Evening Report | September 8, 2022

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Drought footprint unchanged but changes for key ag areas... As of Sept. 6, 64% of the U.S. was experiencing abnormal dryness/drought, according to the U.S. Drought Monitor, unchanged from the previous week. But the Drought Monitor noted key changes within various agricultural regions.

The Drought Monitor summary stated: “This week saw continued improvements on the map across areas of the South, including Texas, in response to another round of localized heavy rainfall during the past week. Overall, the recent rainfall in Texas throughout the past month has started to make a significant dent in the state’s drought conditions in some areas. In contrast, drought conditions intensified in areas of the central and northern Plains with additional degradations on this week’s map. In these areas, recent drought impact reports submitted to the National Drought Mitigation Center indicated drought-related impacts within the agricultural sector including reduced crop yields as well as deteriorating pasture and rangeland conditions... In the Midwest, short-term precipitation deficits and declining soil moisture levels led to the expansion of areas of drought in northern Missouri and central Illinois.”

Across the Corn Belt, dryness/drought covers 30% of Illinois (up 7 points from last week), 31% of Indiana (down 14 points), 62% of Iowa (unchanged), 96% of Kansas (up 6 points), 21% of Michigan (unchanged), 26% of Minnesota (up 6 points), 44% of Missouri (down 2 points), 100% of Nebraska (unchanged), 28% of North Dakota (unchanged), 5% of Ohio (down 2 points), 74% of South Dakota (up 3 points) and 19% of Wisconsin (unchanged).

USDA estimates the drought footprint covers 29% of corn acres (up 1 point from last week), 21% for soybeans (unchanged) and 45% for cotton (down 2 points).

Click here for more details and to view the related map.

CPC: La Niña expected to persist through winter... The U.S. Climate Prediction Center (CPC) now says La Niña is favored to continue through the Northern Hemisphere winter, with 91% odds it will persist through the September-November timeframe and 54% chances it lasts through January-March 2023. CPC says, “There is an interesting split in the dynamical versus statistical model forecasts, with the latter set suggesting La Niña will persist longer, through January-March 2023. At this time, the forecaster consensus sides with the statistical models, although there is still large uncertainty over how long La Niña will last and when it will transition to ENSO-neutral.” CPC gives slightly greater than two-third odds of ENSO-neutral conditions during the U.S. spring and early summer next year.

Click here to view CPC’s ENSO probability chart.

As we reported in “Evening Report” on Wednesday, World Weather noted shifts in CPC’s ENSO model runs, saying: “The significance of this new forecast is huge for several areas in the world, but first on the list is South America. The longer La Niña lingers the higher the potential will be for another less-than-ideal South America growing season and the higher the potential will be for too much rain to fall in eastern Australia. India will likely have another wet winter and dryness may be an issue again in the central United States during the spring of 2023 if La Niña lasts too long. If La Niña dissipates in the middle of winter some of the U.S. weather concerns should diminish or dissipate and that is a real possibility in 2023.”

Argentine soybean sales remain strong after FX boost... Argentine soybean farmers sold 3.1 MMT of soybeans between Monday and Wednesday, nearly five times more than last week, after the government introduced new foreign exchange incentives, according to the Rosario Grain Exchange. Argentine farmers had been holding soybeans to hedge against potential devaluation of the peso amid soaring inflation.

U.S. sees no indication Ukraine grain export deal falling apart... The U.S. sees no indication that a United Nations-brokered Ukrainian grain export deal is unraveling, the White House said on Thursday. “We see no indication that it’s falling apart now and it is in fact having the intended effect,” White House national security spokesman John Kirby told reporters.

Firm raises Russian wheat crop estimate... Russia this year has already exceeded the record wheat harvest of 86 MMT set in 2017, Dmitry Rylko, general director of the Institute for Agricultural Market Studies (IKAR), said on Thursday. “Judging by the official data on the pace of harvesting, there is a high probability that in standard weight [after drying and cleaning], the previous record for harvesting wheat has already been broken,” Rylko said.

Russia’s ag ministry reported that as at Sept. 8, the country’s wheat harvest totaled 92.7 MMT in bunker weight, prior to drying and cleaning.

Brazil raises bean crop estimate, cuts corn production peg... In its final assessment of the 2021-22 crop, Conab raised its official Brazilian soybean crop estimate by 1.5 MMT to 125.6 MMT, though that was still 9.9% shy of the previous year’s record. Conab increased its 2021-22 soybean export forecast by nearly 2 MMT to 77.2 MMT, though that would be down sharply from record shipments of 86 MMT the previous year.

The agency cut its Brazilian corn crop estimate by 1.4 MMT from last month to 113.3 MMT. Its 2021-22 corn export forecast was lowered 500,000 MT to 37 MMT, though that would be up significantly from shipments of 20.8 MMT in 2020-21.

Record beef exports in July, pork shipments remain sluggish... The U.S. exported 306.9 million lbs. of beef during July, according to USDA. While that was down 8.0 million lbs. (2.6%) from June, it was up 9.9 million lbs. (3.3%) from July 2021 and a record for the month. Through the first seven months of 2022, U.S. beef shipments totaled 2.093 billion lbs., up 132.9 million lbs. (6.8%) from the same period last year, driven by a 32.5% surge in exports to China. USDA in August projected beef exports would rise 3.4% from last year, suggesting it will increase the export forecast in the Sept. 12 Supply & Demand Report.

U.S. pork exports totaled 484.0 million lbs. in July, down 47.1 million lbs. (8.9%) from June and 25.6 million lbs. (5.0%) less than last year. Through the first seven months of the year, pork shipments at 3.633 billion lbs. fell 701.4 million lbs. (16.2%) from the same period last year as export to China plunged 65.6%. In August, USDA projected pork exports would decline 6.4% from last year. The export pace through July suggests that’s too optimistic.  

IPEF confab begins... The U.S. is hosting the first gathering of Asian nations on an economic agreement envisioned by the White House as a counter to China’s rising influence in the region. Thirteen countries sent representatives to the two-day kickoff event that started today in Los Angeles for the Indo-Pacific Economic Framework for Prosperity (IPEF), which covers about 40% of global gross domestic product. It includes Japan, India, South Korea, Australia and Indonesia, all members of the Group of 20 largest economies.

The U.S. is focused on non-tariff issues that can still deliver market access for American exporters, a Biden administration official said Wednesday, without providing specifics beyond the four so-called pillars of the framework — trade; supply chains; clean energy, decarbonization and infrastructure; and taxes and anti-corruption. Among those, a potential point of progress could be efforts to combat climate change, particularly after Biden and his Democratic allies in Congress recently secured $375 billion for green energy development.

ECB delivers unprecedented interest rate hike... The European Central Bank (ECB) hiked interest rates by a historic 75 basis points and pledging “several” further increases, even as the outlook for economic growth in Europe darkens. ECB raised its outlook for inflation this year and next, while slashing its forecast for economic expansion in 2023. The 0.9% projection for growth next year is still more optimistic than the 0.7% median of predictions in a Bloomberg poll. Bloomberg Economics sees an advance of only 0.4%. ECB also suspended its two-tier system for remunerating excess reserves.

Powell: Fed ‘strongly committed’ to taming inflation... Federal Reserve Chairman Jerome Powell said this morning the U.S. central bank is focused on strongly pushing back against rising prices in order to avoid the “very high social costs” that came about during the high inflation period of the 1970s. “History cautions strongly against prematurely loosening policy,” Powell said during a moderated discussion at the Cato Institute, a libertarian think-tank in Washington. “I can assure you that my colleagues and I are strongly committed to this project, and we will keep at it until the job is done.” The event was Powell’s last scheduled public appearance before the Fed’s next policy meeting on Sept. 20-21.