Evening Report | January 9, 2024

Evening Report
Evening Report
(Pro Farmer)

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

 

Brazil’s dryness spreads to Parana... Parana, which is expected to be Brazil’s third largest soybean production state this year, is seeing crop conditions worsen amid recent heat and dryness. According to state crop agency Deral, soybean crop conditions stand at 71% “good” compared with 86% last week. The amount of crop rated “bad” increased to 5% from 1% previously. If rains don’t some soon, the state’s soybean production could fall below 21 MMT from its current forecast of 21.7 MMT, Deral said.

 

Favorable weather to boost Argentine crops... Argentina’s 2023-24 soybean and corn crops will get a boost this month due to forecasts calling for rains and moderate temperatures, the Buenos Aires Grain Exchange said in its monthly weather report. The exchange said, “Rainfall will likely continue to replenish soil moisture reserves, and temperatures will remain moderate with a low risk of intense heat, which will improve harvest projections.” The exchange currently forecasts production at 50 MMT for soybeans and 56 MMT for corn.

 

U.S. posts ag trade surplus in November... The U.S. exported $16.09 billion of agricultural goods in November against imports of $15.99 billion, resulting in a surplus of $98.97 million. This snapped an eight-month string of ag trade red ink. During the first two months of fiscal year (FY) 2024, U.S. ag exports stood at $32.73 billion against imports of $32.90 billion for a deficit of $162,766. Given the first quarter of the fiscal year is the strongest period for ag exports, this is a sluggish start.

USDA forecasts ag exports at $169.5 billion and imports at $200.0 billion for FY 2024, which would imply a deficit of $30.5 billion.

 

U.S. trade deficit unexpectedly narrowed in November as imports declined... The trade deficit contracted 2.0% to $63.2 billion from a revised figure of $64.5 billion in October. Exports declined $4.8 billion to $253.7 billion while imports fell $6.1 billion to $316.9 billion.

The trade deficit with China decreased by $2.4 billion to $21.5 billion. With the European Union, it decreased by $3.5 billion to $15.6 billion.

 

The cost of a war in Taiwan... War over Taiwan would have a cost in blood and treasure so vast that even those unhappiest with the status quo have reason not to risk it. Bloomberg Economics estimates the price tag at around $10 trillion, equal to about 10% of global GDP — dwarfing the blow from the war in Ukraine, Covid pandemic and Global Financial Crisis.

Bloomberg Economics modeled two scenarios: A Chinese invasion drawing the U.S. into a local conflict, and a blockade cutting Taiwan off from trade with the rest of the world. A suite of models is used to estimate the impact on GDP, taking account of the blow to semiconductor supply, disruption to shipping in the region, trade sanctions and tariffs and the impact on financial markets.

In the case of a war:

  • Taiwan’s economy would be decimated. Based on comparable recent conflicts, Bloomberg Economics estimates a 40% blow to GDP. A population and industrial base concentrated on the coast would add to the human and economic cost.
  • With relations to major trade partners turned off and no access to advanced semiconductors, China’s GDP would suffer a 16.7% blow.
  • For the U.S., further from the center of the action but still with a lot at stake — through the reliance of Apple on the Asian electronics supply chain, for example — GDP would be down 6.7%.
  • For the world as a whole, GDP would be down 10.2%, with South Korea, Japan and other East Asian economies most impacted.

A yearlong blockade of Taiwan by mainland China:

  • For Taiwan, a small, open economy that has thrived through trade, GDP in the first year would be down 12.2%.
  • For China, the U.S., and the world as a whole, GDP in the first year would be down 8.9%, 3.3% and 5%, respectively.

 

USDA spent over $1 billion on bird flu outbreaks in two years... Since the onset of highly pathogenic avian influenza (HPAI) outbreaks nearly two years ago, USDA has allocated over $1 billion for compensating farmers for lost flocks and containing the spread of the viral disease, according to the Food and Environmental Reporting Network, citing a spokesperson for the Animal and Plant Health Inspection Service. The primary expenditure, totaling $715 million, was directed toward indemnities for depopulated birds and eggs, benefiting producers, growers, and integrators. An additional $183 million was used for culling and disposing of flocks and virus elimination efforts. The remaining expenses, estimated at approximately $130 million, covered associated personnel, contractors, state agreements, and field costs.

Among the major recipients of indemnities, Jennie-O Turkey Store, a subsidiary of Hormel Foods, received the largest sum, totaling $74.8 million. Other prominent recipients included Rembrandt Enterprises of Iowa with $27.9 million, Sunrise Farms of Iowa with $25.8 million, MG Waldbaum of Minnesota with $25.2 million and Tyson Foods of Arkansas with $24.3 million.

USDA indicates that overall, since 2022 over 79 million birds have been impacted, with a notable increase to 11.4 million last month, up from 1.3 million in October.

These ongoing outbreaks of HPAI represent the largest animal disease event in U.S. history.

 

SCOTUS upholds poultry companies’ judgment sharing agreement in price-fixing litigation... The U.S. Supreme Court (SCOTUS) decided not to review a lower court ruling regarding an agreement among major poultry companies to share the cost of any judgments in price-fixing litigation cases. This case involves Armory Investments LLC v. Tyson Foods Inc. and pits large poultry companies against poultry purchasers, including retailers and food companies. The Supreme Court’s decision leaves in place a May 2022 ruling by Judge Thomas Durkin of the U.S. District Court for Northern Illinois that upheld a judgment sharing agreement (JSA) among 14 poultry companies. These companies, including Tyson Foods and Perdue Farms, agreed to collectively share any costs arising from ongoing broiler chicken price-fixing lawsuits brought by purchasers.

 

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