Friday, September 29, 2023

Russian Invasion of Ukraine Overshadows USDA Ag Outlook

by Colter Brown

Leaders at USDA on Thursday sought to hold a rational, focused discussion on agricultural commodities, trade and farm conditions as commodity prices spiked, equity markets fell, and the world watched in shock as smoke bellowed from the outskirts of Ukrainian cities with both Russian helicopters and tanks moving into the country.



Agriculture Secretary Tom Vilsack was asked by reporters on a livestream press conference from the forum whether the invasion posed new risks for farmers in terms of fertilizer and energy costs. The secretary raised some concerns that suppliers could try to take advantage of the situation to further increase prices.

“That’s my biggest concern here in terms of the current situation,” Vilsack said. “It will take some time, obviously, for the impact of all of this to be understood and felt. I sincerely hope that no company out there — whether it’s fertilizer or any other supply that may be impacted by this — will take unfair advantage of the circumstances and situation.” He added USDA would be “making sure they don’t use this situation as an excuse for doing something which isn’t necessarily justified by supply and demand, and that’s my biggest concern. We will keep an eye on that.”



Crop commodities had quick responses to the invasion. Early Thursday, corn, soybeans and both winter wheats were all limit-up, but by the end of the day, there was some moderation. Cattle futures closed with triple-digit losses in response to the strong gains in the grain market this week.

The Dow Jones Industrial Average ended up 92 points  after starting the day with an 800-point drop.



A lot of eyes in the grain trade were watching for news about fighting around the key southern Ukraine port of Odessa. Cargill, CHS and ADM are among the companies with operations at the port.

Bunge and ADM each reported they had temporarily shut down operations in Ukraine. Bunge, according to a news report, has more than 1,000 employees and shut down processing facilities in the country as well as a grain terminal.

ADM also suspended operations in Ukraine where it employs 630 people. ADM has a grain terminal at the Odessa port, as well has six inland grain elevators and a trading office in Kyiv.

“Our first concern is the health and welfare of our employees and their families, and their safety is our top priority,” an ADM spokesperson stated to DTN. “Currently, our facilities in Ukraine are not operating, following security protocols and government guidelines. ADM will use the full breadth of our global and integrated supply chain to support the needs of our customers around the world as we manage through this difficult situation.”

Bloomberg reported that a ship chartered by Cargill in Ukrainian waters in the Black Sea was “hit,” but the vessel and crew are safe and accounted for.



Condemning the attack, President Joe Biden announced new sanctions against Russia, targeting the country’s financial system and claiming to reduce Russian access to technology as well. The White House stated the sanctions would affect nearly 80% of Russian banking assets while cutting off imports of technology as well.



USDA Chief Economist Seth Meyer’s speech at the USDA Ag Outlook Forum — held entirely online — reflected the inability overnight to properly factor in the immediate disruption and uncertainty created in the previous 12 hours. Meyer pointed that out as he began his presentation looking at grains, oilseeds, protein outlooks and price projections.



USDA is calling for higher wheat supplies with wheat production pegged at 1.94 bb on higher area and yield. Winter wheat seedings came in at 34.4 million acres and USDA is pegging total wheat acres for the 2022-23 crop at 48 million acres, up nearly 1.3 million acres from 2021-22 and the highest wheat acreage since 2016-17.

The all-wheat yield is projected at 49.1 bpa. A significantly larger crop also offsets lower beginning stocks to raise total 2022-23 supplies by 5% to 2.708 bb.

Total use will increase slightly to 1.977 bb, up slightly from 2021-22 but still below the five-year average. Domestic use is projected to lower modestly on lower feed and residual use “despite increased supplies as corn is expected to be more competitively prices during the summer months.

Higher exports are expected to offset lower domestic use with exports pegged at 850 mb.

Ending stocks are expected to come in at 731 mb, 13% higher than 2021-22 but still below the five-year aver.

The average 2022-23 wheat price is projected at $6.80 per bushel, down 50 cents from the 2021-22 crop.



USDA calls for record corn production at 15.24 billion bushels (bb), about 1% higher than the 2021-22 corn crop. Farmers will plant 92 million acres this spring and USDA projects a record yield of 181 bushels per acre (bpa).

Feed and residual use is unchanged at 5.65 bb, with some expectations of “declining cattle on feed numbers during the year.”

USDA projects corn ending stocks at 1.965 bb, up 425 mb from USDA’s forecast for the 2021-22 crop, which is now pegged at 1.54 billion in the February World Agricultural Supply and Demand Estimates (WASDE). That would bring projected stocks-to-use for the 2022-23 corn crop at 13.2%, which would be highest since the 2019-20 crop.

Despite the current markets and the potential for a crop-insurance price protection floor coming in close to $6.00 per bushel next week, USDA’s price forecast for the 2022-23 corn crop is pegged at $5 per bushel, about 45 cents lower than overall price forecasts for the 2021-22 crop.



Soybean production is pegged at 4.5 bb, up 1% from the 2021-22 crop “with higher planted acreage accounting for most of the increase. USDA projects planting at 88 million acres and yield is forecast at 51.5 bpa.

Soybean exports are projected for 2022-23 at 2.15 bb, up 100 mb from the 2021-22 crop. Exports are expected to be “relatively strong through the first half of the marketing year with the current drought in South America limiting their exportable supplies this fall.” However, USDA is calling for “higher South American harvest expected in early 2023,” leading to export competition in the second half of the U.S. soybean crop marketing year that “will likely limit additional U.S. gains.”

The average farm-gate price for soybeans is projected at $12.75 per bushel, down slightly from 2021-22. Again, USDA projects lower prices even though the crop-insurance price protection level right now is closing in near $15 per bushel.




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