirements came as officials predict levels at Lake Mead, the largest U.S. reservoir, will plummet even further. Lake Mead is currently less than a quarter full and the seven states – California, Arizona, Nevada, Colorado, Wyoming, New Mexico and Utah – that depend on its water missed a federal deadline to announce proposals on plans cut additional water next year. The river serves 40 million people in the U.S. West and northern Mexico and is also a key source for farmers.

 

Germany industry increasing warnings as Rhine water levels fall... Germany’s main industry lobbying group warned that factories may have to slow or even halt production temporarily due to the drop in water levels along the Rhine River, a key shipping artery for Western Europe, after levels fell to a record-low. “The ongoing drought and the low water levels threaten the supply security of industry,” Holger Loesch, deputy head of German business lobby group, BDI, told the Associated Press. He warned droughts like this could become more frequent in the years to come, and asked leaders in Berlin to react more quickly to weather conditions that could affect the Rhine or other waterways.

Many barges will not ship cargo along the Rhine when its levels drop below 40 cm. “It’s only a question of time before facilities in the chemical and steel industry have to be switched off, petroleum and construction materials won’t reach their destination, and high-capacity and heavy-goods transports can’t be carried out anymore,” Loesch said, citing fear of bottlenecks, especially for key energy supplies.

Background: The Rhine is the most important river for delivery of diesel, coal, and other commodities in the region, as we previously highlighted. Low water levels also mean utilities could end up using more gas as an alternative — a dangerous situation that could exacerbate the bloc’s ongoing gas crisis.

 

Where’s the long-delayed Cattle Price Discovery and Transparency Act action in the Senate?... Sen. Chuck Grassley (R-Iowa) says the legislation is out of committee and on the Senate calendar. While optimistic the bill will receive support, Grassley adds he’s not confident Senate Majority Leader Chuck Schumer (D-N.Y.) will add it to the agenda. Grassley made the comments in a meeting at the Iowa State Fair on Monday.

 

USDA unveils nutrient management initiative... USDA will direct additional funds toward voluntary nutrient management projects on the farm and streamline the process of applying for funding. USDA Secretary Tom Vilsack said nutrient management would “help farmers address local resource concerns and global food security issues while also improving their bottom line.” The Natural Resources Conservation Service also announced a streamlined funding opportunity for up to $40 million in nutrient management grants through the Regional Conservation Partnership Program. USDA also announced an outreach campaign focused on the benefits of nutrient management. It said farmers could save an average of $30 per acre through steps such as reducing nitrogen loss and minimizing nutrient runoff.

 

USDA seeking comments on information collection required under proposed regulations for poultry... USDA is proposing new regulations under the Packers and Stockyards Act to clarify rules under the law relative to poultry dealers. USDA’s Agricultural Marketing Service wants comments on the scope of information that would be required of live poultry dealers on “certain disclosures to poultry growers in advance of entering into production contracts.” AMS is proposing that live dealers could use the USDA Live Poultry Dealer Disclosure Form or they could develop their own cover page to meet the requirement.” AMS estimates it would impact 89 businesses due to the annual reporting requirements. Link to notice with a 30-day comment period.

 

U.S. housing recession?... Home builder confidence fell six points to 49, hitting the lowest level since May 2020 and marking the eighth consecutive month of decline. Other than a brief moment in the early days of the Covid pandemic, it’s the first time that has happened since 2014. Given the tumble, economists warn of an ongoing housing market cool down if not housing recession. “Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession,” said Robert Dietz, the chief economist for the NAHB. Mortgage rates have declined from recent highs but are still nearly double what they were at the beginning of the year. Home prices are still rising, too, and supply remains tight.

Nuveen’s chief investment officer Saira Malik anticipates “neither a bubble nor bottom” for the market, but says defense is the smartest play right now when to comes to this market. “Deteriorating home builder and consumer sentiment, higher mortgage rates, historically low affordability, declines in housing starts and building permits, and record-low inventories of existing homes for sale, among other factors,” will have implications for the housing sector and broader economy, Malik wrote in a commentary Monday. “But in our view they’re not evidence of a housing bubble that’s due to burst” with demand still healthy, she said.

 

Walmart cancels ‘billions in orders’ amid supply/demand imbalance... Walmart canceled has “canceled billions in orders” to deal with inventory backlogs that have amassed over the last few quarters. Like others, the largest U.S. retailer has found itself with higher-than-usual inventories as a result of delayed orders from the first two quarters of the year that have only recently arrived, compounding existing orders. On top of that, consumers have drastically shifted spending away from discretionary categories, leaving Walmart with excesses of some items.

Walmart said it slashed prices on clothing and other merchandise to help clear inventory valued at more than $61 billion at the end of the first quarter. Walmart reported inventories of $59.92 billion at the end of the second quarter on July 31, 25% above last year’s level. Walmart CFO John David Rainey said electronics, home items and clothing were “problem areas” for the retailer where it must reduce stock.

The company said it was too early to tell whether food price inflation in the third quarter would be different from the double-digit rate of the second quarter. Shoppers are putting fewer items in their cart and buying more private-label food products, where growth doubled in the second quarter from the first, Rainey said.

 

“Instead of buying maybe deli meats or beef, they’re trading down to things like canned tuna, chicken and even beans. We’re seeing the same thing in the quantity, where they’re trading down for smaller pack sizes that are more affordable.” he said.

Surging inflation also drove many mid-to-high income customers to Walmart, mainly to its online business, CEO Doug McMillon said. But they too favored purchases of groceries rather than other merchandise. “We expect inflation to continue to influence the choices that families make, and we’re adjusting to that reality,” he said.

 

Canadian inflation eases in July, but remains elevated and will persist... Canadian inflation slowed to 7.6% in July from an almost 40-year high of 8.1% in June, Statistics Canada data showed. Gasoline prices, up 35.6% in July versus 54.6% in June, did much to blunt annual price acceleration, while the cost of food and demand-driven services, such as travel and dining out, continued to gain speed.

CPI common, which the Bank of Canada says is the best gauge of the economy’s performance, hit 5.5%, with CPI median edging up to 5.0% and CPI trim easing slightly to 5.4%. The average of those three preferred measures was at a record high, suggesting the economy would face continued price pressure for some time yet.

 

Latest News

H&P Report negative compared to pre-report expectations
H&P Report negative compared to pre-report expectations

Nearly every category topped the average pre-report estimates.

After the Bell | March 28, 2024
After the Bell | March 28, 2024

After the Bell | March 28, 2024

Pro Farmer's Daily Advice Monitor
Pro Farmer's Daily Advice Monitor

Pro Farmer editors provide daily updates on advice, including if now is a good time to catch up on cash sales.

PF Report Reaction: Bullish USDA data for corn
PF Report Reaction: Bullish USDA data for corn

Corn planting intentions and March 1 stocks came in lower than expected.

Report Snapshot: USDA shows lighter-than-expected corn acres and stocks
Report Snapshot: USDA shows lighter-than-expected corn acres and stocks

USDA reported corn acres of 90.036 million acres for 2024 and March 1 stocks of 8.347 billion bu., both well below trade estimates. Soybean acres were slightly lower than expectations, while stocks were higher.