Pro Farmer Evening Report: Dec. 21, 2021

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Hogs & Pigs Report expected to show more herd contraction... USDA’s Hogs & Pigs Report is expected to show the U.S. hog herd contracted 2.9% from year-ago as of Dec. 1. The marketing herd is expected to be down 3.1%, with breeding numbers 0.1% above last year. Analysts anticipate the fall pig crop was 2.9% smaller than last year on a 3.3% drop in farrowings. But they expect USDA will report farmers intend to farrow slightly more sows this winter and next spring. USDA will release the data at 2 p.m. CT on Thursday.

USDA continues to estimate higher consumer meat prices... USDA continues to increase its forecasts for food price inflation for various grocery store items, led by beef and pork prices, but so far it has not raised the overall outlook for all foods, grocery store or restaurant prices for 2021 or 2022. For 2021, USDA expects all food prices to increase 3% to 4%, grocery store prices to rise 2.5% to 3.5% and restaurant prices to jump 4% to 5% -- all unchanged from the previous outlook.

For 2022, USDA still expects higher food prices for consumers compared with 2021, but the rate of increase is seen easing. All food prices are forecast to rise 2% to 3% in 2022, while grocery store prices are projected to increase 1.5% to 2.5% and restaurant prices are forecast to increase 3% to 4%. All of these levels for 2022 are steady with prior forecasts.

Beef and veal prices were raised for the tenth straight month, up 9.0% to 10.0% from 2020 levels. For 2022, USDA forecasts beef/veal price will increase another 2.0% to 3.0%.

Pork prices increased for the ninth straight month, up 8.0% to 9.0% compared to last year, and are forecast to increase another 2.0% to 3.0% for 2022.

Poultry prices are now expected to increase 4.5% to 5.5% versus 2020. This was the third straight month for an increase in poultry prices. For 2022, USDA forecasts poultry prices will rise another 1.0% to 2.0%.

USDA’s explanation for the higher prices for meats has not changed. It says, “Prices have been driven up by strong domestic and international demand, labor shortages, supply chain disruptions and high feed and other input costs. Concentration and capacity constraints within the meat industry could also affect prices.”

Bottom line: USDA’s forecast range for overall food price inflation still falls within the increases that have been seen so far this year in all three of the “headline” categories. The December data that will be released in January will provide the complete picture for 2021 food price inflation, and that could result in the “final” numbers being toward the upper end of USDA’s current forecast ranges. With this year nearly complete, attention will turn to 2022 prices. USDA’s recent history has been to gradually adjust those prices over the course of the year.

Brazil farmers pushing for drought relief... Brazilian farmers affected by dry conditions are lobbying for the government to allow late planting of soybeans and financial relief. Crop Consultant Dr. Michael Cordonnier notes agricultural groups in Rio Grande do Sul have petitioned the federal government to extend the planting date to qualify for crop insurance. The ideal planting window for soybeans in has passed and farmers who intend to replant their soybeans need to plant them by Dec. 31 in order to qualify for crop insurance.

In addition, farmer groups in Western Paraná are working with government officials on flexibility regarding the possibility of soybean replanting and allowing planting of second-crop soybeans. They want local governments to declare a state of emergency, a necessary step needed to extend the deadline for payment of crop financing, according to published news reports.

Europe soft wheat exports remain ahead of last year... So far this year, the Europe Union has exported at least 13.36 MMT of wheat as of Dec. 19, according to figures from the European Commission. That is up 670,000 MT from 12.69 MMT for the same week last year.

This year’s data does not include the latest figures from France, which has had technical problems with its custom service in recent months. The Commission expects the French data to be in the reports at the start of new year.

The European Union has exported 4.40 MMT of barley this year, up 650,000 MT from this date last year.

Massachusetts lawmakers delay humane standards... The Massachusetts House and Senate agreed to delay the start of space requirements for livestock. The state was to start implementing space standards for poultry and hogs on Jan. 1, 2022. However, concerns of egg, poultry and pork shortages meant the lawmakers met and delayed the start of the standards until Aug. 15, 2022. They also moved the regulation development and enforcement from the attorney general’s office to the state department of agriculture.

The governor is expected to sign the delay as he has been warning about the potential shortages.

U.S./China gas deals defy tensions between world powers... China’s voracious appetite for natural gas has sparked a wave of deals with U.S. exporters of the fuel, strengthening energy trade between the world’s two biggest economies even as their relationship grows more fraught. The latest sales were announced on Monday when Venture Global LNG, a company building a pair of liquefied natural gas export plants in Louisiana, said it had agreed two contracts to ship 3.5 MMT a year of liquified natural gas (LNG) to state-owned China National Offshore Oil Corporation, the country’s biggest LNG importer. The CNOOC deals bring to seven the number of big contracts signed between U.S. exporters and Chinese customers since October. Some of the contracts are to last decades.

China is poised to surpass Japan as the world’s largest LNG buyer this year, analysts say, while the U.S. will leapfrog Australia and Qatar in LNG export capacity next year, according to the U.S. Energy Information Administration.

Russia warns of military action as fears mount of Christmas invasion of Ukraine... Russia upped the ante Monday in its standoff with Ukraine, openly warning of military action if President Joe Biden and America’s NATO allies ignore a list of demands Moscow announced late last week — a far-reaching list that some key U.S. lawmakers have dubbed a “pretext to war.” Russian Deputy Foreign Minister Sergei Ryabkov said his country is fully prepared to respond through “military-technical means” if Western powers fail to address those demands. He said NATO must not expand to include Ukraine or Georgia and the U.S. must not base additional military assets in former Soviet republics in Central Asia.

Most of Moscow’s proposed security guarantees seemingly have little chance of becoming a reality. Still, some foreign policy specialists warn that Russian President Vladimir Putin could use their rejection to justify a major land invasion of Ukraine. Russia’s proposal and the direct threat of military action put renewed pressure on the White House to defuse a crisis that seems to be nearing the boiling point.

Potash importers brace for prolonged price rally... Potash prices will likely remain high into the new year given U.S. sanctions against Belarus Potash Company (BPC). Global spot prices for potash are at 13-year highs around $650 per MT after a spike in crop prices and a demand recovery this year.

In Brazil, spot potash prices could rise to $900 to 950 per MT in the first quarter of 2022 from $800 per MT now. They have already jumped more than 230% since January. India’s potash consumption and imports may fall if potash prices rise further due to the sanctions on BPC. The company typically agrees to annual supply contracts with India with the most recent deal signed in January 2021. China gets 20% of its potash imports from Belarus and prices in the world’s largest consumer are also high, despite the recent release of some of its potash reserve.

Transportation of potash out of Belarus might become an issue. Currently Lithuania continues to transport potash under existing contracts and pre-payment in December and part of January. Russia, a Belarus ally, does not have enough extra shipping capacity to handle the 12.5 MMT per year.

U.S. meat plants changed COVID-19 safety protocols... Some U.S. meat and chicken plants have relaxed protective measures implemented near the start of the pandemic, according to workers and union officials. Across the country, different plants have removed dedicated employees to enforce social distancing, mask wearing and cleaning. They have also stopped staggering break times. The meat packing companies note they still require masks and have invested in protective barriers between workstations. Many of the companies also mandate Covid-19 vaccines for employees.

Canada to challenge U.S. softwood lumber duties... Canadian officials have filed a notice to challenge U.S. duties on Canadian softwood lumber under the U.S.-Mexico-Canada (USMCA) trade deal, according to Canada’s trade minister. Last month, the U. S. almost doubled the duty on softwood lumber to 17.9% after a review of anti-dumping and countervailing duty orders.

The U.S. accused Canada of unfairly subsidizing and dumping softwood lumber. Canada denies it is dumping the lumber.