Ongoing Lockdown in Shanghai & Farmers in Ukraine
Update for April 15, 2022
China’s policy of Zero-Covid in Shanghai is becoming ugly and inhumane. Bloomberg and others are reporting that the Chinese government has ordered the building of “isolation facilities” to house anyone that tests positive for Covid. Shanghai is believed to have 4 such facilities at this time with a combined total of beds now reaching above 38,000 and the municipal government is speeding up the construction of more. Individuals of all ages that have tested positive are being rounded up and shuttled to these facilities while those that have not tested positive are locked in their homes unable to leave. Keep in mind that Shanghai has 28 million residents making it the 3rd largest city in the world, it is a financial hub and has the largest seaport in the world in terms of cargo. This total lockdown is in now in its third week, food and medical supplies are running low which is adding to the misery and desperation for the entire population. Supply disruptions are expected to be felt globally.
This action has stalled the rally in soybean prices. During the last lockdown the Chinese diet shifted away from meat, which is mostly consumed in restaurants that are all closed right now, to a more starch filled diet while quarantined at home. Even when the lockdown is over it will take some time for the consumption of meat to return to pre-lockdown levels.
U.S. ethanol stocks were reduced for the second week in a row. On the week stocks were lowered by -4.3% but the overall supply still sits at the 2nd highest on record seasonally. Across the Corn Belt ethanol margins are breakeven to positive and the possible use of E15 this summer could help increase corn demand by an estimated 10 to 30 million bushels in the weeks to come. The corn market has been on the move. Some of this can be credited to the E15 news but the markets last minute attempt to “buy back” corn acreage with the market driven shift in corn vs soybean profitability is a huge contributing factor. The new crop corn to soybean ratio is just above 2 to 1 which “screams more corn acres”. Fertilizer availability and cost could still be too big of a roadblock for some producers to decide to make the last-minute switch.
The Covid lockdown in China, the war in Ukraine and now the unseasonably cold weather that is delaying planting across much of the U.S. are all factors effecting the markets this week. The Crop Progress report for this week is shown below followed by a corn graph and U.S. map detailing corn planting progress by state.
We have witnessed the resiliency of the Ukrainian people over the last several weeks and farmers in Southeastern Ukraine are a true testament to this. Pictures have captured images of farmers in the Zaporozhye region in SE Ukraine which is less than 20 miles from active combat zones, wearing helmets and bulletproof vests while working in the field.
The Ukrainian Agriculture Ministry says that despite the war, spring planting has begun in 22 of 24 regions of the country. Hopes are that farmers will be able to plant about 80% of the acres that were farmed a year ago.
De-mining operations are underway, according to Oleh Bondar a spokesman for the Ukraine emergency service. He reports that nearly 50% of the area or 116,000 square miles need to be searched for explosives. The operations are mainly concentrated in the area south and east of the capital as well as the cereal growing region. Authorities are clearing between 2,000 to 6,000 explosives every day. Bondar said, “But we will do our best to make it possible for our farmers to do planting this year.” In some areas farmers are working around the clock in an attempt to complete planting crops before any further disruptions arise.
The photograph below was taken on April 8th as a farmer examines his field for Russian mines as well as other explosives before the tractor passes through to drill sunflowers.
Consumer inflation is now at the highest level since 1981. The Bureau of Labor and Statistics released the monthly Consumer Price Index this week which shows:
· 48% year-over-year increase in gasoline prices.
· A 35% increase in used vehicles.
· Gas utilities have gone up by 22%.
· Food at the grocery store has risen by 10%.
· Housing costs are up by 5%.
Cold temps are expected to hang around the Corn Belt and Plains through next week. Around April 23rd temps are expected rebound to above normal in the Northern Plains and the Corn Belt a couple of days later.
Ag Performance wishes all of you and your family a Blessed Easter!!
