Evening Report | October 20, 2022
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Russian official: Not much progress in grain export talks... Talks on extending a allowing Ukrainian grain and fertilizer exports via Black Sea ports are not making much progress because Russian concerns are not being addressed, Russia’s United Nations ambassador in Geneva said on Thursday. “I wouldn’t say that much has been achieved as a result of the latest consultations. The dialogue is continuing,” Gennady Gatilov said. He reiterated Moscow’s concerns that Western sanctions were hamstringing Russia’s exports of grain and fertilizer, even to poor countries that need the supplies.
In discussions with the UN, “we have emphasized our concerns about the implementation of the Russian part of the deal, because we are still experiencing troubles with essential logistics,” Gatilov said. “The extension of the deal depends on ensuring full implementation of both previously-reached agreements. There is no point in continuing an agreement, one part of which may come out as dead on arrival.”
UN officials insisted the grain export deal was working and must be renewed. The 120-day agreement is set to expire Nov. 19 unless an extension is reached. UN officials would like to renew the deal for one year.
Meanwhile, Gatilov played down the idea Russia would use nuclear weapons in the conflict even though the Kremlin has repeatedly raised the prospect of doing just that. “We will never do this, at least, we will not be the country who initiate this, so it’s clear,” he said.
NWS extended forecast offers little hope for drought improvement... The National Weather Service (NWS) 90-day forecast calls for elevated chances of above-normal temps and below-normal precip across most of the Southern Plains for November through January. There are “equal chances” for above, below- and average temps and precip across northern HRW production areas and most of the major SRW states during the period. The extended outlook offers little hope for any meaningful improvement to conditions for U.S. winter wheat production areas.
The outlook also offers little hope for major improvements for low water levels on the lower Mississippi River, as that area is expected to be the hottest and driest compared to normal.
The Seasonal Drought Outlook indicates drought will persist or develop across most areas of the Plains, Delta and Southeast, though there could be some improvement in the Ohio River Valley.
Click here to view related maps.
Drought footprint unchanged, but spreads in SRW areas... As of Oct. 18, 82% of the U.S. was experiencing abnormal dryness/drought, according to the U.S. Drought Monitor, unchanged from the previous week. There were “targeted improvements in the Southern Plains,” though none of that came in the major HRW wheat production states.
USDA estimates the drought footprint covers 70% of winter wheat acres (up 4 points from last week).
In HRW areas, dryness/drought covers 77% of Colorado (unchanged), 99% of Kansas (unchanged), 90% of Montana (unchanged), 100% of Nebraska (unchanged), 100% of Oklahoma (unchanged), 100% of South Dakota (up 5 points) and 94% of Texas (unchanged).
In SRW areas, dryness/drought covers 100% of Missouri (unchanged), 76% of Illinois (up 12 points), 100% of Indiana (up 20 points), 59% of Ohio (up 13 points), 41% of Michigan (down 10 points), 86% of Kentucky (up 1 point) and 79% of Tennessee (up 5 points).
Click here for more details and to view related map.
IGC lowers global corn crop forecast... The International Grains Council (IGC) trimmed its forecast for 2022-23 global corn production, partly reflecting downgrades to output in the European Union and the United States. IGC now forecasts global production for this year at 1.166 billion MT, down 2 MMT from its prior estimate and 51 MMT (4.2%) below last year.
IGC kept its 2022-23 world wheat crop forecast unchanged at 792 MMT, which would be up 10 MMT (1.3%) from last year.
IGC trimmed its 2022-23 global soybean production forecast by 1 MMT to 386 MMT, though that would still be up 31 MMT (8.7%) from last year.
USDA lowered its global production forecasts for 2022-23 to 1.169 billion MT for corn and 782 MMT for wheat in its October Supply & Demand Report. USDA raised its 2022-23 global soybean crop forecast to 391 MMT.
Another cut to Argentine wheat crop... The Buenos Aires Grain Exchange cut its Argentine wheat crop estimate by 1.3 MMT to 15.2 MMT, citing the late-season frost and ongoing drought. The exchange also cut its corn planted area forecast by 200,000 hectares to 7.3 million hectares due to planting delayed caused by drought.
Earlier this week, the Rosario Grain Exchange cut its Argentine wheat crop forecast to 15 MMT.
Biden administration looking to counter extremely low diesel supplies... Bloomberg reports diesel demand is surging in the U.S. while supplies remain at the lowest seasonal level ever, according to government data released Wednesday. The shortage of the fuel used for heating and trucking is a key worry for the Biden administration heading into winter — and ahead of the November election. National Economic Council Director Brian Deese told Bloomberg TV diesel inventories are “unacceptably low” and “all options are on the table to build supplies and reduce retail prices.”
Farm-state lawmakers urge EPA to set highest ethanol mandate ever... The coming EPA regulatory reset of the Renewable Fuel Standard (RFS) should push the corn ethanol target above 15 billion gallons for the highest annual mandate ever and allow E15 to be sold year-round, said farm-state senators. In a letter (link) to EPA administrator Michael Regan, the senators urged the agency to establish “robust and expanded” biofuel mandates.
Farm safety-net election process underway... Producers can now change their election and enroll in the Agriculture Risk Coverage (ARC) and Price Loss Coverage programs for the 2023 crop year. Signup began Oct. 17 and will run until March 15, 2023. Although election changes for 2023 are optional, producers must enroll through a signed contract each year. Also, if a producer has a multi-year contract on the farm and makes an election change for 2023, they must sign a new contract. If producers do not submit their election by the March 15 deadline, their election remains the same as their 2022 election for crops on the farm. Farm owners cannot enroll in either program unless they have a share interest in the farm. Payment calculation tools are available here. USDA’s Farm Service Agency (FSA) has started issuing payments totaling more than $255 million to producers with 2021 crops that have triggered payments through ARC or PLC.
Recession warnings increase... Americans should brace for a recession, according to Amazon founder Jeff Bezos, who has become the latest to warn about economic doom and gloom on the horizon. “Yep, the probabilities in this economy tell you to batten down the hatches,” he wrote on Twitter, in response to a CNBC interview of Goldman Sachs’ CEO David Solomon, who warned “there’s a good chance” of recession. Bezos has his finger on the pulse of many parts of the economy. Not only can he size up transactions taking place in the retail space, but Amazon Web Services (responsible for the bulk of the company’s profits) supports nearly a third of all cloud businesses worldwide.
In the U.S., the spread between the 3-Month Treasury Bill and 10-Year Treasury Note Yields, which is widely viewed as the most consistent, accurate and “fastest” recession-indicator across the yield curve, inverted on Tuesday, substantiating expectations for a U.S. recession in the next 12 months.
UK’s Truss resigns... United Kingdome Prime Minister Liz Truss resigned after just six weeks on the job, Truss told a heated session of Parliament on Wednesday that she was a “fighter, not a quitter” but this morning did just that in resigning. Truss fired Home Secretary Suella Braverman for what was described as a national security breach, adding to turmoil in her government. Speaking from Downing Street, Truss said she was stepping down as leader of the Conservative Party as she could not deliver the mandate on which she was elected. There will be an election within the party to select her replacement as leader and prime minister, she added, which will be “completed within the next week.” Truss said she will stay on as prime minister until her successor is chosen.
