Evening Report | June 2, 2022

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

Russia ready to guarantee safety of ships carrying Ukrainian grain... Russia’s defense minister told UN Under-Secretary-General Martin Griffiths Russia isn’t blocking Ukrainian ports in the Black Sea and vessels carrying grain can leave Ukraine’s ports in the Black Sea via “humanitarian corridors,” noting his country is ready to guarantee their safety, Interfax news agency reported.

The defense ministry also said Russia would not use the humanitarian situation to solve the issues of what Moscow calls its “special military operation” in Ukraine, Interfax added.

Drought footprint shrinks... Based on U.S. Drought Monitor data as of May 31, 54% of the U.S. winter wheat crop area was experiencing drought, down four percentage points from the previous week. USDA classified the drought as 16% “moderate,” 22% “severe,” 13% “extreme” and 3% “exceptional.”

Across HRW areas, dryness/drought covers 86% of Texas (down a point from the previous week), 49% of Oklahoma (down four points), 67% of Kansas (down four points), 99% of Colorado (down a point), 94% of Nebraska (down four points), 69% of South Dakota (down four points) and 95% of Montana (unchanged).

For other crops, USDA estimates the drought footprint at 19% for corn (down a point from the previous week), 10% for soybeans (down two points), 25% for spring wheat (down a point) and 51% for cotton (down a point).

Canadian planting/crop update... The crop situation in Canada ranges from dryness/drought in areas of the Western Prairies to excessive wetness/flooding in eastern growing regions. Mike Jubinville of Canada-based MarketsFarm provides the following assessment:

“A rough estimate... Western Canada is about 75% planted. Manitoba is extremely wet, with Winnipeg recording the second wettest spring on record, and is only about 40% planted. Eastern Saskatchewan is similar. Growers are shifting away from corn/beans, likely to more canola, maybe wheat, oats. Prairie-wide, upwards of 10% of total crop land is at risk of facing some acreage shifts or abandonment.

“Like every year at this time, we stress about areas that are too dry or too wet... with a swath of regions somewhere in between. The glass-half-empty crowd is supply-bullish. The glass-half-full crowd is focused on what has been seeded, knowing that a wide range of supply outcomes are still possible. That said… I think Western Canada does have very real incremental crop challenges...ones that already reduce the odds of a strong yield/production outcome overall this year but does not yet assure poor a poor crop or eliminate the possibility yet of a normal overall outcome. June is usually a month to over-think supply vagaries, while plants kill time growing into July reproduction.”

Exchange raises Argentine soybean crop estimate, cuts wheat acreage for next year... The Buenos Aires Grain Exchange raised its 2021-22 Argentine soybean crop estimate by 1.3 MMT to 43.3 MMT due to higher-than-expected yields. The exchange kept its Argentine corn crop forecast at 49 MMT.

The exchange cut expected wheat acreage for 2022-23 by 100,000 hectares to 6.5 million hectares due to a lack of soil moisture in northern areas of the country and said prolonged dryness could further cut planted area. It previously noted high fertilizer costs as a negative impact for wheat acreage.

Big jump in weekly ethanol production... Ethanol production for the week ended May 27 jumped 57,000 barrels per day (bpd) to 1.071 million bpd. That was the highest weekly production tally since the week ended Dec. 10 and 3.6% above the corresponding week last year.

Ethanol stocks declined 751,000 barrels, despite the surge in production, to 22.961 million barrels, the lowest since the first week of this year.

Gasoline demand is still about flat with year-ago. PADD 2 (Midwest) gasoline supply is the lowest May level ever. Industry sources say demand isn’t falling as low as supply, signaling high prices aren’t curbing demand. Gasoline prices will continue to push higher until demand slows.

OPEC+ agrees to boost output... The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia (OPEC+), agreed to raise output by 648,000 barrels per day (bpd) in both July and August. Its previous plan was for monthly increases of 432,000 bpd through September.

Deputy Russian Prime Minister Alexander Novak told state TV it was important for Moscow to continue cooperating with OPEC+. He noted the plan to raise output was pulled forward to help cover rising demand for oil due to seasonal factors. He also said the EU’s embargo on Russian oil may result in significant shortages of oil and oil products in Europe, calling the decision “political.”

The White House welcomed Thursday’s decision and recognized the roles of Saudi Arabia, the United Arab Emirates, Kuwait and Iraq in securing consensus on the increased output. Washington wanted clarity on oil output plans before a potential visit by President Joe Biden for a summit with Gulf Arab leaders in Riyadh, Saudi Arabia.
 

WSJ: European sanctions may be no match for oil sector’s murky supply chains... Crude carriers and refiners already appear to be getting Russian products to global markets by obscuring their origins, and the Wall Street Journal reports some fuels believed to be partially made from Russian crude landed in New York and New Jersey last month. Shipping records and industry analysts say the cargoes were brought through the Suez Canal and across the Atlantic from Indian refineries, which have been big buyers of Russian oil. It’s one example of how shipping processes are being manipulated to obscure the origins of Russian oil to keep it flowing. The oil is being concealed in blended refined products and it’s being transferred between ships at sea, a page out of the playbook used to buy and sell sanctioned Iranian and Venezuelan crude.
 

Aviation industry pushes for green jet fuel incentives... The aviation industry warned that efforts to expand sustainable aviation fuel (SAF) may be stalled if Congress doesn’t enact a tax incentive and invest more on production facilities. Lobbyists said the industry may not be able to meet the joint Biden administration and industry target of 3 billion gallons of SAF available per year by 2030, up from around 5 million last year, without a blender’s tax credit that they have lobbied Congress to pass. Such a tax break was included in the stalled Build Back Better bill and may be included in restarted negotiations with Sen. Joe Manchin (D-W.Va.), as we previously reported. Besides tax credits, industry officials are looking at other initiatives for advancing SAF. R&D programs can also be expanded in appropriations bills and even potential provisions in the any farm bill.

“There’s no doubt that today’s volatility in oil prices and the uncertainty in our markets reinforce our need of greater SAF production,” Billy Nolen, acting chief of the Federal Aviation Administration, said Wednesday. Meanwhile, Southwest Airlines announced Wednesday they were investing in a sustainable aviation fuel pilot project backed by the Energy Department.

But environmental groups are urging the U.S. to reconsider its plans to develop SAF because of concerns about the plans’ inclusion of crop-based biofuels, which are derived from soy and other agricultural products.

EPA restores rights of states, tribes to block projects... EPA on Thursday restored the right of states and tribes to block projects based on environmental grounds through the federal clean water permitting process, reversing a Trump-era effort to prevent them from doing so. The agency issued a proposed rule last May to revise the 2020 Clean Water Act Section 401 certification rule by strengthening the authority of states, territories and tribes to protect their water resources and the climate by blocking potentially harmful projects. The Trump EPA rule had made it impossible for a state to block a federal water permit for a project for any reason other than direct pollution into state waters, such as the project’s potential climate impacts.

“EPA’s proposed rule builds on this foundation by empowering states, territories, and Tribes to use Congressionally granted authority to protect precious water resources while supporting much-needed infrastructure projects that create jobs and bolster our economy,” EPA Administrator Michael Regan said.

Perspective: This is another potential limitation on pipelines, yet the Biden administration says it wants to bring down gas prices. 

Will the global food crisis get political?... Ian Bremmer of Eurasia Group shared his insights on the topic with GZERO. He said: “Yeah, I think it's interesting. Right now, it’s political in the sense that a lot of the developing countries are blaming the West for not caring about them, refusing equitable redistribution through the pandemic and through the Russia war and as a consequence, focusing more on how they can take care of themselves, which means more protectionism. But that protectionism is of course political. It is willingness to accept lack of efficiency and not getting the best price to ensure that your population is fed, that your population is taken care of. And I think going forward, there's going to be a lot more of that. It'll be interesting to see whether the developing world is equally angry at the West for this as they are with the Chinese for lots of investments on the ground in their countries to get access to food for the Chinese population. Because of course they’re significant importers too. And in places like Sub-Saharan Africa, the Chinese are writing all the big checks, but they’re also the ones taking out a lot of the resources in a way that the Europeans and the Americans were 50 years ago and that led to a lot of backlash against the advanced industrial democracy. So, we’ll watch how all that plays out, but certainly the food crisis is a deeply political crisis.”