Evening Report: April 27, 2022
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Indonesia changes palm oil export ban details – again... Indonesia announced today its palm oil export ban will now include crude and refined palm oil. The announcement flipped the minister’s statement a day earlier, in which he had said the export ban would only cover refined, bleached and deodorized palm olein. Indonesia deployed navy ships and personnel to thwart illegal shipments. The export ban will be reviewed monthly or as often as needed but is unlikely to last more than a month due to limited infrastructure to store the surplus oil and mounting pressure from buyers to resume shipments, industry officials said.
Palm oil export ban re-ignites biodiesel debate... Indonesia’s palm oil export ban has re-ignited the discussion of using cooking oils to make biodiesel. The Malaysian Palm Oil Board said countries should cut back on using edible oils for biodiesel. However, the Malaysian Biodiesel Association countered that the country should not cut its biodiesel mandate as it would lead to a crash in crude palm oil prices. Indonesia and Malaysia are the world’s top palm oil producers, accounting for around 85% of global output. Both countries make it mandatory for biodiesel to contain a certain amount of palm oil. The Pakistan Edible Oil Refiners Association has also called for Indonesia to cut back its use of palm oil for biodiesel instead of imposing an export ban.
Part of Brazil’s safrinha corn facing dryness concerns... Mato Grosso, Brazil’s top safrinha corn producer, is facing its driest April in 17 years, according to weather service EarthDaily Agro. Accumulated April rainfall for the state is expected to be 70% below the ten-year average. The weather service noted the Normalized Difference Vegetation Index (NDVI) has deteriorated slightly in recent days and soil moisture levels are low and expected to drop even further, potentially cutting the corn yield. Neighboring Goias is expected to have an 85% reduction in April rainfall.
Heatwave throughout India... India is getting too hot too early, raising the risk of fires, Prime Minister Narendra Modi warned on Wednesday, as a heatwave gripped much of the country. Extreme heat has swept across large areas of India and Pakistan this week and follows the hottest March since the India Meteorological Department (IMD) began keeping records 122 years ago. Near the capital New Delhi, temperatures have soared past 40 degrees Celsius (104 Fahrenheit) for several days. They are forecast to linger around 44C (111 Fahrenheit) until Sunday, with peak summer heat still to come before cooling monsoon rains arrive in June. The typically humid eastern Indian states have been the worst hit, with temperatures above 43C (109 Fahrenheit) on Wednesday. IMD warned that conditions were likely to worsen in the next four days.
India might consider a cotton export ban... India’s government may impose a temporary ban on cotton exports if prices continue to surge, textiles secretary Upendra Prasad Singh told Mint, an Indian financial daily newspaper. The statement comes when the Indian textile Industry is reeling under a spike in cotton and yarn prices, impacting production and exports. However, he cautioned a move should not be a knee-jerk reaction and an export ban would be an extreme step. The statement comes after India suspended import duties until September.
India approves fertilizer subsidy... India will provide a $7.96 billion subsidy for phosphatic and potash-based fertilizers over the coming months to insulate farmers from higher global prices. The subsidy will cover the period to September 2022. India provided a subsidy of $7.47 billion for the previous 12-month period ending March 31. A subsidy of $32.68 for each 50 kg bag of the crop nutrient diammonium phosphate will retain the price at $17.64 in local markets, the minister said, detailing the decision taken by the federal cabinet.
Attaché cuts Argentine soybean crush, raises next year’s acreage... USDA’s attaché in Argentina reduced the country’s projected soybean crush to 38.9 MMT due to reduced imports from Paraguay. The office also expects Argentine farmers to plant 17 million hectares (HA) to soybeans for next year’s crop, projecting production to 51 MMT as farmers shift acreage out of cereal crops that require more fertilizer. The post kept 2021-22 soybean production unchanged at 41 MMT. The post also expects farmers to increase their sunflower seed acres to 2 million hectares with total production estimated at 4 MMT in response to high prices for the 2022-23 marketing year.
The attaché cut Argentina’s corn production forecast to 51.5 MMT for the 2021-22 marketing year, 1.5 MMT lower than the official USDA projection. The post expects farmers to harvest 52 MMT of corn for the 2022-23 marketing year, despite planting 6.75 million hectares, a drop of about 550,000 hectares from the planted area in 2021-22. Corn exports are forecast at 38 MMT for 2022-23, the second-highest on record and slightly higher than 2021-22.
Mexico inflation measure to include farmer assistance... Mexico’s plan to fight inflation will consist of extra fertilizer and other aid to increase domestic food supplies. Mexico’s government is in talks with companies to reach price agreements on essential goods amid the fastest inflation in two decades. The government is seeking a deal with major Mexican businesses on the price of 24 items including rice, corn, beans and milk. The plan doesn’t involve imposing a price limit without the sellers’ consent. The government is reaching agreements with major food item producers and distributors, with stores to help without establishing price controls. The plan will be presented formally in a week.
EU looks to remove Ukraine trade tariffs and quotas... The EU has proposed temporarily removing all remaining tariffs and quota requirements on Ukrainian exports in an effort to bolster the war-torn nation’s economy. The proposal also includes the temporary removal of existing tariffs and quotas on steel, industrial goods and agricultural products currently not covered by the EU’s trade agreement with Ukraine. Since 2016, Ukraine and the EU have had a free trade deal to eliminate tariffs or quotas. The proposal will need to be agreed by all 27 member states and the European Parliament before it comes into force.
Deutsche Bank raises interest rate expectations, recession risk... Deutsche Bank AG economists expect the Federal Reserve to move interest rates into the 5% to 6% range. The bank expects the U.S. to slide into a “deep recession” by late next year. That includes unemployment ultimately rising “several percentage points.” The economists are much more pessimistic than most other major forecasters by their own admission. Goldman Sachs Group Inc. estimated the chances of a contraction at about 35% over the next two years. Bloomberg Economics’ recession-probability model has estimated a 44% chance of recession before January 2024.
Beef cow slaughter numbers above average... Beef cow slaughter for the year to date is up 17.5 percent year over year, according to Derrell Peel, Oklahoma State University Extension livestock marketing specialist, in his weekly "Cow Calf Corner" newsletter. He says combined with a large number of heifers in feedlots and the fact that heifer slaughter is up 2% year over year thus far in 2022 suggests that female numbers are being pulled down even before the worst drought impacts are felt. Perhaps the ongoing drought, carried over from 2021 for many producers, combined with strong feeder cattle and cull cow prices is prompting early adjustments in herds. At the current pace of cow slaughter, the beef cow herd could decrease up to 4% year over year in 2022. This would be the largest yearly decrease in the beef cow inventory since the 1980s. The pace of cow slaughter may slow in the second half of the year but is expected to remain strong in the second quarter and significant herd liquidation seems inevitable this year.
Biden administration to release $670M in international food aid... USDA and the U.S. Agency for International Development are providing $670 million in food assistance to countries in need “as a result of [Russian President Vladimir] Putin’s unprovoked invasion of Ukraine,” USDA said in a statement. The Bill Emerson Humanitarian Trust will provide $282 million to bolster existing emergency food operations in Ethiopia, Kenya, Somalia, Sudan, South Sudan and Yemen. USDA will provide $388 million in additional funding through the Commodity Credit Corporation to cover ocean freight transportation, inland transport shipping and other associated costs.
CME Group to launch Canadian wheat futures... CME Group announced it will launch Canadian wheat (Platts) futures on June 13, pending regulatory review. This contract will offer market participants a new tool to directly manage exposure to the Canadian wheat market. Canadian wheat futures will be cash-settled and will closely track the shipment of grains from Vancouver, where the bulk of Canadian western red spring wheat is exported today. The Canadian wheat contract will be based on the Platts CWRS (Canadian Western Red Spring) Wheat for Number 2 CWRS 13.5% protein FOB Vancouver daily price assessment.
