Evening Report | September 22, 2022

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Drought expands, intensifies across HRW areas... Drought As of Sept. 20, 69% of the U.S. was experiencing abnormal dryness/drought, according to the U.S. Drought Monitor, up three percentage points from the previous week. Drought conditions expanded and intensified in HRW areas of the Plains.

The Drought Monitor noted: “Parts of the High Plains region had rain while other parts were dry. Up to two inches fell locally in parts of several states. Especially dry areas occurred in parts of the Dakotas, Montana, Kansas, and Colorado. The lack of rain was accompanied by unusually hot temperatures regionwide, which increased evapotranspiration and accelerated the drying of soils. The drying soils and dry ponds and waterholes led to extensive expansion of D0-D2 in North Dakota and Montana, and D0-D4 in South Dakota and Kansas. Groundwater levels are low with wells in Wichita, Kansas, going dry. According to media reports, a water emergency developed in Caney, a town in southeast Kansas, when water stopped flowing over the Little Caney River’s dam; there are 6 weeks of water supply left. D1 and D2 expanded in parts of Colorado, and D3 expanded in southeast Wyoming while other parts of the state saw contraction of D0 and D1. Nebraska also had some contraction of D2, but expansion of D1-D3 in other parts of the state. According to USDA statistics, all states in the region had half or more of the topsoil moisture short or very short of moisture. In Nebraska and Kansas, three-fourths of the pasture and rangeland was in poor to very poor condition, while the value was 50% for Colorado, 55% for South Dakota, and 58% for Montana.”

Across the Plains, dryness/drought covers 84% of Colorado (unchanged from last week), 97% of Kansas (up 1 point), 91% of Montana (up 6 points), 100% of Nebraska (unchanged), 100% of Oklahoma (unchanged), 89% of South Dakota (up 7 points) and 79% of Texas (up 1 point).

USDA estimates the drought footprint covers 57% of winter wheat acres (up 3 points).

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Big Russia wheat crop getting bigger... SovEcon raised its 2022 Russian wheat crop forecast by 5.3 MMT to a record 100 MMT due to strong spring wheat yields across most regions. Wheat production is now expected to top the previous high by 14 MMT. SovEcon now expects total grain production to be a record 151.4 MMT.

Despite record production, SovEcon estimates July-September wheat exports at 10.2 MMT, down 14% from the five-year average, due to the strong ruble and the export tax.

IGC raises global wheat crop forecast, cuts corn production... The International Grains Council (IGC) raised its forecast for 2022-23 global wheat production by 4 MMT to 792 MMT amid an upward revision for the Russian crop. IGC now expects the Russian wheat crop to total 93.4 MMT, up from its prior forecast of 87.6 MMT, but still well below others, including SovEcon. Global wheat production is now forecast to top year-ago by 10 MMT (1.3%).

IGC cut its 2022-23 global corn crop forecast by 11 MMT to 1.168 billion MT, driven mostly by a 10.5-MMT cut to the U.S. production outlook.

Cold Storage Report: Beef, pork stocks imply strong demand... USDA’s Cold Storage Report showed both beef and pork stocks climbed seasonally during August, though less than average. The smaller-than-normal rise in frozen meat stocks came despite hefty monthly increases in beef and pork production, implying demand was strong and outpaced supplies.

Beef stocks totaled an August record of 515.8 million lbs., up 3.8 million lbs. (0.7%) from July, whereas they rose an average of 20.1 million lbs. over the previous five years. Beef inventories increased 100.8 million lbs. (24.3%) from year-ago and were 53.3 million lbs. (11.5%) above the five-year average.

Pork stocks totaled 532.0 million lbs., up 5.6 million lbs. (1.1%) versus July, though less than the five-year average increase of 12.3 million lbs. for the month. Pork inventories increased 77.8 million lbs. (17.1%) from August 2021 but were 4.6 million lbs. (0.8%) under the five-year average.

 Total poultry stocks at 1.265 billion lbs. 22.2 million lbs. (1.8%) from July and were 120.2 million lbs. (10.5%) greater than year-ago.

UK: Putin will struggle with troop activation... The UK’s forecast for Putin’s 300,000-man recruiting surge: “Russia is likely to struggle with the logistical and administrative challenges of even mustering the 300,000 personnel,” many of which “are unlikely to be combat effective for months,” the British military tweeted Thursday in its latest Ukraine update. From London’s point of view, “Putin is accepting considerable political risk in the hope of generating much needed combat power,” the military said. “The move is effectively an admission that Russia has exhausted its supply of willing volunteers to fight in Ukraine,” UK’s military added. It predicts, “Even this limited mobilization is likely to be highly unpopular with parts of the Russian population.”

Russia secretly planning even bigger troop call-up?... Independent Russian newspaper Novaya Gazeta reports there is a “secret seventh paragraph” in Russian President Vladimir Putin’s Wednesday decree that permits calling up one million Russians for his Ukraine invasion, according to a government source. Meanwhile, Russians are leaving the country in droves following Putin’s announcement earlier this week. Shortly after he ordered his country's first war mobilization since World War II on Wednesday, prices for one-way plane tickets out of Moscow immediately skyrocketed and border crossings began surging across locations in Finland and Georgia, Reuters reported Thursday from the capital cities of Helsinki and Tbilisi. BBC reports a 3-mile long wait for at least one border crossing into Georgia.

EU to pursue additional sanctions against Russia... The European Union has agreed to pursue new sanctions against Moscow in response to its escalation of the war in Ukraine, including an oil price cap on Russian crude, curbs on high-tech exports to Russia and more individual sanctions on diplomats and individuals in Moscow, Reuters reports. Three EU diplomats said the new sanctions would “center” around the oil price cap plan that G7 ministers agreed to pursue earlier this year. The new EU measures were drafted at an ad hoc meeting of EU leaders, Reuters notes. European Commission President Ursula von der Leyen told reporters the new measures would include “additional export controls on civilian technology.” “We also fully expect more individual listings,” another individual said of the sanctions.

GOP warns banks on climate activism... Sen. Pat Toomey (R-Pa.), the top Republican on the Senate Banking, Housing and Urban Affairs Committee, warned the four largest U.S. banks to stop “embracing a liberal ESG agenda that harms America,” when they take stances on non-banking social and political issues. “I can’t help but observe that when banks do weigh-in on highly charged social and political issues, they seem to always come down on the liberal side,” Toomey said at a hearing this morning. He earlier this week sent letters to more than a dozen credit firms earlier this week requesting information on their ratings system used to assign ESG ratings to companies.

The SEC proposed two rule changes earlier this year aimed at preventing misleading claims and enhancing disclosures made by ESG funds.

Amazon to use ‘electrofuel’ to cut CO2 emissions... Starting next year, Amazon will look to cut its CO2 emissions in Southern California by about 95% by using a new, renewable “electrofuel” diesel to power tens of thousands of delivery vehicles. The retail giant says the fuel causes significantly less carbon pollution than petroleum-based diesel due to how it’s produced: clean hydrogen sourced from renewable energy is mixed with waste carbon dioxide captured from industrial sources. Amazon expects to source the “electrofuel” from Sacramento, California-based startup Infinium.

California focuses on eliminating diesel trucks... The California Air Resources Board (CARB) is expected to vote Oct. 27 on whether to ban the sale of diesel big rigs by 2040. The state previously voted to end the sale of gasoline-fueled cars and light trucks by 2035.

USDA distributes millions in funds to speed up rural broadband service... USDA will distribute $502 million to communities in 20 states in the latest round of funding designed to upgrade broadband access in rural areas struggling with upload and download speeds so slow they risk being left behind other Americans. USDA Secretary Tom Vilsack said the $360 million grant money and $142 million in loans through the department’s ReConnect continues efforts to close the broadband gap between rural America and other parts of the country connected to high-speed broadband and economic opportunities.

Vilsack said his department meets regularly with other agencies to avoid duplication of efforts. “Coordination has been good. We’re attempting to make sure we have a good accurate read on where the gaps are in terms of coverage,” Vilsack said.

Ag trade nominee pushed for fast Senate vote next week... Key bipartisan senators on the Senate Ag Committee want to confirm nominees for trade, food safety, and farm credit by unanimous consent next week. “I hope next week that we can get 100% of the Senate” to back the nominees, Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) said at a panel hearing Thursday, citing broad bipartisan support. Democratic and Republican senators praised Alexis Taylor, the president’s pick for USDA’s undersecretary of agriculture for trade and foreign agricultural affairs. Sen. Chuck Grassley (R-Iowa) also said “we ought to move” her nomination next week by unanimous consent. The other two nominees are Jose Emilio Esteban, for USDA’s undersecretary for food safety, and Vincent Garfield Logan, for the Farm Credit Administration board, a three-person panel that oversees the policies of a network of rural lenders. Senators noted that the USDA trade position has been vacant for over 20 months. A Senate panel earlier this month advanced Doug McKalip for the post. “I do question if they will be receiving the support they need from the White House,” Sen. John Boozman (R-Ark.), the panel’s ranking member, said about the length of time it has taken to nominate and confirm Taylor and McKalip.