Evening Report: March 3, 2022
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Russia/Ukraine update... In the first sign of any agreement since the start of the Russian invasion of Ukraine, the two countries agreed on the need to set up humanitarian corridors and a possible ceasefire around them for fleeing civilians. Russia continues to try to capture more Ukrainian cities. Russian forces are trying to blockade the southeastern Ukrainian port city of Mariupol. Ukraine President Volodymyr Zelenskyy said Ukraine’s defense lines are holding up. Six people were rescued after an explosion that sank an Estonian-owned cargo ship off the Black Sea port of Odessa. French authorities have seized four cargo vessels and one luxury yacht linked to Russian oligarchs. The Pentagon has established a direct line of communications with Russia’s defense ministry to prevent “miscalculation, military incidents and escalation” in the region.
Commodity index likely to biggest weekly gain since 1960... The Bloomberg Commodity Spot index will likely set its highest weekly gain since 1960 at the end of this week, Bloomberg reports. After Wednesday’s close, the index was up 8.6% for the week. Barring a significant reversal at the end of the week, the index has likely already passed the 9.7% weekly increase in September 1974. Many commodities such oil, zinc, wheat, corn and aluminum have surged due to supply issues and as traders hedged against inflation.
Egypt looking at plans for wheat procurement... The Egyptian government is investigating its options related to wheat supplies and demand. Since Russia’s invasion of Ukraine, at least two cargoes purchased by Egypt’s state buyer have been stuck at Ukrainian ports. Egypt’s state buyer has agreed to extend the shipment deadline for at least one cargo stuck in Ukraine and will be flexible over the documentation provided by suppliers. The world’s top wheat purchaser might switch from the Black Sea area to other areas, including the EU and other sources.
Algeria to allow French wheat imports... Traders told Reuters Algeria allowed French supplies in its most recent tender for 700,000 MT of wheat. Algeria had barred French wheat imports due to a diplomatic spat. Algeria is working to replace wheat supplies from the Black Sea region, where Ukraine wheat exports have been shut off and Romania and Bulgaria might slow grain exports. Algeria is one of the largest purchasers and a primary export market for EU wheat.
Bulgaria accused of slowing grain shipments... Bulgaria is slowing grain vessel loading to limit exports, Radoslav Hristov, the head of the National Association of Grain Producers, told Reuters.
Hristov said a cargo ship planning to load wheat for Portugal was not allowed to dock as customs authorities carried out document checks. According to the group, there is no official slowdown but just verbal instructions to slow the loading. There are also rumors Bulgaria is considering a grain export ban.
Bulgaria’s agriculture minister, Ivan Ivanov, denied any ban was in force and vessels were not being blocked. He explained there are specific reasons for checks being conducted.
Buyers booking Australian wheat and canola... The head of trading for CBH Group, Australia’s largest coop, expects more demand in the short and medium-term due to the loss of exports from the Black Sea area, Bloomberg reported. The firm will offer an additional 500,000 MT of wheat for export. That is on top of the 17 MMT already expected to be shipped out of Western Australia. That would be a 20% increase over the previous export record from the major wheat-producing state. More buyers are starting to book wheat supplies in the third quarter of 2022. Ships are already booked for several months, meaning buyers are booking export shipments further out.
CBH reports there is buyer interest for canola during the “typically dormant time” in the third quarter.
Argentina to hold some wheat for domestic use... Argentina’s government will hold 800,000 MT of wheat in a trust to control higher food prices. The plan will continue until the end of January 2024 and focus on wheat flour and dry pasta prices. Argentine government officials have already limited 2021-22 wheat exports to 14.5 MMT; exporters have reported export sales of 13.6 MMT. The trust would decouple domestic prices from the international wheat prices. Wheat millers and exporters agreed to the plan. However, farmers and the Buenos Aires Grains Exchange oppose the project.
U.S. winter wheat drought area remains steady... The amount of U.S. winter wheat considered in drought conditions remained at 73% for the week ended March 1, according to the U.S. Drought Monitor. USDA said winter wheat drought was 22% “moderate,” 32% “severe,” 18% “extreme,” and 1% “exceptional.” Last week, USDA rated winter wheat drought as 27% “moderate,” 27% “severe,” 18% “extreme,” and 1% “exceptional."
For HRW areas, all of Kansas is now considered abnormally dry/drought, up 14 points from the previous week. Oklahoma decreased the area classified as abnormally dry/drought by one point to 92%. Texas has an increase of one point to 39% considered abnormally dry/drought. The amount of land classified as abnormally dry/drought in Nebraska (100%), South Dakota (81%), Montana (92%) and Colorado (100%) remained the same.
In SRW areas, abnormally dry/drought conditions in Missouri increased 10 points to 41%. North Carolina dropped by nine points to 52%. The area classified as abnormally dry/drought in Michigan decreased by seven points to 53%. Forty percent of Arkansas is abnormally dry/drought, down three points. Illinois (24%), Ohio (0%) and Indiana (0%) had the same percentage of area considered abnormally dry/drought as the previous week.
U.S. and Canadian cattle inventory down 2%... According to USDA, the combined U.S. and Canadian cattle inventory totaled 103 million head on Jan. 1, down 2% from a year ago. U.S. total cattle inventory decreased 1.9 million head or 2% to 91.9 million from 2021. Canada’s cattle inventory dropped 100,000 head or 1% to 11.1 million head. Cows and heifers that have calved were down 2% in the U.S. and 1% in Canada.
U.S. and Canadian hog inventory declines 3%... The combined U.S. and Canadian hog inventory for December 2021 was 88.3 million head, according to USDA. The breeding herd inventory was 7.44 million head, slightly more than a year ago. Market hog inventory was 80.9 million head, a 4% drop. The semi-annual pig crop was 82.5 million, head down 4%. Farrowing sows were down 5% to 7.31 million head.
The U.S. had 74.2 million hogs, down 4% from 2020. The U.S. market hog inventory was down 4% to 68.0 million head. The U.S. had a 33.7 million head pig crop and 3.01 million sows farrowing.
Canada had a total of 14.1 million head of hogs at the start of the year, up 1%. Canada had a breeding inventory of 1.26 million, up slightly, and a market hog inventory of 12.8 million head, up 1%.
EU may allow farmers to plant fallow land... The European Commission will investigate modifying EU farm policy rules to enable farmers to plant fallow land, especially protein crops for livestock feed. Proposals on the idea will be presented at the next minister’s meeting on March 21.
French cooperative group InVivo, one of Europe’s largest agricultural firms, explained waiving the rules could increase the cultivated area by 10% to 15% and boost EU wheat output.
The EU is considering options to help farmers with higher fertilizer costs, relief measures for pork and poultry sectors, humanitarian aid for Ukraine and the needs of countries that rely on Ukraine for food.
Brazil works to secure fertilizer supplies... Brazilian leaders are working to ensure future fertilizer supplies. While the country’s fertilizer stocks should last until October, the government plans to launch a plan on March 17 to get more investments in potash and phosphorus mines.
Brazil's agriculture minister, Tereza Cristina Dias, says the plan will minimize bottlenecks in terms of legislation, taxes and environmental issues. Dias is scheduled to travel to Canada to talk to fertilizer companies.
Brazilian President Jair Bolsonaro is lobbying the legislature to approve his bill to open up indigenous lands to mining companies. Verde Agritech announced plans to increase its potash production in Brazil.
Fed Beige Book: Inflation is the primary concern... “Prices charged to customers increased at a robust pace across the nation,” the Federal Reserve’s “Beige Book” noted on Wednesday. Businesses expect more price increases for several months due to higher input costs. The term “inflation” was mentioned 17 times in the report. There are some concerns that a wage-price spiral might be near.
Overall, the 12 Federal Reserve districts reported stable conditions and generally positive outlook for the next six months. However, there is a heightened sense of uncertainty among businesses.
