Ukraine, Russia still moving grain to meet contracts | Crop

Olson updated “core issues in agriculture” in Ukraine and Russia in the April NDSU ag economics webinar.

Olson also discussed the World Agricultural Supply and Demand Estimates (WASDE) report and commented on the March planting intentions report.

Previously, the ag world had always referred to grain in Ukraine and Russia as “Black Sea” corn, feed barley and grain.

“We’ve always lumped Ukraine and Russia together because they are so common, so similar in ag production practices. Their cost of production is a little different, but similar, “said Olson.

Their shipping and loading vessels at ports in the Black Sea are only a few hundred miles from each other.

“Historically, we’ve put the two countries together. Now because of the war, Ukraine and Russia are separating quite dramatically, “he said, adding that conditions are very different in Ukraine than in Russia.

Moving forward, from a pricing standpoint and a shipping and logistics standpoint, the US and other countries will need to “think about Ukraine grain and Russian grain as two separate types of wheat.”

“We will need to think about Ukrainian grain and Russian grain as two different types of markets,” said Olson.

Regarding Ukraine, old crop grain shipments of corn, feed barley and wheat have obviously slowed down but are still moving.

Early in the war, Ukraine was able to divert some feed to Barley and other grain to Moldova and Romania for loading onto ocean vessels.

“These were purchases that were already committed and Ukrainian companies were trying to deliver on those purchases,” Olson said. “There is a little of that that is still happening.”

But most current shipments of grain, some newer purchases, and ability for Ukraine to ship out of the country mean moving by rail into Western Europe.

“The primary focus has been on the moving grain by the rail system,” he said.

There have been challenges with moving grain by rail, in particular, that the rain gauges are different in Ukraine than in Europe.

The width of the rails in the former Soviet Union was wider than the gauge of the rails in Europe.

“That was done as a military and a safety precaution to prevent troop movements by rail,” Olson said.

Ukraine is struggling with moving grain, and they are basically having a trans load.

“They are taking the grain off the rail cars, and loading it on different rail cars,” he said.

The other issue is that grain rail cars are not always available, understanding troops and military equipment are a priority.

New crop planting and production levels will fall off this spring and summer. There is a lot of discussion about how many acres will be planted.

“It’s getting difficult to get the fertilizer, the chemical, and the fuel into the country to maintain crop quality,” Olson said.

There is expected to be a 30-60 percent cut in production and those numbers will vary by crop.

Regarding Russia, they are moving out of the country slowly, but they are meeting their contracts.

“Most of the loading ports in Ukraine are closed,” he said. “However, Russian ports are still open.”

Insurance underwriters for ocean vessels have raised rates significantly.

“The cost of ocean movement will continue to struggle,” he said. “While there are countries willing to buy the grain, moving grain through a war zone will be difficult.”

While global wheat prices have risen, Russian wheat is still cheap. Egypt has purchased wheat from Russia.

Most of Europe is French French wheat, which is like a soft winter wheat.

India is producing wheat, and more volume is being exported. They are expected to have a record wheat crop in 2022.

“The challenge for wheat in Europe is they don’t have enough wheat to backfill the lower Russian and Ukrainian supplies,” he said.

Economists and others will be keeping an eye out for the May WASDE. It will be the first report for the new crop year.

“May be the first month the USDA begins making formal projections into the new crop for the WASDE, the 2022-2023 marketing year,” said Olson. “That report will be watched very closely and will be a market mover.”

About 25-28 market analysts make their own estimates of crop supply and demand conditions, which are released just before the USDA reports are announced. In the April report, the trade’s estimate for ending stocks – the grain that will be in the bin just before harvest begins – was closer to what the actual USDA numbers were.

“The numbers came in very close to what the trade was expecting,” Olson said.

The trade estimated the average for all wheat would come in .656 Billion bushels (BB), for corn, 1.415 BB and for soybeans, .262 BB.

USDA reported actual numbers for all wheat, .678 BB; for corn, 1.440 BB, and for soybeans, .260 BB.

“Typically, the April report does not have a lot of shock value in it,” he said. “We were looking for some adjustments because of the war between Russia and Ukraine and I think the USDA will continue to include and incorporate that information but will not be cautious, and not report it all in one report.”

They also received trade estimates and actual USDA numbers from South American production.

Trade projections coming out of South America find numbers closer to USDA reported value.

For Argentina, the trade estimated an average of 52.04 million metric (MM) tons of corn, and 42.83 MM of soybeans.

The USDA April numbers were 53 MM tons of corn, and 43.50 MM tons of soybeans.

For Brazil, the trade estimated 115.09 MM tons of corn, and 125.14 MM tons of soybeans.

The USDA April numbers were 116 MM tons of corn, and 125 MM tons of soybeans.

“The private estimates came in very close to the USDA numbers. Again, there was no shock value in the April report, “he said.

Soybean and the first corn crop in Brazil are complete, while the second crop is being planted.

In Argentina, corn and soybean harvest is also complete, after harvest cleanup in April.

Olson pointed to the prospective plantings report.

Reuters and Bloomberg, as well as Dow Jones, “usually do what surveys private forecasting firms expect to see ahead of the March report,” he said.

Traders were expecting to see a decline in corn plantings from 2021 planted acres at 93. 4 million acres to 92 million acres. They were also expecting to see an increase in soybean plantings, from 2021 planted acres at 87.2 million acres to 88.7 million acres.

“That is what we got, but that swing was bigger than we expected, with more of a decrease in corn and more of an increase in soybeans,” Olson said.

USDA 2022 planting intentions numbers for corn were 89.5 million acres, and for soybeans, 90.9 million acres.

“That’s why we saw some big price movements, especially in corn, after the report,” he said.

When looking at the spring wheat and durum numbers, it is important to understand that the survey for the March prospective planting was taken in the first two weeks of March.

“We were aware of Russia invading Ukraine, and the war was starting but it was not going to be long enough for the market to figure out what the potential implications of that invasion and how long this war might last. We are learning about the situation everyday and what the implications are for ag and for energy, “said Olson.

The June planting report will provide an update on acres.

“I’m expecting to see a little more rebalancing of corn and soybean acres,” he said. “I think the market is trying to signal to farmers not to switch quite as many acres to soybeans.”

With spring wheat and durum acres located more in the dry area of ​​the state, the trade estimate for spring wheat was 11.8 million acres. That compares to actual USDA numbers of 11.2 million acres.

The trade estimate for durum acres was 1.7 million acres, compared to USDA numbers of 1.9 million acres.

“However, after snowfall and moisture fell in central and western North Dakota in April, as well as much higher spring wheat prices, are we going to see some switching acres to try and bring more spring wheat and durum back into production?” Olson asked. “With spring wheat and durum, I expect to see a little rebalancing.”