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Update for July 7th, 2022

CONAB Production Updates, Ukraine and Weather Outlooks

Reuters reports today that Ukraine’s foreign ministry has requested a meeting with a Turkish ambassador regarding the recent export of stolen Ukrainian grain from a Turkish port. The disputed grain was seized by Russian forces within the territories they have gained control of since the invasion of Ukraine began in late February. On Sunday a Russian ship was detained in a Turkish port based on suspicions that the ship contained stolen grain. Ukraine asked that the detained ship be put under arrest but Russia’s foreign ministry claimed this was a false report. On Wednesday Turkish authorities allowed the Russian-flagged cargo ship to leave the northwestern port of Karasu. Ukraine’s ministry calls the action “unacceptable”. Oleg Nikolenko, a spokesperson for Turkey’s foreign ministry wrote on Twitter, “We regret that Russia’s ship Zhibek Zholy, which was full of stolen Ukrainian grain was allowed to leave Karasu port, despite criminal evidence presented to Turkish authorities.” Refinitiv ship tracking data shows that the grain is expected to arrive in the Russian port of Kavkaz tomorrow. Talks between Kyiv and Moscow regarding the development of a safe shipping corridor in the Black Sea have been ongoing for several weeks now. Turkey has been actively involved in these negotiations and have played a key role in the process due to the unique, neutral type relationship they have with both nations. Interestingly though, from the start Turkey has criticized Russia for invading Ukraine but disagrees with Western sanctions on Russia and have refused to implement them. Exports out of Ukraine have fallen off drastically since February, the Ukrainian ministry says that to date 2022/23 grain exports are down 68.5% from previous shipping seasons. According to official data, grain exports account for almost 20% 106 MMT which consisted of 23 MMT of corn and 19 MMT of wheat. This year exports of both crops are projected at 10 MMT each. With sea ports heavily damaged, exports could resume on a larger scale if other efficient options were available like the use of railways. The problem that has slowed heavier use of the rail system leading through Ukraine’s neighboring country of Romania has been the difference in the size of the tracks. Ukraine has Soviet-era wide rails, Romania has a narrow, more modern track. A recent Bloomberg report says that Romania has been working to repair a Soviet era link from the border with Ukraine to their sea ports. The rail was not expected to be ready for at least another month but reports are that the rails are now ready for use. This will help to accelerate exports but will not replace the ports that are damaged and the large volume of grain they could move.

CONAB released their monthly updates to Brazilian production estimates today. Soybean production was lowered from 124.268 million ton a month ago to 124.08. Considerably lower than a year ago when soy production reached 138.153 million ton. Total corn production for the first and second crops in 2021-22 came in at 115.663 million tons higher than last years production of 87.097 million tons.

Tuesday a derecho stormed across a swath of South Dakota, Southwestern Minnesota, Iowa and into Illinois. A storm is categorized as a derecho if it cuts a path at least 60 miles wide and causes damage intermittently for 400 miles or more. (SPC) This weather phenomenon has developed across the Midwest for 3 consecutive years and is a trend that could continue if Dennis Todey, director of the USDA Midwest Climate Hub is correct and the La Niña weather patterns continue.

La Niña typically brings with it, drought conditions. Much of the western half of the U.S. has experienced drier than normal conditions for the past couple of years. As of Tuesday, the U.S. Drought Monitor from the University of Nebraska-Lincoln (UNL) shows the severity of the dryness. (shown below)

UNL cautions that while “heavy rains across the country may have eased the drought conditions in the short-term, but they won’t be enough for the long run.” Listed are changes in drought conditions between the June to the July Drought Monitor readings:

• East-central Illinois was degraded from a (D1) moderate drought to a (D2) severe drought.

• South-central Missouri moved to a (D2)

• Lower Michigan and Ohio have abnormally dry conditions (D0)

• NW Wisconsin (D1)

The High Plains remain in a (D2) level of drought but UNL noted that some regions that received enough rainfall saw conditions improve and ratings moved into the “drought elimination” category. Some states in the western U.S. continue to suffer through very dry conditions and have drought ratings that have escalated into (D3) extreme drought. CEO, Kirk Hinz says that “July’s current weather snapshot is important, but August will be pivotal when it comes to crops.” “August seems to be that transitional month where it’s really going to come down to speed-how quickly temps will level out or warm up. If we continue to warm up the oceans, like we are right now, there may be cold front risks into August.” Hinz says that if hot temps are present over the next 2 to 3 weeks they are likely to stay into August.

Eric Snodgrass, senior science fellow with Nutrien Ag Solutions says that the long-lasting La Niña weather event is responsible for the “flash drought” that developed across Texas and spread through the Ohio region. This is a result of a weaker than normal Pacific branch of the jet stream that has been pushed further northward than normal, allowing more ridging in the U.S. mid-section.

Ag meteorologist for DTN, John Baranick expects hot and dry summer conditions will prevail in the Corn Belt and central and southern Plains. He said, “We are seeing a strong indication of that. It’s going to be a feature for the rest of summer.”

Baranick explained that when a heat dome sets up over the central Plains the middle of the country is hot and dry while the coasts are cool and wet which is what happened during the first part of June. When the dome moves to the west it delivers wetter and cooler conditions to the Corn Belt, which is exactly what has been happening. Looking ahead he expects the dome will return to the central Plains. He says, “I would expect a lot more of these heat wave events to come through like we saw earlier in June.” He finds the area to the south of a line from Kansas to Ohio most concerning.

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