Evening Report | December 19, 2023
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Farmer group: Mato Grosso soybean production to fall 20%... Hot, dry weather in Mato Grosso, Brazil’s top soybean producing state, is expected to reduce soybean production by around 20% in 2023-24, according to farmer group Aprosoja. The group’s survey of more than 600 producers in the state forecast soybean production at 36.15 MMT, which would be down 9.16 MMT (20.2%) from last year, driven by a 20.3% expected drop in yields. Aprosoja also said the situation could worsen if rains do not come soon and normalize conditions.
Of those surveyed, 34.3% of the farmers said their crops are in good or excellent condition, while 37.7% said the crop is in fair condition and 27.6% said fields were in bad or very poor condition.
El Niño has peaked; steady decline in early 2024... The latest computer forecast models for ENSO events suggest El Niño peaked a few weeks ago and will begin a steady decline in January. As impressive looking as the warm temperature anomalies are in the eastern equatorial Pacific Ocean, the impact of El Niño on the world has not been nearly as severe as once predicted, according to World Weather Inc. The forecaster says the event will steadily decline over the next few months.
World Weather says, “Weather adversity in Brazil this spring cannot be attributed entirely to El Niño. The lingering impact of greater moisture in the stratosphere resulting from the January 2022 Hunga Tonga volcanic eruption is believed to have had a huge impact on Brazil weather possibly contributing to the failed summer monsoon just like that in North America during its summer season. Brazil’s forecast is expected to eventually trend more favorably toward more normal rainfall in the middle to latter part of January and especially in February and March. Shortly after that, though, what little monsoon flow has evolved by then should abate and the dry season will begin.”
ENSO computer modeling is not very accurate after three months, especially the NOAA forecast model, according to World Weather. But the forecaster notes the model suggests after the rapid demise of El Niño additional cooling of ocean surface water is possible in the eastern equatorial Pacific Ocean, resulting in the possible redevelopment of La Niña. Still, it says the second half of 2024 is likely to feature neutral ENSO conditions.
World Weather concludes, “Years in which moderately strong El Niño events gave way to neutral ENSO conditions have a tendency to receive less-than-usual rainfall in the spring and summer in the U.S. Corn Belt with temperatures that vary mostly in a seasonable to slightly warmer bias. If that occurs and precipitation stays below normal during the balance of winter in the Northern Plains and western Corn Belt there would be potential that dryness might return to stress crops in the spring and summer, especially if remnants of the Hunga Tonga volcano prevail. “If” La Niña returns, these tendencies would be enhanced, but confidence in such an event is very low – at least for now.”
Year-round E15 sales rule sent to OMB... EPA sent a presumably final rule to the Office of Management and Budget (OMB) for review regarding an RVP waiver to allow year-round E15 sales. This rule pertains to a request from several states to remove the 1-psi volatility waiver under the Clean Air Act concerning ethanol fuel blends, effectively allowing year-round sales of E15. The states involved in this request include Illinois, Iowa, Minnesota, Missouri, Nebraska, Ohio, South Dakota and Wisconsin. While EPA introduced a proposed rule to enable this action in March, it had not specified a deadline for the issuance of the final rule, categorizing it as “to be determined.”
USDA sends two livestock market rules to OMB for review... USDA’s Agricultural Marketing Service has submitted two additional proposed rules concerning livestock market matters to OMB for review. The first rule focuses on “Unfair Practices, Undue Preferences, and Harm to Competition Under the Packers and Stockyards Act.” It aims to revise regulations under the Packers and Stockyards Act to provide clarity regarding violations of the Act. Furthermore, it seeks to clarify the Act’s scope to determine actions or conduct that could be in violation of the Act, even without evidence of harm or likely harm to competition. USDA’s position is that the Act should primarily address cases involving harm to competition.
The second proposed rule deals with “Poultry Grower Payment Systems and Capital Improvement Systems.” This rule is designed to address certain problematic practices within poultry grower payment systems and capital improvement programs.
USDA plans to release the proposed rule on unfair practices in February and the rule concerning poultry growers in January. These rules are part of the Biden administration’s commitment to addressing issues within the livestock industry.
Railroad bridge closures at U.S./Mexico border worry Mexican poultry farmers... The closure of railroad bridges at Eagle Pass and El Paso along the U.S./Mexican border has raised concerns among Mexican poultry farmers who depend on shipments of feed that typically pass through these bridges. Mexico’s National Union of Poultry Producers (UNA) revealed that approximately 25% of Mexico’s yellow corn imports from the U.S. and 63% of its soybean paste imports enter the country via these two border crossings.
UNA has requested the support of Mexican authorities to intervene and negotiate the reopening of these railway crossings as soon as possible. They have emphasized the shutdown could potentially impact the production of chicken and eggs in Mexico.
The decision to temporarily close the railroad bridges was made by the U.S. Customs and Border Protection (CBP), citing the need to redirect personnel to assist the U.S. Border Patrol in handling the custody of migrants. CBP has not provided any specific information regarding the duration of the bridge closures.
Senators facing challenges in reaching consensus on immigration reform... According to Senate Minority Whip John Thune (R-S.D.), it is unlikely the Senate will be able to vote on an immigration deal this week. Thune said negotiators were unable to resolve thorny issues during talks over the weekend. Consequently, the approval of aid for Ukraine and Israel is also postponed for the foreseeable future. Sen. Roger Wicker (R-Miss.), the ranking member of the Armed Services Committee, said he anticipates the parties will reach a deal, at least in principle, on Ukraine aid and border policy by the end of the week. That would tee up votes on the legislation the first or second week in January, he said. Minority Leader Mitch McConnell (R-Ky.) suggested talks will extend “beyond” this week but remained committed to getting a deal. The House is out until Jan. 9.
The 118th Congress is on track to be one of the least productive in modern history, with just a couple dozen laws on the books at the close of 2023.
U.S., EU agree to extend truce on steel and aluminum imports... The European Commission, the EU’s executive branch, announced that retaliatory measures implemented during the Trump administration would be suspended for 15 months, until March 31, 2025. However, the EU was unsuccessful in convincing the U.S. to make its current tariff-rate quotas (TRQs) more flexible.
This extension will result in significant savings for EU steel and aluminum exporters, estimated at around €1.5 billion ($1.6 billion) in tariffs annually. The U.S. will also need to complete its own process to extend its TRQ system for the same period, starting from January.
The EU has expressed dissatisfaction with the current quota system, which includes quarterly quotas for 54 steel mill product categories and 16 aluminum mill product categories. They have been advocating for improvements, including annual quotas for the European market.
Both the EU and the U.S. are racing against time to finalize the Global Arrangement on Sustainable Steel and Aluminum (GSA), which would provide a permanent solution to the trade dispute that began during the Trump era. The GSA is set to maintain tariff exemptions until after the U.S. presidential election in November 2024.
The EU’s main objective in the GSA negotiations is to have all tariff-rate quotas lifted, while the U.S. opposes this demand. The EU could potentially relaunch a case against the U.S. at the World Trade Organization or reimpose tariffs on American products if an agreement cannot be reached. However, such actions lack broad support among EU member states, as they are concerned about escalating trade tensions ahead of next year’s U.S. election.
