Evening Report | August 30, 2023

Check our advice monitor on ProFarmer.com for updates to our marketing plan.

Livestock producers: Extend feed coverage... The Pro Farmer corn and soybean crop estimates are lower than USDA’s August forecasts, as we expect a poor finish to the growing season. As a result, we advise livestock producers to cover all corn-for-feed and soymeal needs in the cash market through September.  

U.S. working with Romania, Moldova to increase Ukraine grain exports... The U.S.is working with Romania and Moldova to increase Ukraine's grain exports via the Danube river as it explores alternative routes after Russia withdrew from the Black Sea grain deal. “We are looking to support alternative routes: that is most prominently the Danube route. That route... stays within NATO territorial waters. So it’s one that’s very attractive for us because it keeps it into a more secure corridor,” a senior State Department official said. “That (route) potentially can bring a significant amount, potentially, we'll try to double the amount going to that route,” the official said.

Washington has also been working with Turkey to support its efforts to bring Russia back into the grain deal, the official added. “We’re not directly involved in the negotiations, but our teams are working closely with the UN and the Turks in support of trying to see it restart.”

Reuters: High pasta prices set to boil over as supplies decline... Drought in Canada and bad weather in Europe has damaged durum wheat and reduced supplies available to flour millers and food companies. With global production of durum wheat headed for a 22-year low, Italy’s famed pasta makers have had to turn to unusual suppliers such as Turkey for their main ingredient, Reuters reported.

Concern is rising further now that farmers in top durum exporter Canada have seen their harvest cut by drought. Canada accounts for around half of global trade in durum but this year’s harvest looks to be the country’s second-smallest in 12 years. Canadian farmers are expected to produce 4.259 MMT of durum this year, Statistics Canada reported yesterday.

The U.S. is also expected to harvest a smaller crop due to dryness, while drought has cut production in Spain and severe weather has produced mixed quality in Italy and France.

The International Grains Council forecasts 2023-24 global durum production at a 22-year low, pushing world stocks to their smallest in three decades.

Consultancy Strategie Grains says pasta makers could possibly use more soft wheat where regulations allow and consumer income is limited. Durum, the hardest wheat, produces pasta with the prized “al dente” firm texture, unlike soft wheat. In North Africa, durum is also used to make couscous.

“There’s not going to be enough durum to supply the whole world at a normal demand level,” Strategie Grains analyst Severine Omnes-Maisons told Reuters.

India allows some rice exports to Bhutan, Singapore and Mauritius... India on Wednesday decided to allocate export quotas of non-basmati white rice to Bhutan, Mauritius and Singapore, the government said. Exports of 79,000 MT of non-basmati white rice would be allowed to Bhutan, while export quotas of 50,000 MT and 14,000 MT, respectively, would be allocated for Singapore and Mauritius.

Indonesia plans more biofuel blends, will require more ethanol imports... Indonesian state energy company Pertamina plans to mix more of its gasoline products with ethanol in 2024 in a bid to offer alternative fuels to the public, its chief executive said. The company will mix its 90-octane gasoline, Indonesia’s most widely used fuel product under the brand Pertalite, with 7% ethanol, which will improve the quality of the fuel, Nicke Widyawati told a parliamentary hearing.

Pertamina will also increase the ethanol blend in its other fuel product to 8% from 5%. That fuel, called Pertamax Green 95, is currently only offered at 17 fuel stations in Jakarta and Surabaya, the country’s two biggest cities.

Pertamina will import the ethanol to be blended due to limited domestic production made from sugar molasses. Current domestic output of fuel-grade ethanol is estimated at around 63,000 kiloliters per year. Pertamina did not provide an estimate for how much it will seek to import.

U.S. Q2 economic growth revised lower... U.S. gross domestic product increased at a 2.1% annualized rate in the second quarter, according to the second estimate from the Commerce Department. That was down from the initial estimate of 2.4% growth but up from the 2.0% pace in the first quarter. Economists expected second quarter GDP to be unchanged from the initial estimate.

GOP presidential candidates align with Trump’s trade policy views... In the lead-up to the 2024 GOP presidential race, a consensus is emerging within the Republican Party that aligns with Donald Trump’s anti-free trade stance, the Wall Street Journal reports. Republican candidates, including front-runner Trump, are advocating for more protectionist approaches, particularly towards China. They call for ending permanent normal trade relations with China and promoting domestic manufacturing, possibly through government subsidies. Trump has gone further by proposing a universal baseline tariff on U.S. imports, escalating on countries involved in unfair trading practices or currency manipulation.

The ag sector is concerned. While GOP contenders are primarily focusing on China, their views align with the party’s increasing hawkishness on this matter. However, they are not advocating for new trade pacts with other international partners, a stance that concerns advocates of free trade, including many in the U.S. ag sector.

The hardening Republican stance on trade is tied to China’s growing economic and military influence. The Covid-19 pandemic also exposed vulnerabilities in the U.S. supply chain that heavily relies on China. While Trump’s rivals are mostly keeping their focus on China, they are cautious about forging new trade deals and instead aim for better reciprocity.

Bottom line: This shift signifies a departure from decades of open-border policies that gained momentum through free-trade agreements in the 1980s and 1990s. China’s rise in economic and military power has challenged this approach. Although these protectionist views resonate with a considerable portion of the U.S. population, some fret they could result in economic costs and hinder global economic growth.

A so-called ‘protection gap’ seems likely to grow... Last year, insurance covered just 60% of the $165 billion in total economic losses from climate-related disasters in the United States. That widening gap is becoming a major concern for federal regulators, who worry it leaves big swaths of American homeowners and businesses vulnerable to the next superstorm.