Evening Report | August 17, 2023

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NWS extended forecast: Mostly ‘equal chances’ for September rains... The extended weather forecast from the National Weather Service calls for “equal chances” for normal, above-normal and below-normal rainfall across the central U.S. during September. Above-normal rainfall is expected in the Southeast. There are also equal chances for temps across the eastern two-thirds of the Corn Belt next month, while western areas of the region, the Plains, Mid-South, Delta and Southeast have increased chances of above-normal temps.

Unless there are timely rains during September, it could be a less-than-favorable finish to the growing season in the areas expected to see above-normal temps.

 The 90-day forecast through November is similar, suggesting it should be a relatively open harvest window across the Corn Belt.

The Seasonal Drought Outlook calls for persist across most areas of the southern, western and northern Corn Belt through November.

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Corn, soybean drought footprint shrinks... As of Aug. 15, the U.S. Drought Monitor showed 50% of the U.S. was covered by abnormal dryness/drought, down one percentage point from the previous week. USDA estimated drought (D1 or higher) covered 42% of corn production areas (down seven points) and 38% of soybeans (down five points). Drought expanded to cover 54% of spring wheat areas (up two points) and 24% of cotton (up three points).

For the Midwest, the Drought Monitor noted: “Widespread improvements were seen throughout the Midwest due to precipitation and at- or below-normal temperatures. Ohio, Indiana and Illinois saw continuing improvement, with D1 removal from Ohio and Indiana. Much of Illinois, except for the northern region, and all of Missouri also saw continued improvements, with improving streamflow and soil moisture. Large parts of Wisconsin and Minnesota saw heavy precipitation. Southeastern Wisconsin and central Minnesota saw areas of 2 to nearly 5 inches of rain, aiding short-term dry conditions.”

For the Plains, the Drought Monitor stated: “Eastern parts of the High Plains saw the benefits of this week’s precipitation along with below-normal temperatures. Kansas saw heavy precipitation continue from last week, bringing further improvements to the east and central regions. Areas near Kansas City saw upwards of 3 inches of precipitation, while the southeast areas received 4 to 7 inches of rain, carrying over improvements seen in Oklahoma. Some improvements occurred along parts of the Nebraska-South Dakota border. Both southeast and northeast South Dakota saw improvement from heavy rainfall and improving soil moisture. This improvement bled over in southeast North Dakota, where areas of D0 were removed due to heavy precipitation. Little precipitation was received further north. Continual soil moisture and streamflow impacts led to D1 and D2 expansions. Southeastern Colorado received spotty precipitation, adding to the already-degrading conditions and resulting in expansion of D1 and D0.”

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U.S. officially requests USMCA dispute panel over Mexico’s GM corn policy... The U.S. officially established a dispute settlement panel under the United States-Mexico-Canada Agreement (USMCA) regarding Mexico’s ban on genetically modified corn, as we alerted in “First Thing Today.” The U.S. contends Mexico’s ban on GM corn is not based on science and undermines market access agreed to via USMCA.

Mexico says it will defend its policies, arguing they are “"consistent with trade obligations.”

IGC raises global corn production forecast... The International Grains Council (IGC) raised its forecast for 2023-24 global corn production, with an improved outlook for Ukraine’s crop only partially offset by a downward revision for China. IGC now forecasts global corn production at 1.221 billion metric tons, up 1 MMT for last month and 61 MMT above last year. The inter-governmental body raised its outlook for Ukraine’s corn crop by 3 MMT to 27 MMT, though that would be down 700,000 MT from last year. IGC cut China’s corn crop estimate to 277.4 MMT, down 2 MMT from last month, due to recent flooding in the main northeast producing region.

IGC kept its 2023-24 global wheat production forecast at 784 MMT, which would be down 19 MMT from last year.

The global soybean production forecast was cut 2 MMT to 398 MMT, though that would still be up 30 MMT from last year.

WTO rules against China regarding tariffs on some U.S. goods... A World Trade Organization (WTO) dispute panel ruled China wrongly imposed retaliatory tariffs on various U.S. products, including pork, wine, fruits and nuts, in response to the Trump-era tariffs on aluminum and steel imports. The panel stated that China’s retaliatory tariffs, which included an additional 25% on pork and an additional 15% on fruits and derived products, violated trade rules.

The U.S. argued that its tariffs on aluminum and steel were imposed due to national security concerns and were therefore exempt from trade rules. In response, China implemented what the U.S. called “sham safeguard tariffs.”

During the tit-for-tat tariff exchanges between China and the U.S., U.S. food and ag exports suffered a decline of over 9%. While some tariffs remain in effect and others were temporarily suspended, both countries declared a truce in early 2020. China is a significant customer for American ag exports, with purchases projected at $34 billion for the current trade year.

WTO panel reports can be appealed within 60 days after release, but due to a lack of judges, the appellate body is currently not operational. China’s commerce ministry said it was studying the WTO panel’s ruling.

U.S. preparing for new metals tariffs... The U.S. Commerce Department is preparing to impose new tariffs on metal used for food cans originating from China, Germany and Canada, the Wall Street Journal reported. The investigation revealed that steelmakers from these countries were selling their tinplate products in the U.S. at unfairly low prices, justifying the imposition of import duties. Among the three countries, Chinese products will face the highest tariffs, amounting to 122.52% of the import value. This decision is causing concern among food companies, as it could potentially result in higher prices for certain canned foods.

Container shipping rates surge... Spot container shipping rates on trans-Pacific routes are experiencing a notable upward trend, at least for the time being. Recent data indicates the rate increases container shipping companies have been pursuing during the summer are finally having an impact on Asia-to-U.S. trade, the Wall Street Journal reports. Xeneta estimates prices have surged by 61% in the past six weeks. Although U.S. importers have generally accommodated these price hikes without major issues, the rates are still considerably lower than the steep highs that disrupted the market in the previous two years. While shipping rates have faced declines this year, experts anticipate the recent gains made by carriers will likely be short-lived due to an influx of new capacity that is expected to flood the container markets. Currently, both carriers and shippers are feeling a sense of urgency as the peak shipping season progresses, with little indication consumer demand will significantly boost the flow of goods through ocean supply chains.