Evening Report | September 28, 2022

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U.S. says consequences of Russian annexation will be ‘real and extraordinary’... The U.S. will not recognize Russian-annexed areas across Ukraine amid what the White House called “illegal and illegitimate” referendums that were manipulated by Moscow and would be challenged internationally. “Based on our information, every aspect of this referanda process was pre-staged and orchestrated by the Kremlin,” White House spokesperson Karine Jean-Pierre told reporters at a briefing, adding Washington would rally opposition to recognizing the annexed territories, “including at the UN.”

The U.S. State Department aid to expect additional measures in coming days from Washington in response to referendums held by Russia in occupied regions of Ukraine. “We will continue to work with allies and partners to bring even more pressure on Russia and the individuals and entities that are helping support its attempted land grab,” State Department spokesperson Ned Price told reporters.

Ukraine’s foreign ministry asked the U.S., other G7 nations and NATO to “immediately and significantly” step up pressure on Russia with new sanctions and by significantly increasing their military aid to Kyiv. “Forcing people in these territories to fill out some papers at the barrel of a gun is yet another Russian crime in the course of its aggression against Ukraine,” the ministry said, adding that the balloting was “a propaganda show” and “null and worthless.”

Traders await usually unpredictable Grain Stocks Report... USDA’s Quarterly Grain Stocks Report has a history of shocking markets, and the pre-report range of estimates is wide, suggesting someone will again be surprised Friday morning. Sept. 1 stocks will set final 2021-22 carryover for corn and soybeans and signal implied first quarter 2022-23 wheat use. USDA could also revise its 2021 corn and soybean production estimates. Based on the pre-report estimates, traders on average expect USDA to cut 2021-22 corn ending stocks by 15 million bu. and raise soybean ending stocks by 2 million bu. from what it projected in this month’s Supply & Demand Report. The following results are from a Reuters survey.

Final 2022 wheat crop estimates also coming Friday... USDA will issue its final production estimates for this year’s U.S. wheat crop in Friday’s Small Grains Summary. The report typically features minor fine tuning, which is expected again this year. The following results are from a Reuters survey.

Ethanol production continues to slump... Ethanol production averaged 855,000 barrels per day (bpd) for the week ended Sept. 23, down 46,000 bpd from the previous week and 6.5% below the corresponding week last year. That was the lowest ethanol production since the week ended Feb. 26, 2021, and the smallest for this week since 2013.

Despite the sharp reduction in output, ethanol stocks climbed 190,000 barrels to 22.691 million barrels. Implied ethanol use over the past four weeks was below average but in line with the same period the past two years.

Some Brazilian crushers halt operations amid negative margins... Between eight and 10 Brazilian soybean processors have temporarily halted operations as crushing margins turned negative, reflecting weak domestic demand for biodiesel and high vegetable oil inventories at production sites, Reuters reported, citing to two analysts.

Abiove, a trade group representing global oilseed crushers in Brazil, confirmed the move, telling Reuters some of its members advanced scheduled maintenance stoppages that traditionally happen at the end of the year as soyoil prices dropped while soybean prices remained high, hurting margins.

Abiove’s chief economist says the group may revise its Brazilian soy crush forecast as new processing data becomes available.

Exchange expects bigger Argentine soybean crop, smaller corn and wheat production... Soybean production in Argentina is expected to rise to 48 MMT in 2022-23, the Buenos Aires Grains Exchange said, as it provided its first estimates for the new season. That would be up 4.7 MMT (10.9%) from 2021-22 production. The exchange says soybeans will pick up acres at the expense of other crops such as corn and wheat. Soybean area is expected to rise 400,000 hectares to 16.7 million hectares in 2022-23, the exchange forecasts.

“After almost six seasons, the soybean crop might increase in terms of planted area,” said Martin Lopez, an analyst at the exchange, noting that adverse weather could lead farmers to soybeans in areas they originally intended to plant with corn.

The exchange forecasts will drop to 50 MMT, which would be down 2 MMT (3.8%) from 2021-22. Wheat production is forecast to fall 19.5% to 17.5 million acres as drought cut planted area and will negatively impact yields.

Axios: Treasury secretary eyed in White House midterm shake-up... White House officials are weighing the possible departure of Treasury Secretary Janet Yellen after the November elections as part of a Cabinet shake-up, according to Axios. The decision is not final and is expected to hinge on the outcome of the midterm elections, sources familiar with the matter told the news outlet. Yellen’s successor will need to be confirmed by the Senate, posing a challenge if the Republican Party takes control of the upper chamber. This is not the first time speculation about Yellen’s fate has surfaced. Officials are also considering whether Brian Deese, the director of the National Economic Council, could leave in the new year, according to Axios. Deese, speaking at the Economic Club of D.C. on Tuesday, said he had “no plans to leave” the Biden administration. “I’ve got my head down, and I’m certainly fully, fully absorbed in the work we’re doing,” Deese added. Treasury spokesperson Lily Adams also said Yellen has no plans to leave.

Fed’s Kashkari: Keep tightening monetary policy until inflation normalizes... Federal Reserve Bank of Minneapolis President Neel Kashkari said the U.S. central bank needs to tighten monetary policy until underlying inflation is declining, and then wait to see whether it has done enough. “The one mistake that I’m acutely aware of — that I want to avoid repeating from the 1970s — is when policy makers saw the economy weakening, saw inflation start to tick down, and then they cut rates, thinking they had done the job. And then inflation flared back up again — that, I believe, is a mistake we cannot make and will not make,” Kashkari said Tuesday. The Fed has raised interest rates aggressively this year to reduce inflation, which remains near its highest rate in 40 years.