Evening Report (VIP) -- March 17, 2014

March 17, 2014 10:01 AM

China's top ag lender calls for stronger sales of state grain, cotton reserves... Aggressive stockpiling of grains and cotton by the Chinese government is causing debts to mount for China's top ag lender, the Agricultural Development Bank of China, which provides loans to China's state grain and cotton stockpiling firms. Those loans accounted for 70% of the bank's lending last year.

The head of the bank is calling for stepped-up sales of bulging state stockpiles as he says loans for the stockpiling is putting "unprecedented pressure and difficulty" on operations of his institution. He claims the Chinese government's stockpiling program distorts domestic prices for grains and cotton, encouraging end-users to turn to cheaper imports. He is also encouraging the Chinese government to restrict cheap imports and reduce the price it pays farmers for domestically grown grains and cotton. He further suggests the government could offer tax incentives to domestic firms to buy from state reserves.

China has announced it will end its stockpiling program for cotton and soybeans this year, instead offering direct subsidies to producers. But stockpiling of grains will continue.


White House sanctions Russian and Ukraine leaders... As expected, President Barack Obama announced sanctions affecting 11 Russian and Ukrainian/Crimean officials today, following Crimea's vote to secede from Ukraine and rejoin Russia. He also warned that he is prepared to take additional steps to isolate and "diminish its [Russia's] place in the world." The president reiterated that neither the U.S. nor the rest of the international community will accept the referendum on Crimea that showed 97% of the votes in favor of joining Russia. Politico reports a senior administration official as saying there is evidence the ballots were "pre-marked." The sanctions authorize U.S. Treasury Secretary Jack Lew and Secretary of State John Kerry to work together to freeze assets and restrict travel on individuals or entities that operate "in the Russian arms industry, and any designated individual or entity that acts on behalf of, or that provides material or other support to, any senior Russian government official," according to a statement from the administration. The European Union also imposed an asset freeze and a ban on travel for 13 Russian and eight Crimean officials.


Turmoil in Ukraine may lower grain sowing by up to 20%... A shortage of funds could cause Ukraine to lose around 11 MMT of grain production this year, according to an analyst with UCAB. The firm says up to 20% of the country's land may not be sown this year due to the absence of funding as a result of economic and political turmoil in the region. Further complicating the situation is low topsoil moisture and unusual weather, UCAB notes. The analyst says the nation has sown 306,000 hectares of spring grain as of March 13. The nation's ag ministry says it expects spring grain sowings around 8.6 million hectares in 2014. The political crises has caused the value of Ukraine's currency to fall more than 10% since the start of the year and some banks have had to cut lending. The currency devaluation has also increased the cost of seed, fertilizer and fuel.


February soy crush slows less than anticipated... Members of the National Oilseed Processors Association (NOPA) today reported soybean crush of 141.612 million bu. for February, which was above expectations for 140.9 million bushels. While this is down 9.8% from crush of 156.943 million bu. in January, it is 3.9% above 136.322 million bu. crushed in February 2013. Soyoil stocks rose to 1.893 billion lbs, which compares to pre-report expectations for soyoil stocks to total 1.870 billion pounds.


Latham claims USDA is no longer farmer friendly, Vilsack responds... Rep. Tom Latham (R-Iowa) surprised USDA Secretary Tom Vilsack during a March 14 hearing by the House Ag Appropriations Subcommittee. Latham, who announced previously he was not seeking reelection, told Vilsack that during his talks with Iowa farmers, "they don't think the department is on their side." Vilsack forcefully responded with specific examples to the contrary. The heated exchange surprised many observers. Read the transcript here.

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