Evening Report | December 19, 2022

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Update on U.S./Mexico GMO corn trade clash... To avert a potential shutoff of U.S. corn exports to Mexico, a senior-level Mexican delegation told U.S. officials they wanted to ensure self-sufficiency in corn for tortillas. U.S. officials said Mexico “presented some potential amendments” to its presidential decree against imports of genetically modified corn beginning in January 2024 (with a possible extension to 2025). “There was a joint recognition that time is of the essence, and we must determine a path forward soon,” said U.S. Trade Representative Katherine Tai and USDA Secretary Tom Vilsack in a statement after the meeting on Friday. The Mexican Foreign Ministry said meetings will continue “to arrive at a mutual understanding in January that gives legal certainty to all parties.”

The Biden administration is threatening a USMCA challenge of the Mexican decree.

During Friday’s the meeting in Washington, Mexico “explained its food security policy, highlighting three goals: To preserve Mexico’s biocultural heritage as the birthplace of more than 60 varieties of corn; to continue to ensure self-sufficiency in corn for tortillas; and to strengthen food security in North America,” said the Foreign Ministry. The delegation was led by four government ministers.

“The Mexican delegation presented some potential amendments to the decree in an effort to address our concerns. We agreed to review their proposal closely and follow up with questions or concerns in short order,” Tai and Vilsack said.

Mexican Foreign Minister Marcelo Ebrard, who took part in talks with Tai and Vilsack, separately met Secretary of State Antony Blinken and national security adviser Jake Sullivan to prepare for President Biden’s trip to Mexico and the tri-national North American Leaders Summit in January in Mexico.

 

Canadian durum ending stocks forecast at record low... Updated monthly forecasts from Agriculture Canada on Friday estimated durum ending stocks for 2022-23 at just 500,000 MT. That is down from the government’s November estimate of 900,000 MT and below the 2021-22 level of 579,000 MT when widespread drought slashed the production of most Prairie crops by about one-third or more. If accurate, it would be the tightest durum ending stocks on record going back to 1980.

All of this month’s reduction in ending stocks from November is due to the Dec. 2 Statistics Canada crop production report, which lowered this year’s crop to 5.44 MMT. Amid the smaller crop, Ag Canada lowered its 2022-23 durum export forecast by 200,000 MT from last month to 4.8 MMT, and trimmed expected domestic use slightly. However, it was not enough to completely offset the fall in production.

 

U.S. extends its reprieve on tariffs for some goods from China... The move comes as the Biden administration reviews the need for the duties introduced by former President Donald Trump. The exclusions — due to expire at the of the year — will apply to 352 products and run through Sept. 30, the Office of the U.S. Trade Representative (USTR) said in a statement Friday. The goods include pumps, compressors, air and water purifiers, valves and a variety of motors. Exemptions from the duties will lapse for 197 other products. USTR earlier this year got hundreds of requests for the tariffs to continue, and in November opened a public web portal to receive comments for two months as it undertakes a review of the need for the tariffs. The deadline for comments is Jan. 17.

 

Lighthizer: U.S. needs to change the way it does business with China... Writing in the New York Times, former USTR Bob Lighthizer says: “America’s China policy does need to change. The ruthless repression of its Covid-policy protesters is the latest proof of that, but the greater urgency is that the status quo has things moving to the disadvantages of the United States as well as to the benefit of China. An incremental shift is not enough.” Other key quotes from Lighthizer:

  • “In our economic competition, China is winning. We transfer well over $300 billion to the country annually in trade deficits, and China uses it to build its military, improve its competitiveness and buy our assets — increasingly our technology companies and even our farms.”
  • “The U.S. objective should be to continue trade and economic activity beneficial to us and to discourage any part that is not. For example, trade in agricultural products, raw material and some consumer and pharmaceutical goods can be mutually beneficial. Importing to the United States computers, automobiles and telecommunications equipment is not.”
  • “Strategic decoupling has several aspects. First, we should progressively impose tariffs on all of China’s imports into the United States until we have balanced trade. Second, we should disentangle our technology.”

 

FAO: War increasingly hits farm households in Ukraine... One of every four rural Ukrainian households in an FAO survey said it has reduced or stopped agricultural production due to the Russian invasion, with the figure rising to 40% in some oblasts. “Ukraine’s agriculture sector is an important source of livelihoods for the roughly 13 million Ukrainians living in rural areas,” said Pierre Vauthier, head of the FAO’s Ukraine country office. The FAO survey of 5,200 households focused on those involved in backyard and small-scale farming.

 

EU energy ministers reach deal on gas price cap... EU energy ministers have reached an agreement to cap gas prices in the bloc when they hit 180 euros per megawatt hour ($191) for three days on the Dutch Title Transfer Facility (TTF) gas hub’s front-month contract, which serves as the European benchmark, despite fears that such an intervention could cause greater volatility in the market. The ceiling — equivalent to around $275 a barrel in oil terms — is almost 100 euros per MWh less than the European Commission first proposed last month when it suggested a mechanism to limit prices when they reached 275 euros per MWh for 10 consecutive days. That proposal was branded “a joke” by several ministers as it would not have been activated even when prices in the bloc hit record highs in August.

The cap would only come into effect under certain conditions. Under the current proposal, the EU price cap would not fall below €188/MWh, even in the event that the LNG reference price falls to far lower levels. However, the EU gas price cap would move with the LNG reference price if it increased to higher levels, while remaining €35/MWh above the LNG price. This system is designed to ensure the bloc can bid above market prices to attract gas in tight markets. Once triggered, the cap will prevent trades being done on the front-month to front-year TTF contracts at a price higher than €35/MWh above a reference price that comprises existing LNG price assessments.

The measure must now go through the EU’s legal procedures and can be implemented from Feb. 15 to temper prices ahead of the next gas storage filling season.

 

COP15 adopts plan to protect 30% of land, water... Around 190 nations, aiming to stem rampant biodiversity loss, reached a sweeping deal to protect 30% of the planet’s land and oceans by 2030. Overall, the deal lays out a suite of 23 conservation targets. The most prominent one, the measure placing broad areas of land and sea under protection, is known as 30x30. Countries also agreed to manage the remaining 70% of the planet to avoid losing areas of high importance to biodiversity and to ensure that big businesses disclose biodiversity risks and impacts. While the U.S. sent a team to the talks, it could only participate from the sidelines because the country is not a party to the Convention on Biological Diversity. Republicans, who are typically opposed to joining treaties, have blocked its passage.

 

HPAI hits 56 million... Highly pathogenic avian influenza (HPAI) was confirmed on two large egg farms, each with more than 1 million hens, in South Dakota and Washington State, driving U.S. losses to 56 million birds in domestic flocks since February.

 

 

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