Evening Report: April 23, 2022

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

 

Your Pro Farmer newsletter is now available... Food insecurity, debt distress and inflation were among the list of global risks cited by leaders of the World Bank and the International Monetary Fund (IMF) during their annual spring meetings. War in Ukraine is adding pressure to a global economy already hit by the Covid pandemic. Both IMF and the World Bank lowered their global economic forecasts due to the increased risks. With heightened food security concerns, there's greater focus on global production forecasts. The U.S. winter wheat crop continues to be rated very poorly, while spring planting is off to a slow start. Brazil’s safrinha corn crop is holding up for now, but the dry season may be starting early. Ukraine's crop production will be severely impacted by the Russian attack, but Russia is forecast by some to grow a record wheat crop this year. We cover all of these items and much more in this week's newsletter, which you can access here.

 

Cattle on Feed Report: Placements top expectations... USDA estimates the April 1 inventory of cattle in large feedlots (1,000-plus head) totaled 12.105 million head, up 208,000 head (1.7%) from year-ago and 160,000 head more than the average pre-report estimate implied. The bigger-than-expected increase was driven by placements, which declined only 0.4% from last year, whereas traders expected a 7.8% drop. March marketings were just fractionally less than anticipated at 2% under last year’s pace.

Cattle on Feed Report

USDA
(% of year-ago)

Avg. Trade Estimate

(% of year-ago)

On Feed April 1

101.7

100.4

Placements in March

99.6

92.2

Marketings in March

98.0

98.2


Compared to last year, March placements dropped 7.4% for lightweights (under 600 lbs.), increased 1.5% for 6-weights, rose 3.9% for 7-weights, declined 1.5% for 8-weights, increased 2.9% for 9-weights and were unchanged for heavyweights (1,000-plus lbs.). Nebraska placed 30,000 head more cattle than year-ago during March, while placements were unchanged in Kansas and Colorado. Placements dropped 30,000 head in Texas and 8,000 head in “other states.”

As of April 1, there were 7.54 million head of steers on feed, up 133,000 head (1.8%) from last year and 4.565 million heifers in feedlots, up 75,000 head (1.7%) versus year-ago.

The report data is bearish, as the April 1 feedlot inventory and March placements both topped the highest pre-report estimates. That will weigh on the market Monday. But barring a heavy round of sustained fund liquidation, we doubt there will be much lasting impact.  

 

Cold Storage Report: Record March beef stocks... USDA’s Cold Storage Report showed increases in both beef and pork stocks at the end of March, whereas both typically decline during the month.

Beef stocks totaled a March record 536.9 million lbs., up 5.4 million lbs. (1.0%) from February and 53.9 million lbs. (11.2%) above last year. Over the previous five years, beef stocks declined an average of 15.5 million lbs. during the month. Beef inventories were 63.8 million lbs. (13.5%) above the five-year average for March.

Pork stocks at 487.2 million lbs. increased 7.3 million lbs. (1.5%) during March and were 36.1 million lbs. (8.0%) above year-ago. Over the previous five years, pork stocks declined an average of 18.6 million lbs. during March. Pork inventories were still 79.4 million lbs. (14.0%) under the five-year average.

Total poultry stocks increased 10.0 million lbs. (0.9%) during March to 1.087 billion pounds. Poultry meat inventories declined 5.8 million lbs. (0.5%) from last year.

 

Japan’s inflation finally taking off...  The Bank of Japan has resolved to keep interest rates low. The Bank of Japan’s (BOJ) unusual stance has propelled the yen to its weakest level against the dollar in two decades. The weak yen is one reason prices are rising in Japan, with consumer price inflation expected to approach the central bank’s longstanding 2% target in the next month or two. Japan is paying more in yen terms for imports such as oil and food, while global energy shortages and supply-chain bottlenecks also push prices higher. BOJ officials believe the current inflation is a one-time phenomenon driven by factors outside of their control. In BOJ’s mind, such “cost-push” inflation contains the seeds of its own demise because it is likely to tamp down demand and cool the economy. Japan and the U.S. will likely discuss the idea of coordinated currency intervention to stem further yen depreciation during an upcoming bilateral finance leaders’ meeting.

 

Import tariffs could be in Chinese trade strategy re-examination... U.S. Treasury Secretary Janet Yellen said the U.S. trade strategy with China is getting re-examined. On Bloomberg Television’s “Balance of Power,” she said it was worth considering scaling back the Trump-era import tariffs on Chinese imports.  The Peterson Institute for International Economics estimated that eliminating a wide array of Trump-era tariffs, including those on Chinese goods, could reduce inflation by 1.3 percentage points.
 

IMF: Central banks need quick action on inflation... Central bankers must act decisively and quickly to tackle the rise in inflation, said Gita Gopinath, first deputy managing director of the International Monetary Fund. She said there was confidence central banks would bring down inflation, but the time frame for action is narrow. She noted central banks worldwide intend to act now on inflation.

Indonesia to ban palm oil exports... Starting on April 28, Indonesia will effectively ban palm oil exports, President Joko Widodo announced. The export ban is aimed at controlling domestic prices for cooking oil. GAPKI, an Indonesian palm oil group, asked the government to re-evaluate the export ban if it harms the palm oil sector.

In reaction to the news, USDA called for international cooperation rather than export bans given the global supply disruptions due to the war in Ukraine and other factors.


Indonesia conducting palm oil investigations... Indonesian state prosecutors are examining transcripts of conversations between people accused of unlawfully obtaining palm oil export permits. To get an export permit earlier this year, palm oil companies had to sell part of their planned exports to domestic buyers to control cooking oil prices at home. Currently, a trade official and palm oil executives are suspected of corruption. More investigators are being added to the case. The government is also investigating eight cooking oil producers on suspicion of cartel practices amid high prices of edible oil.
 

Malaysia increases palm oil export tax reference price...  Malaysia raised its palm oil export tax reference price from $1,371.61 per MT to $1,564.63 per MT for May. The export tax rate was unchanged at 8%. The country’s export tax rate starts at 3% when crude palm oil is in a range of $520.23 to $554.91 per MT and can rise to a maximum rate of 8% when prices are over $798.61 per MT.

 

Ukraine extends ag export rail restrictions... Ukrainian Railways is extending its temporary restrictions on supplies of some agricultural goods through the Izov border checkpoint into Poland from April 25 to May 3. The restrictions cover exports of cereals, oilseeds, grains and other plant food products, finished animal feed and residues of food. Last week, the state-run railway imposed restrictions to Romania through the Dyakovo and Vadul-Siret crossings and to Poland through Yahodyn and Izov.



Ukraine able to cover Europe’s sunflower oil needs... Ukraine will be able to export 745,000 MT of sunflower oil until the end of the marketing year that ends in August, according to APK-Inform agriculture consultancy. That would be more than enough to cover Europe’s needs. The consultancy reports the country shipped 107,000 MT in March via rail and truck. Before the war, it would only ship 20,000 to 25,000 MT via land.

 

Ukraine increases planting estimates... The Ukraine agriculture ministry raised its estimate of how much of the country’s farmland will get planted by five percentage points to 75%. It explained that many fields were demined primarily in Sumy and Chernihiv. The planted area could be revised up another five points if more fields cleared from landmines.


Pig crate activists take aim at McDonald’s... The Humane Society of the United States has asked the U.S. Securities and Exchange Commission to investigate and hold McDonald’s accountable for deceiving shareholders and the public about its animal confinement policies. This comes after McDonald’s said investor activist Carl Icahn’s demand to stop buying pork from suppliers that use crates would be logistically unfeasible and prohibitively expensive. McDonald’s said it would require at least 300 to 400 times the animals housed today in “crate-free” systems to keep its supply chain running. Icahn has also nominated two directors to monitor the progress on the issue. Investors will vote for directors at the company’s annual meeting on May 26.
 

China to increase production in ten-year projections... China plans to increase its grain output by 1.3% annually over the next decade, according to the China Agricultural Outlook Report issued by China Agricultural Outlook Conference 2022. Xinhua news reported that China’s grain production is expected to total 688 MMT in 2022 and increase to 762 MMT in 2031. The average yield is forecast to increase by 6.4% during the period. The country should reach 88.1% grain self-sufficiency by 2031 and significantly cut agricultural imports. The authors noted science and technology would play a role in helping the country achieve its goal of being more grain self-sufficient.

 

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