USDA Report, Ethanol Supplies and Weather Outlook Through 4/25
Update for March 11th, 2022
The following paragraph was posted by the USDA at the top of the March WASDE report:
NOTE: Russia’s recent military action in Ukraine significantly increased the uncertainty of agricultural supply and demand conditions in the region and globally. The March WASDE represents an initial assessment of the short-term impacts as a result of this action.
In general, this week’s USDA report was viewed as bullish for both corn and soybeans but was considered negative to the wheat market, at least at this time. Some bulls had expected to see larger reductions made to both the SAM and Ukraine production estimates and were upset the cuts were not more significant. Others see this as an opportunity for the USDA to make further slashes these production estimates in the coming months. On the other hand, soybean numbers were extremely bullish as supply fell below 300 million bushels.
March 2022 USDA WASDE Report
As expected there are differing views and estimates on what the ultimate fallout will be for Ukrainian crops in 2022. At this point no one can really know but right now people of Ukraine are fighting for freedom while protecting their family, friends, neighborhoods and their country. It’s seriously hard to believe that anyone is focused on the preparation of equipment and inputs for the planting season that is only weeks away while at the same time your backyard is being invaded by a foreign aggressor. Once the fighting ends things will still take time to return to normal operations. There are going to be enormous logistical issues and repairs that will need to be made before products can be produced or transported across the country due to the major infrastructure damage that is occurring every day across the nation of Ukraine.
For a few weeks we have been watching the price of gas and diesel fuel rise. Unbelievably, in most areas of the U.S. the price of diesel has climbed by more than $1.00 to well over $5.00 per gallon this week and unleaded gasoline now averages above $4.31 vs $2.81 per gallon a year ago.
Ethanol production output was up 3.1% on the week and sits at the normal level of production seasonally. Stocks have increased by 1.3% on the week to 25.271 million barrels which is the highest level of stocks on record for this same time period and is near the highest prints ever recorded for any time period. Concern is mounting that the spiking oil and gas prices may begin to reduce consumption in the near future, pressuring U.S. ethanol producers to slow production since supplies are already near record high levels. So far we have not seen “the price” it will take to really make a noticeable difference in usage.
The National Weather Service’s Climate Prediction Center has updated their outlook for the current La Niña weather pattern. Earlier this winter the CPC expected that the Northern Hemisphere would shift into a “ENSO-neutral” pattern sometime between May and July, 2022. (mean’s that neither La Niña nor El Niño patterns are present) Now the CPC expects that the La Niña weather pattern will last through August 2022. “The forecaster consensus favors a slower decay of La Niña due to the recent renewal of ocean atmosphere coupling, which contributed to cooler near-term forecasts.” (Reuters)
The next several weeks are critical for the rebuilding of sub-soil moisture levels. Without the rebuilding of moisture during the winter and early spring months, crops must rely on plentiful and regular precipitation during the growing season. The first map below shows the generally dry conditions that are likely through March 17th.
The EURO weeklies shown in the map below detail total precipitation forecast through April 25th.
This map indicates how the expected precipitation totals through 4/25 compare to normal.