Evening Report | December 6, 2023

Evening Report
Evening Report
(Pro Farmer)

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

 

Brazil 2023 soybean, corn exports to be record-large... Brazil’s National Cereal Exporters Association (ANEC), which represents large grain traders, forecasts Brazil will export a record 101.2 MMT of soybeans in 2023, up 23.3 MMT (30%) from last year. ANEC forecasts record Brazilian corn shipments of 55.95 MMT this year, up 11.2 MMT (25%) from last year. Combined soybean and corn exports are forecast to beat the previous record by 25 MMT — 14 MMT for soybeans and 11 MMT for corn.

 

Don’t expect many changes in USDA’s Dec. 8 crop reports... USDA won’t update its corn and soybean crop estimates this month; only a revised cotton production forecast. Any changes to domestic use will likely be limited. The bigger focus will be global production forecasts, especially for South America. The following pre-report estimates are from Reuters; Bloomberg for cotton:

Expectations for U.S. Cotton Production

Cotton

 

Production
(mil. bales)

Yield
(lbs. per acre)

Average est.

13.080

NA

Range

12.900 – 13.200

NA

USDA Oct.

13.090

783

 

Expectations for U.S. Carryover

Corn – billion bushels

 

 

2022-23

2023-24

Average est.

NA

2.152

Range

NA

2.106 – 2.293

USDA Nov.

1.361

2.156

 

 

Soybeans – million bushels

 

 

2022-23

2023-24

Average est.

NA

243

Range

NA

215 – 270

USDA Nov.

268

245

 

 

Wheat – million bushels

 

 

2022-23

2023-24

Average est.

NA

684

Range

NA

670 – 700

USDA Nov.

580

684

 

 

Cotton – million bales

 

 

2022-23

2023-24

Average est.

NA

3.26

Range

NA

3.00 – 3.45

USDA Nov.

4.25

3.20

 

Expectations for Global Carryover

Corn – MMT

 

2022-23

2023-24

Average est.

NA

313.44

Range

NA

311.00 – 316.50

USDA Nov.

299.22

314.99

 

 

Soybeans – MMT

 

2022-23

2023-24

Average est.

NA

112.76

Range

NA

110.00 – 116.80

USDA Nov.

100.31

114.51

 

 

Wheat – MMT

 

2022-23

2023-24

Average est.

NA

258.86

Range

NA

257.00 – 262.00

USDA Nov.

269.55

258.69

 

 

Cotton – million bales

 

2022-23

2023-24

Average est.

NA

81.42

Range

NA

81.00 – 81.60

USDA Nov.

83.04

81.50

 

Ag trade starts FY 2024 in the red... The U.S. exported $16.64 billion of ag goods in October against imports of $16.90 billion for a trade deficit of $262 million. That marked the sixth straight month U.S. agricultural trade posted red ink. October marked the first month of fiscal year (FY) 2024.

Last week, USDA forecast FY 2024 ag exports at $169.5 billion and imports of $200.0 billion, which would result in a deficit of $30.5 billion. That would be up from the FY 2023 deficit of $16.7 billion.

 

U.S. trade deficit widens in October on weak exports... The U.S. trade deficit widened more than expected in October as exports declined, likely positioning trade to be a drag on economic growth in the fourth quarter. The trade deficit increased 5.1% to $64.3 billion in October versus a revised figure of $61.2 billion in September.

Exports of goods and services fell 1.0% to $258.8 billion. Goods exports decreased 1.8% to $173.5 billion. Imports of goods and services gained 0.2% to $323.0 billion. Goods imports edged up 0.1% to $263.3 billion, potentially flagging softening domestic demand amid higher interest rates.

 

India plans to discourage ethanol production to prioritize sugar... India is planning to discourage the diversion of sugar for ethanol production as part of efforts to ensure sufficient supplies of the sweetener in the local market, government and trade sources said. Lower diversion for ethanol will help the world’s second biggest sugar producer increase output of the sweetener, which is expected to fall because of below-normal rainfall in key growing states.

The Indian government could ask mills not to use sugar cane juice and B-heavy molasses – a byproduct with higher sucrose levels – to produce ethanol, the sources said. The government would allow mills to produce ethanol only from C-heavy molasses, a cane by-product that has hardly any sugar content left.

The new guidelines for ethanol procurement in the 2023-24 marketing year, which began Nov. 1, will be finalized soon and oil marketing companies are likely to honor contracts already awarded.

 

Panama Canal crisis starting to have significant impact on global energy markets... Impacts are particularly being felt in the price of liquefied petroleum gas (LPG), a significant U.S. export. This price surge in Asia is notable, especially as crude oil prices have been declining. In a report, the Wall Street Journal says the primary reason for this increase in LPG prices is the worsening impact of drought at the Panama Canal, which serves as a crucial route for U.S. LPG shipments to reach Asian markets. Transit through the canal has been significantly reduced in recent months and further restrictions are expected. In January, daily transits will be limited to 20, and in February, this will drop to 18. Canal authorities have also categorized LPG carriers as the lowest priority among vessels, leading some ships to take longer routes, consequently driving up shipping rates. As a result, day rates for very large gas carriers on the Houston-Japan route have surged by 35% since the beginning of August.

 

U.S. job market, a significant driver of economic strength, is weakening... In October, the number of available jobs hit its lowest level since March 2021, according to the Labor Department. This decline in job openings comes amid a year-long increase in the unemployment rate and a lengthening period for Americans to find new jobs. The number of job openings fell to 8.7 million in October, down from a peak of 12 million in March 2022, although still higher than pre-pandemic levels. While there are still more job openings than unemployed Americans, the gap has narrowed.

The surge in resignations that characterized the early stages of the pandemic recovery has subsided, with workers increasingly hesitant to leave their jobs without a new one lined up. The hiring rate has also ticked lower in October, indicating that employers are becoming less eager to fill job roles. Meanwhile, layoffs have remained historically low. This evolving job market dynamic suggests a normalization in the labor market.

The relationship between job openings and the unemployment rate, known as the Beveridge curve, has moved closer to pre-pandemic levels, further indicating a shift in the labor market.

The November jobs data on Friday will provide additional insights into the state of the labor market.

 

Weak U.S. Q3 unit labor costs point to slowing inflation... U.S. unit labor costs were much weaker than initially thought in the third quarter amid robust worker productivity, providing a boost to the Federal Reserve's fight against inflation. Unit labor costs – the price of labor per single unit of output – fell at a 1.2% annualized rate in the third quarter. That was the first drop since the fourth quarter of 2022.

The inflation outlook was further brightened by other data on Wednesday showing a moderation in wage growth in November.

This data strengthened ideas the Fed is done with its monetary tightening cycle.

 

Canada keeps rates steady... The Bank of Canada (BOC) held its key overnight rate at 5%, while leaving the door open to another hike, saying it was still concerned about inflation though it acknowledged an economic slowdown and a general easing of prices. BOC noted labor market pressures had eased and growth stalled during the middle part of the year, leaving the economy no longer in excess demand.

 

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