Ukraine and A Cold, Wet Week Leading Into Easter
Update for April 8th, 2022
For several weeks there has been a lot of speculation regarding the possible emergency release of CRP acres to be put back into production for this upcoming season. In a letter to grain merchandisers U.S. Agriculture Secretary Tom Vilsack announced that he had determined that there would be “no significant” gains that would result from the emergency planting of crops on CRP enrolled acres. Right now, there are 22.1 million acres in the reserve with 4 million acres set to expire from the program on September 30th. Vilsack explained, “Our data reflects the reality that, with higher commodity prices, producers are not re-enrolling all of these acre…There is no need to step in and adjust the program when producers themselves are making decisions based on market conditions and environmental realities.” (Successful Farming)
Bloomberg reports that 590 million bushels of corn are “stuck” in Ukraine, this is more than 50% of the expected exports for the marketing year. Normally the grain would have already arrived by rail to key ports along the Black Sea like Odessa and Mukolaiv and then loaded onto ships headed to Asia and Europe. But with the damage caused from Russian military attacks the ports are shutdown which means the only way still available to export grain is by railroad to the west. The railway system in Ukraine has not been modernized, they still are using Soviet era train cars that run on wider tracks so the transportation of grain beyond their western border is not efficient. Once the railcars reach the western border of Ukraine the wheels need to be changed to be able to travel on the narrower tracks. In addition, only small amounts of corn are able to be moved along the rail system through Poland and Romania to their ports which is limiting exports to about 10% of pre-war levels. Ukrainian Agribusiness Club deputy chair, Kateryna Rybachenko said, “Railways are not supposed to go that way with grain. This makes the whole logistics very expensive and inefficient, and also very slow. Logistically, it’s a big problem.” This has stranded millions of tons of grain in storage which should have already been shipped out to global markets.
With the global grains trade already slowed by supply-chain bottlenecks, rising shipping costs and weather issues the grain markets have been on a wild ride. There does not appear to be an end in sight for a peaceful resolution between the 2 nations so grain markets will likely be unsettled for some time to come as exports sourced out of Ukraine and Russia will remain unpredictable. The unsettled environment in these countries is very concerning as together the two nations account for 25% of all grain traded in the world which is fueling fears of world-wide food shortages in the coming months. Corn and wheat future in Chicago are up by more than 20% since the start of the year. The United Nations are alarmed by the current situation as food prices are already at all-time highs and could continue to rise by as much as 22% more. The huge drop in exports out of the Black Sea could worsen global hunger and leave an additional 13.1 million people around the world undernourished.
Ag Day host Clinton Griffiths recently interviewed Ukraine farmer Nick Gordiichuk about the outlook for farming in Ukraine this season. He told Griffiths that even if the war were to stop today he has no idea when most farmers would be able to get into fields. While many farmers do not have fertilizer or fuel on-hand Gordiichuk explained one of the major stumbling blocks this season is that, “we have no access”. “You can hear the shelling, you see the missiles and some tractors can get on the mines, which are in the field. It’s a dangerous situation. We will have to wait and get special help to clear the fields after the war.” The photo below is of a Ukrainian farmer towing away(taking) an abandoned Russian tank with their John Deere tractor.
The incredibly high price of fertilizer has caught the attention of Congress. Nearly 100 members of Congress sent a letter to Joe Biden this week specifically asks his administration to address the rising costs of fertilizer, encouraging them to review all available options in lowering the costs of nutrients. The high input prices facing farmers this season are squeezing their bottom line but the overall result could be higher food costs to all. (DTN)
As we approach the spring planting season, weather outlooks are turning wetter and colder for the majority of “key” U.S. Corn Belt areas for at least the next 7 days. Much cooler temps are predicted to arrive by next week, areas across the Northern Plains could see temps fall 20 – 30 degrees below normal, in particular parts of North Dakota, South Dakota and Minnesota are expected to see the coolest temps.