Evening Report | December 5, 2022
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Australia forecasts record wheat crop despite flooding... Australia is expected to produce a record wheat crop, despite impacts from widespread flooding in the country’s eastern region. The Australian Bureau of Agricultural and Resource Economics (ABARES) estimates 2022-23 wheat production at 36.6 MMT, up 4.4 MMT from its September forecast and around 300,000 MT above last year’s record. Barley production is expected to reach 13.4 MMT, the fourth-largest crop on record, with canola expected to hit a record 7.3 MMT.
“While the spring rain has impacted production, yields and quality in some parts of the country, some states are experiencing their best winter crops on record,” ABARES Director Jared Greenville said. ABARES estimates crop abandonment will account for 16% of planted area in New South Wales, 7% in Victoria and 5% in Queensland.
ABARES forecasts agricultural exports are expected to reach a record of over $72 billion in 2022−23, driven by crop exports. It notes, “Wheat exports alone have accounted for over $1 billion a month during 2022 (to September). World grain prices are remaining elevated due to uncertainty surrounding exports from the Black Sea region, and persistent dryness in the United States, European Union, and Argentina. Even when more neutral conditions return to overseas producers as La Niña conditions ease, it will take more than one season to replenish grain inventories.”
Major Ukraine wheat losses due to war... Ukraine has lost at least $1 billion of wheat that was harvested in areas controlled by Russia, according to research using satellite imagery from NASA’s food security and agriculture program. The analysis gives an idea of what’s happening in occupied territories, where information is tightly controlled. It uses a machine-learning model detecting texture and color changes based on a time-series of satellite images to map where crops have been harvested or left unharvested. Almost 6 MMT of wheat was collected from areas not under Ukrainian control, according to NASA Harvest. About 88% of the winter crops planted in occupied areas were harvested, while unharvested areas were mainly along the front line.
La Niña weakening trend has begun, will accelerate... La Niña is in its 29th month of existence but it should be in decline, according to World Weather Inc., who says its influence on the world will be greatly diminished in January and February depending on its rate of decline. The weather forecaster says its confidence is “high” La Niña will diminish in the first quarter of 2023 and will lose much of its influence on world weather by February – if forecast models are correct.
The weakening La Niña should help reduce rain intensity from center west to center south and northeastern Brazil during the early soybean harvest and sufficient rain should fall to support favorable safrinha corn planting conditions. In Argentina, there will be potential for improved rainfall during January and February. World Weather says, “Production of summer crops in Argentina will still be down, but there could be some good improvement for late-season crops (especially double-cropped soybeans) if La Niña weakens quick enough to bring rain early in January or possibly late this month.”
For the U.S., World Weather says: “January and especially February and March weather will bring some bouts of rain to the central and southern Plains and western Corn Belt as well as the Delta and areas northeast to the middle and northern Atlantic Coast region... The heart of spring is expected to have less than usual precipitation in the Midwest, Delta and immediate neighboring areas... The early arrival of moisture in the central Plains should give poorly established wheat a good chance to become better established with new root and tiller development prior to aggressive growth in the spring. The new tillers will help restore production potentials, despite the poor autumn and early winter weather.”
Why did EPA use old data on renewable diesel in its RFS announcement?... Renewable diesel capacity topped 2 billion gallons per year as of August, according to the latest data released from the U.S. Energy Information Administration (EIA). But EPA used a lower figure, 1.5 billion gallons per year, based on EIA info as of February. “Domestic renewable diesel production capacity has increased significantly in recent years from approximately 280 million gallons in 2017 to nearly 1.5 billion gallons in February 2022,” EPA said. A footnote said: “February 2022 renewable capacity based on EIA Monthly Biofuels Feedstock and Capacity Update.”
Meanwhile, private analysts note a Valero plant is starting up six months early and they quote 2 billion gallons in capacity.
Most expect the relatively short comment period deadline of Feb. 10 to be extended. Plus, pressure is already on EPA to modify its renewable diesel decisions and that could happen in a final rule, some contacts note. EPA has until June 14, 2023, to issue a final rule. But EPA has typically not changed the proposed levels a great deal in its final versions over the years so a major shift higher in the advanced biofuel tally would come as a surprise.
Tax credits for EVs dominate U.S., EU trade talks... The U.S. and the European Union on Monday cited progress addressing European concerns about a U.S. climate law that would cut off the bloc’s electric vehicles (EVs) from U.S. tax credits. But the talks failed to resolve the matter. The two sides issued a joint statement after the third ministerial-level meeting of the U.S.-EU Trade and Technology Council (TTC) vowed to work constructively to resolve the matter.
EU Trade Commissioner Valdis Dombrovskis on Monday called the $430 billion U.S. Inflation Reduction Act discriminatory and urged steps be taken before year’s end to modify the law. “With all our discussions, we are in a sense making a step forward, but with the Inflation Reduction Act we’re making two steps backwards, so we need to reconcile it,” he said, although he told reporters he felt “slightly more optimistic.”
U.S. Secretary of State Antony Blinken said the council had enabled both sides to make “practical, concrete progress” on key issues. He said he was confident the tax credit issue could be resolved.
French officials said they are hopeful an executive order from the White House could give European countries a break, without the need for revisions from Congress, a move the White House wants to avoid.
