11 March 2022

5 minute read

By: Jim Wyckoff

Europe

North America

Asia

USDA in a special note said: “Russia’s recent military action in Ukraine significantly increased the uncertainty of agricultural supply and demand conditions in the region and globally. The March WASDE represents an initial assessment of the short-term impacts as a result of this action.”

Report highlights

• War to cut Ukraine and Russia wheat exports by 12%. The Russian invasion of Ukraine will slash wheat exports from the countries by a combined 12%, said USDA in an initial assessment of the short-term impact of the war. Nations from Europe to Asia and Africa will import somewhat less wheat in coming months in the face of higher prices and reduced supplies from the Black Sea region, it said.
• Corn: US ending stocks down 100 mil. bu. from last month to 1.44 bil. bu. USDA increased corn-for-ethanol use by 25 mil. bu. and hiked exports by 75 mil. bu., “reflecting expectations of sharply lower exports from Ukraine.” Global ending stocks were cut 1.25 mil. tonnes (49 mil. bu.). USDA 2021-22 price: $5.65, up 20 cents from last month; up $1.21 from 2020-21.
• Soybeans: US ending stocks down 40 mil. bu. from last month to 285 mil. bu. USDA raised exports by 40 mil. bu. due to reduced South American production and shipments. USDA 2021-22 price: $13.25, up 25 cents from February; up $2.45 from 2020-21.
• Wheat: US ending stocks unexpectedly up 5 mil. bu. from last month to 653 mil. bu. USDA cut projected exports by 10 million bu., despite Black Sea shipment questions. Global ending stocks raised 3.3 mil. tonnes (121 mil. bu.) as increased stocks in Russia and Ukraine are only partly offset by declines in Turkey, India, and the EU. USDA 2021-22 price: $7.50, up 20 cents from February; up $2.45 from 2020-21.
• Livestock, poultry and dairy: The 2022 forecast for total red meat and poultry production was lowered slightly from last month, as higher forecast beef and turkey production is more than offset by lower projections for pork and broilers. The beef production forecast is raised from the previous month on higher fed and non-fed cattle slaughter. Pork production is lowered on a slower pace of slaughter and slightly lighter carcass weights. Pork imports were raised on strong domestic prices, while exports were reduced on increased competition in a number of Asian markets. Hog prices were raised on observed prices to date and expected strength in demand. Broiler production is lowered on lower slaughter to date and a slower-than-previously-expected recovery in hatchability. Turkey production forecasts are raised on early-year hatchery data. The egg production forecast is reduced on slower expected growth in first-half production. The broiler export forecast is reduced as higher prices reduce export opportunities. The turkey export forecast is reduced from last month primarily as recent discoveries of Highly Pathogenic Avian Influenza have resulted in import restrictions by Mexico. The milk production forecast for 2022 is lowered from last month, on lower dairy cow numbers and slower growth in milk per cow. The fat basis import forecast is lowered on lower expected imports of cheese and butterfat products, while exports are reduced on lower shipments of whole milk powder and whey.

Observations from grain/livestock industry sources

• War in Ukraine has severely hobbled shipping in the Black Sea, with broad consequences for international transport and global supply chains, the Wall Street Journal reports. Dozens of cargo ships are stranded at the Ukrainian port of Mykolaiv, shipping trackers said. The result is a shutdown of the world’s second-largest grain exporting region. Ukraine accounts for 16% of global corn exports, and together with Russia, 30% of wheat exports. Global wheat prices have jumped more than 55% since the week before the invasion.
• Ukraine has banned exports of some commodities. Ukraine’s government has banned exports of rye, barley, buckwheat, millet, sugar, salt and meat until the end of this year, according to a cabinet resolution published on Wednesday. Notably missing from the export ban are corn, wheat and sunflower oil.
• Sources say if the war is a protracted one, countries that rely on affordable wheat exports from Ukraine could face shortages starting in July, International Grains Council Director Arnaud Petit said. That could create food insecurity and throw more people into poverty in places such as Egypt and Lebanon, where diets are dominated by government-subsidized bread.
• Ukraine and Russia also combine for 75% of global sunflower oil exports, accounting for 10% of all cooking oils, IHS Markit said. Ukraine supplies the EU with just under 60% of its corn and nearly half of a key component in the grains needed to feed livestock. Russia, which provides the EU with 40% of its natural gas needs, is similarly a major supplier of fertilizer, wheat and other staples.
• Other unknowns include whether Ukraine can get its crops (wheat, corn, sunseed, barley in particular) planted and if so, how much. Some analysts are taking production levels down by 50%, for now. That means more potential exports for the United States. Consider Ukraine’s planting window is about the same as the United States, so there is still time. From a timing issue, the wheat in Ukraine should be top-dressed now; barley plantings would start in around 30 days, corn in 30-45 days.
• Most grain analysts see a tight U.S. corn, soybean and world wheat situation continuing into the 2023-24 season.
• Global food prices hit an all-time high. Global food prices as measured by the U.N. Food and Agriculture Organization (FAO) increased 3.9% in February to an all-time high and were 24.1% above year-ago. Only sugar prices declined. The bulk of impacts from the Russia/Ukraine crisis won’t be reflected until next month.