Global Ag News for Mar 1.22

 TODAY – USDA FATS & OILSEEDS, GRAIN CRUSHINGS

Wheat prices overnight are up 48 in SRW, up 47 in HRW, up 20 in HRS; Corn is up 21 1/2; Soybeans up 40; Soymeal up $0.56; Soyoil up 3.06.

For the week so far wheat prices are up 115 in SRW, up 99 3/4 in HRW, up 50 in HRS; Corn is up 58; Soybeans up 95 1/2; Soymeal up $0.89; Soyoil up 6.72. For the month to date wheat prices are up 215 3/4 in SRW, up 215 3/4 in HRW, up 20 in HRS; Corn is up 87 3/4; Soybeans up 181 1/2; Soymeal up $34.90; Soyoil up 10.77.

Year-To-Date nearby futures are up 23% in SRW, up 23% in HRW, down 0% in HRS; Corn is up 21%; Soybeans up 27%; Soymeal up 11%; Soyoil up 35%.

Chinese Ag futures (MAY 22) Soybeans up 63 yuan; Soymeal up 63; Soyoil up 406; Palm oil up 520; Corn up 21 — Malaysian Palm is up 463. Malaysian palm oil prices overnight were up 463 ringgit (+7.35%) at 6762.

There were no changes in registrations. Registration total: 1,857 SRW Wheat contracts; 0 Oats; 17 Corn; 68 Soybeans; 137 Soyoil; 0 Soymeal; 92 HRW Wheat.

Preliminary changes in futures Open Interest as of February 28 were: SRW Wheat up 5,024 contracts, HRW Wheat up 659, Corn down 1,025, Soybeans down 608, Soymeal up 147, Soyoil up 2,872.

Brazil Grains & Oilseeds Forecast: Rio Grande do Sul and Parana Forecast: Scattered showers through Tuesday. Temperatures above normal through Monday, near normal Tuesday. Mato Grosso, MGDS and southern Goias Forecast: Isolated showers through Tuesday. Temperatures near to above normal through Tuesday.

Argentina Grains & Oilseeds Forecast: Cordoba, Santa Fe, Northern Buenos Aires Forecast: Mostly dry through Thursday. Isolated showers Friday. Temperatures near to below normal through Wednesday, near to above normal Thursday-Friday. La Pampa, Southern Buenos Aires Forecast: Mostly dry through Thursday. Isolated showers Friday. Temperatures near to below normal through Wednesday, near to above normal Thursday-Friday.

The player sheet for Feb. 28 had funds: net buyers of 28,000 contracts of SRW wheat, buyers of 32,500 corn, buyers of 21,500 soybeans, buyers of 3,500 soymeal, and  buyers of 13,500 soyoil.

TENDERS

• WHEAT TENDER CANCELED: Egypt’s state grains buyer, the General Authority for Supply Commodities (GASC), canceled a second international tender for wheat in four days as the Ukraine crisis continued to disrupt grain markets. Only three trading houses participated in the tender, reflecting supply uncertainty and market turbulence following Russia’s invasion of Ukraine.
• SOYBEAN SALE: The U.S. Department of Agriculture confirmed private sales of 136,000 tonnes of soybeans to China for delivery during the 2022/23 marketing year that begins Sept. 1, 2022, and another 120,000 tonnes of soybeans to unknown destinations for delivery in 2021/22.
• WHEAT TENDER: Algeria’s state grains agency OAIC issued an international tender to purchase a nominal 50,000 tonnes of durum wheat, which closes on March 2, with offers to remain valid until March 3.
• WHEAT TENDER: Japan’s Ministry of Agriculture, Forestry and Fisheries is seeking to buy 83,136 tonnes of food-quality wheat from the United States in regular tenders that will close on Wednesday.

PENDING TENDERS

• BARLEY-SOYMEAL TENDER: Iranian state-owned animal feed importer SLAL issued international tenders to purchase up to 60,000 tonnes of barley and 60,000 tonnes of soymeal
• RICE TENDER: South Korea’s state-backed Agro-Fisheries & Food Trade Corp issued an international tender to purchase an estimated 72,200 tonnes of rice to be sourced from the United States and Vietnam
• FEED BARLEY TENDER: Jordan’s state grains buyer issued an international tender to purchase 120,000 tonnes of animal feed barley
• WHEAT TENDER: Turkey’s state grain board TMO issued an international tender to purchase about 435,000 tonnes of milling wheat
• WHEAT TENDER: Jordan’s state grain buyer issued an international tender to buy 120,000 tonnes of milling wheat which can be sourced from optional origins

China Should Raise Edible Oil Imports to Avoid Shortages: Report

China should consider measures to encourage imports of vegetable oils such as palm oil to prevent the risk of future shortages, the China Securities Journal reported, citing several unnamed experts.

• Commercial inventories of palm oil in key areas of the country were lower than the average of the past two years
• Import costs of palm oil are higher than the domestic price and importers can’t turn a profit

Ukraine Ports to Stay Shut Until Russian Invasion Ends

Ukrainian ports will stay closed until Russia’s invasion ends and maritime security can be restored for commercial vessels, Reuters reported Monday, citing comments from the head of Ukraine’s Maritime Administration.

The port of Mariupol has been struck by Russian shelling and authorities are assessing the extent of the damage

Other ports have also sustained some damage, which was “not critical”

Palm Giant Golden Agri Adds to Warnings About Demand Destruction

Golden Agri-Resources Ltd. said sky-high prices of vegetable oil will lead to demand destruction, a scenario where consumers will either scale back purchases or simply not be able to afford it anymore.

While it’s not happening right now — which is why palm oil prices and other vegetable oil crops are repeatedly hitting fresh highs — the rally will be hard to sustain, the Singapore-based company said at a results briefing Tuesday.

Demand rationing will occur. Major importing nations will be buying hand-to-mouth to fulfill immediate needs. They will focus on running down existing inventories and be reluctant to stock up because of high prices, said Richard Fung, director of investor relations at Golden Agri.

The outlook chimes with a chorus of predictions including from Goldman Sachs Group Inc. that demand destruction is the only thing that can stop commodity prices from shooting higher. Raw materials from oil and gas to aluminum and wheat have soared as the war in Ukraine triggered an array of supply risks.

Other details from Golden Agri:

• Russia and Ukraine account for more than 75% of sunflower oil exports; situation in Black Sea is likely to further tighten global vegetable oil supplies
• Palm oil’s fundamentals will remain very tight; while production is expected to rise modestly this year, growth will be limited by high fertilizer costs and labor constraints in Malaysia
• Indonesia’s biodiesel mandate could further tighten supply of palm oil; policy is likely to be sustained in 2022
• Palm oil’s competitive advantage vs other vegetable oil crops means it will continue to play a major role in serving growing populations
• Easing of pandemic restrictions in various countries will support demand growth for vegetable oils

EU predicts pain for farmers and consumers from Ukraine crisis

Russia’s invasion of Ukraine and EU sanctions on Moscow will prove painful for farmers, consumers, fertilizer makers and exporters of farm products, the European Commission warned on Monday.

Michael Scannell, deputy director-general of the Commission’s agriculture division, said grain buyers should brace for higher prices given that Russia and Ukraine made up more than 30% of global trade in wheat, 32% for barley, 17% for corn and more than 50% for sunflower oils, seeds and meals.

The bloc also imports significant amounts of animal feed and fertilizers from the region and its own fertilizer producers rely on imports of natural gas from Russia.

“The consequences of this Russian aggression will have a major impact on our agri-food sector and it will be painful,” Scannell told EU lawmakers ahead of an emergency meeting of EU agriculture ministers on Wednesday, which is expected to focus on food security.

The EU official told the agriculture commission of the European Parliament that close attention was on Black Sea ports, as this was the point of exit for most Ukrainian grain exports. That trade had essentially frozen, he added, with internal logistics hit and the risk of disruption to the summer corn sowing season.

“This raises the possibility that this crisis will continue into medium term because obviously that will impact harvests later this year,” Scannell said.

The European Union has significant exports of pork to Ukraine and both exports and imports of poultry. From Russia, the EU imports wines, spirits and confectionery.

Record Wheat Harvest in Australia Now Seen Over 5% Bigger

• Bumper output needed to ease strained global grain markets
• Hard to believe that prices won’t be higher for longer: Abares

Australia’s record wheat production this year is now estimated to be even larger than expected after mostly favorable weather, helping to ease global shortages caused by drought and the war in Ukraine.

The harvest in one of the world’s biggest exporters is seen at 36.3 million tons, about 5.5% more than predicted in late November, according to a report from government forecaster Abares. Some private forecasters have gone even higher, with IKON Commodities estimating the crop at 39 million tons.

The global grains market has been thrown into turmoil by Russia’s invasion of Ukraine, with traders reluctant to enter into new deals with the two countries after the West announced moves to prevent the central bank from using foreign reserves to blunt sanctions, and also excluded some lenders from the SWIFT messaging system that underpins trillions of dollars of transactions.

Russia and Ukraine supply more than 25% of the world’s wheat exports, about fifth of corn sales and a similar share for barley. “What happens from here really depends on both the supply coming back in, particularly from North America and particularly how their seasonal conditions play out,” Jared Greenville, executive director of Abares, said at a conference. “But it’ll be hard to believe that it won’t at least maintain high prices for longer.”

Abares increased its wheat estimate even after record November rainfall in Queensland and New South Wales led to widespread quality downgrades and an unprecedented amount of feed quality wheat from New South Wales. The forecaster raised its prediction for the barley harvest by 3% to a record 13.7 million tons, and for canola by 12% to an all-time high of 6.4 million tons.

Other notes from Abares:

• Smaller Australian crops are probable in the coming year, partly as a result of more average seasonal conditions, and international prices are likely to drop from current highs on higher overseas production
• The overall value of farm commodity production in 2022-23 is forecast to decline 6% to A$76 billion ($54.6 billion)
• Global climate outlooks show average to above-average rainfall is slightly more likely from March to May 2022 across major grain- and oilseed-producing regions
• In Australia, conditions over the medium term are most likely to be adequate but not highly favorable, with a high likelihood of at least one dry year over the next five years
• The Abares report was written before the invasion of Ukraine and the move by Western nations to impose sweeping sanctions on Russia

Indonesia Lets Tax Amnesty Funds Be Placed in Commodity Sectors

As many as 332 sectors in natural resource downstreaming and renewable energy are open to tax amnesty participants who seek to invest their disclosed assets, according to Finance Ministry’s tax office in a statement.

• Industries include geothermal energy, crude palm oil, power generation machinery, poultry processing, wood furniture and video game development, among many others
• NOTE: Indonesia to Offer Bonds via Private Placement in Tax Amnesty
• Taxpayers who invest in natural resource processing, renewable energy or in government securities will be subject to a lower final income tax rate
• Investments must be made before Sept. 30 for at least 5 years

Turning Grass Into Food is China’s New Plan to Cut Grain Imports

China wants more grass-fed cattle and is boosting domestic production of forage crops as a way of easing the demand for feed grains that’s been a pressure point in its food security goals.

The government laid out a plan to develop China’s forage industry, increasing production of alfalfa and grass silage for animal feed. This will help to reduce the amount of corn and soybean meal that the country needs to import for its cattle and sheep farms.

“Currently, the main pressure of food security lies in feed grains,” according to a statement from the agriculture ministry. “An important way to promote the reduction of feed grains is to increase the supply of forage grass.”

Food security has been a critical priority for Beijing, especially as its imports of corn, soybeans and wheat have jumped to record levels in recent years, increasing China’s vulnerability to trade tensions and supply shocks. Efforts to safeguard the nation’s food supplies range from boosting local production to diversifying imports, developing its seed industry and reducing food waste.

While China’s demand for beef, mutton and dairy has soared in the past decade, domestic production is lagging, in part because of insufficient grass supply, the ministry said. Demand for high-quality forage grass will exceed 120 million tons and currently, local supply leaves a gap of almost 50 million tons.

To increase cattle weight when fed solely on forage, the animal must have year-round access to a high quality forage. This may be difficult to achieve since grasses grow at different times of the year and as climate, soil and water conditions vary across different parts of the country.

EIA adds new forecasts of renewable diesel and other biofuels

In the EIA’s February Short-Term Energy Outlook (STEO), they introduced new forecasts of U.S. production, consumption, and the net of imports less exports of biodiesel, renewable diesel, and other biofuels in the U.S. This new breakout provides a more detailed forecast for U.S. renewable diesel production. In previous STEO releases, the EIA forecast biomass-based diesel consumption, which combined all production and imports of biodiesel consumed in the U.S. with imported volumes of renewable diesel, not including domestically produced renewable diesel. Differentiating biodiesel from renewable diesel, provides a more precise accounting of biomass-based diesel.

The EPA’s proposed rule for 2022 calls for higher production in both of these categories. In addition, state-level programs, including California’s Low Carbon Fuel Standard and Oregon’s Clean Fuels Program, have encouraged several petroleum refineries to convert to renewable diesel. As a result of these conversions and new construction of renewable diesel refineries, the EIA expects U.S. production capacity of renewable diesel to nearly triple by the end of 2023 from the current production capacity of 77,000 bpd.

Based on renewable diesel plant construction and the EPA’s proposed rule for the 2022 RFS, the EIA forecasts that renewable diesel production will increase significantly in 2022 and 2023.

The EIA also assumes a significant ramp-up in the U.S. production capacity of renewable diesel will add upward pressure to already high feedstock oil prices, which limits actual production growth in their forecast.