Click here for weekly export sales/commitments charts and here for report details.
Check our advice monitor on ProFarmer.com for updates to our marketing plan.
Your Pro Farmer newsletter is now available... The 2021 calendar year has come to a close, meaning it’s time to look ahead to 2022. We cover the key market, policy and economic issues we see as important for agriculture in the year ahead. South American weather is currently a critical factor in the soybean and corn markets as hot, dry weather in southern Brazil, Argentina and Paraguay is cutting South American crop estimates. Russia, Ukraine and Argentina are also curbing grain exports in an attempt to tame domestic inflation. We cover these items and much more in this week’s newsletter, which you can access here.
Markets open, gov’t closed Dec. 31... Grain and livestock markets will trade normal hours on Friday, but government offices are closed for the New Year’s holiday. Since the markets are open, Pro Farmer will send out our full schedule of reports throughout the day.
Despite bitter cold, limited winterkill predicted... Forecast snow before bitter cold should help protect the U.S. winter wheat in HRW areas, according to World Weather Inc. The area is expected to get snowfall on Friday into Saturday before temperatures turn bitterly cold Saturday and Sunday.
Weekend snowfall estimates have been slightly reduced compared to previous estimates. However, livestock stress and travel issues are still likely to occur from Kansas and Nebraska to the Great Lakes area.
World Weather says snowfall amounts might continue to be reduced before it starts. It says any winterkill in South Dakota and Montana this past week was “very light.”
The first half of January’s weather pattern does not show much change. Dry conditions are expected to continue from the northwestern Plains down through West Texas.
Parts of Canada’s Prairies, the Northern U.S. Plains and some areas in the western United States are cold biased through the next two weeks due to waves of cold air. The U.S. Plains and Midwest are predicted to have more significant cooling in the second week of January. The eastern U.S. is expected to have more stormy weather.
Drought continues to worsen and expand in HRW areas... The amount of winter wheat in drought continued to expand to 65%, up seven percentage points from the previous week, according to this week’s U.S. Drought Monitor. USDA reported 20% of the winter wheat area is in moderate drought, 28% in severe drought, 14% in extreme drought and 3% in exceptional drought. The previous week, USDA said 18% of the winter wheat area is in moderate drought, 25% in severe drought, 12% in extreme drought and 3% in exceptional drought.
Most of the increase in winter wheat facing drought was in HRW areas. Both Oklahoma and Kansas had five-percentage-point increases in land considered abnormally dry/drought. Oklahoma now has 95% of the state considered dry/drought. Kansas has 73% of its land categorized as abnormally dry/drought. The drought area in Texas increased three percentage points to 87%.
Most locations across southwestern Oklahoma and the Oklahoma and Texas panhandles have received less than 0.10 inch of precipitation during the past 70 to 80 days. As of Dec. 28, Amarillo, Texas has observed no precipitation for 76 consecutive days, the second-longest dry streak on record. Month-to-date temperatures have averaged more than 8 degrees F above normal throughout nearly all of Oklahoma and Texas.
Some of the SRW area considered dry/drought includes east-central Missouri and west-central Tennessee. Missouri had 49% of its land reported as abnormally dry/drought, up six percentage points from the previous week.
Russian wheat exports expectations increased... SovEcon, a Black Sea agricultural markets research firm, has increased its 2021-22 wheat export forecast estimate by 200,000 MT to 34.1 MMT, due to the current robust pace of Russian shipments. Russia’s December 2022 exports are estimated at 3.9 MMT the highest number since December 2017 for the world’s top wheat exporter.. Russia’s exports have increased after getting off to a slow start.
In late November, world wheat prices increased and Russia regained its competitive edge. Another factor is the upcoming wheat export quotas to start on February 15. The allocations to exporters will be based on their shares of wheat exports from July-December 2021.
Russia plans to set its wheat export quota at 8 MMT from Feb. 15 to June 30, 2022. However, the firm predicts “8 MMT wheat export quota seems relatively unrestrictive and likely to have a limited impact on exports if any.”
High fertilizer prices to limit output and keep palm oil prices high... With labor shortages and high fertilizer prices predicted to restrict palm oil production, the Council of Palm Oil Producing Countries (CPOPC) expects prices to remain high. The organization does not expect Indonesia’s and Malaysia’s output to increase. Those countries supply 85% of the palm oil to the world.
“Production of palm oil will remain constrained with limited upside potential, and prices will likely continue to trade in the bullish range of $1,000 per MT,” CPOPC said.
Higher soybean oil output could constrain any palm oil price increase in 2022.
Due to high fertilizer prices, smaller farmers are likely to reduce applications and supplies might be challenging for plantations to get. Palm oil yields did not increase when farmers decreased fertilizer in 2018 and 2019.
On the demand side, CPOPC forecasts the European Union’s palm oil imports will increase the most for 2021-22 compared to 2020-21, up 700,000 MT. China is expected to import 400,000 MT more supplies in 2021-22 from 2020-21 levels. India is expected to import 100,000 MT more in 2021-22 compared to the previous year.
Sustainable aviation fuel (SAF) has several high hurdles... USDA Secretary Tom Vilsack frequently mentions the growth potential for SAF. He says the industry can expect a 35-billion-gallon demand. But a Los Angeles Times article today notes several hurdles for the fledgling industry. While airlines say recycled grease could help end emissions by 2050, they ask, “Is there enough?” Earlier this month, the article notes, “a United Airlines flight from Chicago to Washington made a bit of aviation history, completing a 600-mile trip that the airline hopes will prove the first leg of a journey to a greener future.”
Reaching the goal of eliminating aviation emissions — responsible for 3% to 4% of the world’s carbon emissions — won’t be easy. Some reasons, according to the article:
- It will take huge government investments via tax breaks or grants and ground-breaking technological advances, such as hybrid or all-electric jet planes — some experts envision making the switch to such technology sometime in the 2030s.
- Airlines currently have to pay up to four times as much for low-emission SAF as they pay for conventional fuel, which could mean higher airfares for everyone.
- The world’s refineries now produce about 26.4 million gallons of low-emission, sustainable aviation fuel a year. That is only a fraction of the 18.3 billion gallons of fuel burned by U.S. carriers alone in 2019, according to the U.S. Bureau of Transportation Statistics.
- A proposal in President Biden’s Build Back Better plan calls for a fuel tax credit that could boost production of SAF to 3 billion gallons a year by 2030 — still a fraction of the fuel that airlines expect to need over the next decade.
- For now, biofuel producers are relying on used cooking oil, rendered animal fat, the jatropha plant, algae and other so-called feedstock, but experts say refineries do not have access to enough of those materials to produce the billions of gallons of aviation fuel needed to reach the net-zero goal. About 3 billion gallons of used cooking oil is collected annually from the nation’s hotels and restaurants, according to the U.S. Environmental Protection Agency, but a lot of oil ends up in landfills or in sewers. It takes about eight gallons of used cooking oil to make one gallon of sustainable aviation fuel, industry experts say. That means that even if every drop of cooking oil were collected and turned into jet fuel today, it still wouldn’t be enough to fuel all current flights.
