Evening Report | September 20, 2022

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Putin may block renewal of Ukraine export deal... The deal that allowed Ukrainian grain exports through three Black Sea ports was for 120 days, after which it must be renewed. Ukrainian Foreign Minister Dmytro Kuleba predicted Russian President Vladimir Putin will probably try to block the renewal of the deal.

Russia supports plan to annex swathes of Ukraine... Russia on Tuesday gave support to plans by separatists, which it backs in Ukraine, to hold referendums paving the way for the annexation of swathes of additional territory. In what appeared to be choreographed requests, Russian-backed officials across 15% of Ukrainian territory requested referendums on annexation with plans of joining Russia. The Donetsk (DPR) and the Luhansk People’s Republics (LPR), which Russian President Vladimir Putin recognized as independent just before the invasion, and the Kherson and Zaporizhzhia regions have asked for votes to break away from Ukraine. Luhansk, Donetsk and Kherson officials said the referendums would take place from Friday, Sept. 23 through Monday, Sept. 27.

Russian Foreign Minister Sergei Lavrov said: “From the very start of the operation... we said that the peoples of the respective territories should decide their fate, and the whole current situation confirms that they want to be masters of their fate.”

If Moscow formally annexed a vast additional chunk of Ukraine, Putin would essentially be daring the U.S. and its European allies to risk a direct military confrontation with Russia.

Argentina tightens FX regs for soy exporters... Argentina’s central bank has tightened access to the foreign exchange market by soybean exporters as it decided they are no longer allowed to trade on alternative markets. According to the measure, soybean exporters selling via the so-called “export incentive program,” which entails a higher exchange rate, are not allowed to buy foreign currencies, effective today. Soybean sales during September have a special rate of 200 pesos per dollar as the central bank seeks to boost its own reserves. Exporters were also blocked from trading foreign currency-denominated securities – even though the measure “does not apply to human beings,” the central bank added.

Consultant expects big increase in South American soybean, corn production... Crop consultant Dr. Michael Cordonnier initially projects South American soybean and corn production at the following levels:

• South American soybean production of 211.0 MMT, up 38.3 MMT (21.3%).
  • Brazil soybean production of 151.0 MMT, up 25 MMT (19.8%).
  • Argentina soybean production of 50 MMT, up 6 MMT (13.6%).
  • Paraguay soybean production of 10.5 MMT, up 6.3 MMT (150%).
• South American corn production of 187.5 MMT, up 11.6 MMT (6.5%).
  • Brazil corn production of 125.5 MMT, up 9.5 MMT (8.2%)
  • Argentina corn production of 55.0 MMT, up 2.0 MMT (3.8%)
  • Paraguay corn production of 5.0 MMT, unchanged.

While the initial production outlook is strong, Cordonnier says with La Niña still present, it could impact South American crops for a third year in a row.

EU wheat exports on par with year-ago... Wheat exports from the European Union reached 8.06 MMT from July 1 through Sept. 18, according to the European Commission. That was nearly identical to the 8.07 MMT exported during the same period last year. France was the leading wheat exporter at 3.15 MMT, followed by Romania at 1.27 MMT, Bulgaria at 881,000 MT, Poland at 806,000 MT and Germany at 709,000 MT.

EU corn imports reached 5.90 MMT, up 79% from the same period last year. EU corn import forecasts have been on the rise as drought has put the bloc on course for its smallest crop in 15 years.

Senate Democrats want USDA accelerate producer debt relief... USDA was urged to quickly implement provisions in the Inflation Reduction Act (IRA) that provide debt relief to distressed USDA borrowers with at-risk agricultural operations. Senate Majority Leader Chuck Schumer (D-N.Y.) and Sen. Cory Booker (D-N.J.) and Raphael Warnock (D-Ga.) called on USDA to consider those that are “90 days or more delinquent, borrowers in foreclosure, borrowers who have had their farm loan restructured and borrowers who owe USDA more interest than principal as distressed borrowers.”

The lawmakers also called on USDA to quickly implement IRA provisions to “provide much needed financial assistance to Black farmers and others who have suffered discrimination through USDA’s farm lending programs.”

More of America's farmers rely on off-farm income... That’s happening at the same time when agriculture accounts for a smaller share of rural employment nationwide, said a University of Missouri study. The analysis, commissioned by agricultural lender CoBank, said the majority of principal farm operators worked off the farm and off-farm income accounted for 82% of farm household income. Only the largest operations, with gross cash farm income above $350,000 a year, generate enough revenue to provide more than half of family income in a year; many farms are so small they make little or no money at all.

Inflation watch: shelter... Rents and other shelter costs are emerging as a major driver of overall consumer inflation, keeping it high at a time when some other sources are starting to ease, the Wall Street Journal reports. Economists expect housing inflation to strengthen further before cooling off in the coming months but are unsure of when relief will appear.

Overall annual inflation eased to 8.3% in August from 8.5% in July, according to the Labor Department’s consumer price index. That reflected declines from the month before in prices for items such as gasoline, airfares and used cars, and slower price increases in other categories, such as groceries. Housing was an outlier. Not only are shelter costs rising, they are climbing at an accelerating pace, accounting for a growing share of the overall inflation rate.    

Truss: U.K. trade deal with U.S. is not on the agenda... British Prime Minister Liz Truss made the comments as she arrived in New York on her first overseas trip as prime minister. President Joe Biden has made it clear that such a deal was not a priority and Truss admitted it was not on the agenda. “There aren’t currently any negotiations taking place with the U.S. and I don’t have an expectation that those are going to start in the short to medium term,” Truss told reporters en route to the UN General Assembly.

Truss said her focus was to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, along with trade deals with India and the six countries of the Gulf Cooperation Council. “Those are my trade priorities,” Truss said. Asked when she thought a trade deal with the U.S. might be feasible, she declined to comment.