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Global Grain Supply Crunch & Outlook Is Persistent Drought For Start Of 2022

Update for March 4th, 2022


Major grain importing nations around the globe are looking at options now that shipments through the Black Sea region are on hold. The major swings in grain prices over the past week have been stressful for producers but consumers are also questioning what the long-term impact may be on food costs. Joseph Glauber, former chief economist for the U.S. Department of Agriculture told Bloomberg that he expects the war in Ukraine will only modestly influence food costs in the U.S. but if the conflict drags on and disrupts spring planting in Ukraine the Middle East and Africa will see a severe impact on food prices. The cost of feeding livestock in the U.S. is where we will see the largest impact as it could pressure these meat producers to reduce herds even further. Yesterday Reuters reported that the Biden Administration is considering the suspension of U.S. biofuel blending mandates in an effort to reduce food prices.


Consequences of the timing and length of the war in Ukraine have traders worried. Concerns are growing that farmers across Ukraine will not be able to plant their crop in 2022 leaving tens of millions of acres of prime crop land idle. This would be hugely impactful on global supplies and would mean large corn crops would need to be raised this year in the U.S., SAM and China in order to meet world-wide needs. Currently the planting of the Safrinha crop in Brazil is running ahead of normal with 64% of the acres planted as of a week ago. Additionally, short and long-term weather forecast look to be favorable for most of the 2nd crop corn region as well.


Scott Irwin, an agricultural economist at the University of Illinois warns the Russian invasion of Ukraine, “could devastate global grain markets so deeply that it’s likely to the biggest supply shock in living memory”. He expressed the importance that farmers here in the U.S. plant more acres in 2022, “basically nothing can be done in the short-run except to run up the price of grain high enough to ration demand”. He is advising the U.S. government to open up the Conservation Reserve Program, “so my simple proposal is to let every CRP acre be eligible for cropping in 2022 and only 2022. No interruption of payments or contracts. Just change the rules on an emergency basis so it can be cropped if a farmer wants to risk it this year.” (MarketWatch) Over 20 million acres are currently enrolled in the CRP program.

More sizable sales of U.S. old crop corn are being reported with a sale of 337,000 MMT of corn to “unknown destinations” announced yesterday. It’s important that we continue to see strong exports in the days and months ahead because that will indicate that demand is remaining strong despite prices nearing record levels. All-time record price for corn was sent in August of 2012 when the market traded to $8.43. Funds are most likely holding a record long position right now, but how much more length can the Funds add and how much higher can prices move? The USDA will release the March report next Wednesday, March 9th. The trade expects further cuts to SAM production and an increase in U.S. exports due to the war in Ukraine. Next week could offer a lot of volatility in the market.


U.S. soybean exports are strong. The weekly USDA export sales report shows old crop beans are at the high end of the trade range and new crop sales are higher than expected. Daily data indicates a sale of 132,000 tons of soybeans were sold this week to China. The vegetable oil sector is concerned that the global supply of sunflower seed could be dramatically reduced due to the war. Next week’s WASDE and domestic supply and demand report is expected to trim Brazilian production by an additional 8 to 10 MMT and Argentine production by another 4 to 6 MMT. The 2021/22 soybean harvest in Argentina’s Central Zone is projected to fall to the lowest level in 14 years.


Data from the annual Ag Outlook Forum held in February has been released and show the USDA is starting the 2022 season with an estimated 92.0 million corn acres and 87 million soybean acres. Historically the March planting intentions have come in at or above the Ag Outlook Forum estimates 8 out of 11 years. Final acreage comes in below the February forecast 7 out of 11 years for both corn and soybeans.



The percentage of drought covering the U.S. increased by 2% this week to nearly 60%. The drought of 2012 still holds the record when the level reached 65.5% in September. USDA meteorologist Brad Rippey is very concerned that La Niña is persisting. The current drought which has covered 40% or more of the U.S. has been present for 75 weeks now and shows no signs of subsiding, the previous record of 68 weeks was set between June 2012 through October 2013. “It doesn’t look like there’s going to be any big change before the start of the growing season. Here we are in the spring of 2022, facing significantly more drought than we had going into the spring of 2012. We’ve still got La Niña sticking around enough to influence weather patterns. And that’s a huge concern for the Great Plains and Southwest. Along the Gulf Coast, even into the Southeast.”


Rippey says that wheat acres are most concerning right now, “By far the Wheat Belt is the biggest concern. If you look at crop conditions in areas where the crops starting to actively grow. It’s absolutely terrible.” …We are into showtime in the South and Texas, wheat is already heading out in the far southern portion of the state. Statewide, I think about one-eighth of the crop is reporting heading, and so it is time for growth. Plants are demanding moisture. And despite a couple of winter storms, recently, a little bit of ice and snow in Texas, it is so critically dry. Without any big change in the pattern, that will quickly spread northward into Kansas, Nebraska, and eventually the western Dakotas and Montana over the next few weeks."



Looking ahead there are no signs of any significant drought busting precipitation. Rippey says, “It doesn’t look like there’s going to be any big change before the start of the growing season.” In fact, weather models show the drought persisting and possibly even intensifying through the end of May. The DTN map below shows the percent of normal precipitation received over the past 90 days.


Weather around the Midwest is expected to be very active through early next week. Spring like warmth and thunderstorms are forecast for Saturday which will be followed by cold winter temps and snowfall for many areas.

The strength and severity of the weekend storms will hinge on dew points and temperatures. At this time, it doesn’t appear as there will be high enough dew points for any major storm system to develop but if that changes it would enhance instability on Saturday.


NOAA’s 6 to 10 day outlooks are shown below for March 9th through the 16th.



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