Evening Report | December 21, 2022

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Ukrainian ag minister sees big fall in 2022 corn harvest, smaller corn area in 2023... Ukraine’s corn production could fall to 22 MMT to 23 MMT this year from 41.9 MMT in 2021 because of a reduction in the harvested area caused by Russia’s invasion, Agriculture Minister Mykola Solsky told Reuters. The ag ministry previously said it expected to harvest around 25 MMT of grain this year. Solsky said farmers, facing a lack of fuel and funds, had left a lot of corn in their fields. These areas could be harvested by spring, but “it means less volume and worse grain quality.”

As of Dec. 15, farmers had harvested 18.4 MMT of corn from 70% of planted acreage. Ukraine harvested 19.4 MMT of wheat and 5.6 MMT of barley this year. Total grain output stood at nearly 45 MMT.  

Ukraine could export 49.2 MMT of grain in 2022-23, depending on logistics.

Solsky said a large area of unharvested corn would prevent farmers from sowing corn again on these fields, with sunflowers a possible replacement crop next spring.

 

U.S. consumer confidence jumps to an eight-month high... U.S. consumer confidence rose to the highest since April as inflation eased and the labor market remained strong. The Conference Board’s index increased to 108.3 this month from an upwardly revised 101.4 reading in November. The present situation index, based on consumers’ assessment of current business and labor market conditions, rose to 147.2 from 138.3 last month. The expectations index, based on consumers’ short-term outlook for income, business and labor market conditions, increased to 82.4 from 76.7.

 

Meetings at OMB continue on states’ requests for year-round E15... The Office of Management and Budget (OMB) has held four meetings with stakeholders on EPA’s plan for requests from eight states for removal of the 1-psi volatility waiver provided under the Clean Air Act for ethanol. The meetings so far have been with both those backing the requests — Renewable Fuels Association, National Corn Growers Association and several state corn grower organizations — and refiners/petroleum interests that are seeking to delay the requests — American Fuel and Petrochemical Manufacturers and companies such as Valero, Flint Hills Resources, CHS, Marathon Petroleum, ExxonMobil and Chevron. Those groups submitted a petition to EPA in October calling for a delay in the requests, citing an “insufficient supply of gasoline and serious harm to U.S. fuels markets and consumers that would start just six months from now if EPA were to grant these requests.” The petition argued there would be fuel shortages and refining costs would increase as there is not enough time to “add infrastructure or make other modifications” for E15 fuels. Meetings are slated Thursday with the Iowa Renewable Fuels Association and on Jan. 4 with the American Petroleum Institute on the requests from Illinois, Iowa, Kansas, Minnesota, Nebraska, North Dakota, South Dakota, and Wisconsin.

 

Ethanol production declines... Ethanol production for the week ended Dec. 16 dropped 32,000 barrels per day (bpd) to an average of 1.029 million bpd. That was down 2.1% from the corresponding week last year. Over the past four weeks, ethanol production averaged 1.046 million bpd, down 1.9% from the same period last year.

Ethanol stocks dropped 342,000 barrels to 24.067 million barrels, though that was up 3.363 million barrels (16.2%) from last year.

 

Treasury delays some limits on EV tax credits... Some restrictions on the electric vehicle (EV) tax credit that were slated to take effect Jan. 1 will be delayed until March after the U.S. Treasury Department postponed issuing related guidance on how to meet the new requirements.

 

France and Germany unveil plan for countering U.S. green industry subsidies... France and Germany issued a joint statement outlining their plan regarding the U.S. IRA, which introduces $369 billion worth of tax cuts and other benefits for green technologies (like electric vehicles) that are made in the United States. The Franco-German strategy has two parts. One: Paris and Berlin are urging the White House to extend the IRA’s benefits to European companies (similar to what the United States does for Canadian and Mexican companies). Two: they’re calling on Brussels to develop its own “green industrial policy.” France and Germany want the European Commission to speed up the approval process for state aid for low-carbon technologies, so that national governments can provide tax credits and subsidies for green-related industrial sectors without the commission delaying the process. Berlin and Paris also want to cut in half the time to approve Important Projects of Common European Interest (IPCEI), which allows two or more EU member states to jointly back innovation projects without breaking the bloc's state aid rules.

 

Tougher EPA emission rules for trucks... EPA as expected on Tuesday released final tailpipe emission rules for trucks, which some health and environmental groups say don’t go far enough to be adequately protective. The final rules for nitrogen oxide emissions are 80% more stringent than current standards, which haven’t been updated for more than 20 years, according to an EPA press release. This action begins reductions by model year 2027 and is the first of three in the agency’s Clean Trucks Plan. The next action is projected for March 2023, according to EPA Administrator Michael Regan, speaking at a Tuesday press conference.

 

U.S. current account deficit narrows... The U.S. current account deficit narrowed by $21.6 billion, (9.1%) to $217.1 billion in the third quarter, from a revised $238.7 billion in the second quarter. It was the smallest current account gap more than a year, and equivalent to 3.4% of GDP (vs. 3.8% of GDP in Q2), as a decreased deficit on goods offset a narrower surplus on primary income and a larger deficit on secondary income. The goods deficit shrank to $271.1 billion from $310.9 billion in Q2, helped by rising exports of nonmonetary gold and capital goods, mostly civilian aircraft engines and parts and other industrial machinery, as well as falling imports of consumer goods and industrial supplies and materials. Meanwhile, the secondary income deficit rose to $52.2 billion from $42.3 billion and the primary income surplus declined to $45.6 billion from $57.2 billion. For the first three quarters of the year, the current account gap widened to $738.4 billion from $621.5 billion in the same period of 2021.

 

U.S. mortgage rates fall to 3-month low... The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) in the U.S. fell by 8 basis points to 6.34% in the week ended Dec. 16th, hitting the lowest level since the first week of September, data from the Mortgage Bankers Association (MBA) showed. Mortgage rates stayed above 7% in the beginning of November, close to levels not seen since 2001, and more than double the 3% reported a year earlier, but have been falling since then, tracking Treasury yields lower.

 

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