Evening Report | August 9, 2023

Traders prepare for August crop reports... USDA’s initial survey-based corn and soybean crop estimates in the Aug. 11 Crop Production Report will be based mostly on farmer surveys and satellite imagery. The first cotton crop estimate will include objective yield data from southern Texas. Any changes to the U.S. wheat crop estimates this month are typically minor. USDA will also update its U.S. and global balance sheets. The following estimates are from Reuters; Bloomberg for cotton.

Almost 2% of Heilongjiang farmland impacted by typhoon Doksuri... Remnants of Typhoon Doksuri has affected 3.87 million mu (258,000 hectares) of the sown area in China’s largest grain producing province Heilongjiang, state broadcaster CCTV reported. The affected areas in Heilongjiang, known as China’s “great northern granary,” accounted for around 1.77% of the province’s total of 219 million mu of sown area in 2023. Efforts have been made to drain water from farmland in order to minimize the impact of flooding on the province’s agriculture.

China announced the allocation of another 732 million yuan of disaster relief to support areas that have suffered from the typhoon including Hebei, Tianjin, Beijing, Shanxi and Inner Mongolia in the north, Jilin and Heilongjiang in the northeast, Zhejiang in the east and Fujian province in the south.

French wheat crop may see quality declines... Rain delays to wheat harvesting in northern France may affect test weights and falling numbers, two key measures of milling quality, France’s ag ministry said. For soft wheat harvested before recent rains, quality readings generally met milling standards, though there were varied results for test weights, the ag ministry said in a joint statement with crop institutes Arvalis and Terres Inovia.

Record June pork exports... The U.S. exported 583.9 million lbs. of pork in June. While that was down 34.2 million lbs. (5.5%) from May, it was up 50.7 million lbs. (9.5%) from last year and a record for June. During the first half of 2023, the U.S. shipped 3.451 billion lbs. of pork, up 301.4 million lbs. (9.6%) from the same period last year. Shipments increased to each of the top five destinations for U.S. pork – Mexico, Japan, South Korea, China and Canada.

The U.S. exported 269.9 million lbs. of beef during June, up 2.8 million lbs. (1.1%) from May but 44.5 million lbs. (14.2%) less than last year. During the first six months of the year, U.S. beef exports totaled 1.584 billion lbs., down 202.8 million lbs. (11.4%) from the same period last year. Beef shipments increased to Mexico but were down to the other four top destinations.

Vilsack addresses concerns about Brazil’s animal disease testing and reporting... USDA Secretary Tom Vilsack wrote a letter to Brazilian Agriculture Minister Carlos Fávaro regarding Brazil’s animal disease testing and reporting, particularly related to bovine spongiform encephalopathy (BSE). Vilsack voiced concern about Brazil’s timeliness between the recent atypical BSE initial detection, sampling and completed results, noting it “continues to lag significantly behind the timeliness of other major beef exporters.” He said the long lag “could limit our [United States’] ability to implement control measures in time to mitigate the risk of potential BSE introduction via imported cattle and beef produces” in the case of a classical case of the disease.

Vilsack urged Brazil to “review internal testing processes, consider concurrent rather than consecutive testing strategies for high-suspect samples and decrease the overall time between sampling and testing even further.”

Vilsack offered to provide confirmatory testing for Brazil through U.S. diagnostic laboratories and support technical discussions on surveillance and testing procedures.

EVs cheaper than gasoline cars in China... Bloomberg reports seven of the 10 best-selling cars in China in June were electric vehicles (EVs). Tesla’s Model Y crossover SUV has comfortably outsold every competitor since February, while BYD Co.’s Dolphin hatchback has already overtaken established competitors just months after deliveries began. EVs’ exemption from China’s 10% vehicle purchase have benefitted the sector.

Federal grants for clean energy... In a major move for America’s rural electric cooperatives, $10 billion in federal grants for clean energy projects have become available. From July 31, cooperatives can submit letters of intent to the “Empowering Rural America” grant program, which is worth $9.7 billion and for specific renewable energy initiatives. Furthermore, an additional $1 billion became available through a similar scheme, PACE, in late June. USDA will oversee the distribution of the funds. The grants, classified into three categories based on the size of the cooperatives, are competitive, so timelines are tight. The deadline for submitting letters of intent is Sept. 15, and missing it would mean forfeiting the opportunity to enter the formal application process.

Fed’s Harker: Time for a pause... Philadelphia Fed President Patrick Harker, who is a voter in the rate-setting Federal Open Market Committee this year, indicated in his latest comments the Federal Reserve may have reached a point where they could hold steady with increasing interest rates. He did, however, caution that this trajectory could change depending on future data. Harker believes the monetary policy actions already done should be given time to play out. He also added that he doesn’t see any rate cuts in the foreseeable future. The Fed has tightened monetary policy 11 times since March 2022, leading to the highest level for interest rates in over 22 years.