Evening Report | January 11, 2023

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Agroconsult forecasts record Brazilian soybean, corn crops... Agroconsult expects Brazil to produce record corn and soybean crops in 2022-23, despite dry weather in the far southern state of Rio Grande do Sul. The firm expect Brazilian soybean production to reach 153.4 MMT, which is just below Conab’s official forecast of 153.5 MMT it forecast in December. Agroconsult projects total corn production at 130.9 MMT, including the first crop at 29.6 MMT and the safrinha crop at 101.3 MMT. In December, Conab pegged Brazil’s corn crop at 125.8 MMT, though that was based off an estimate of the first corn crop and projections for safrinha acreage and yield.

Conab will update its Brazilian production forecasts Thursday morning but it’s first official estimate of safrinha corn production won’t be incorporated until February.

Agroconsult will conduct its annual crop tour through Brazil’s main crop areas in the coming weeks.

Argentine farmer sales of old-crop soybeans, corn slightly lag last year... Farmer sales of soybeans and corn in Argentina were slightly behind last year’s pace, according to agriculture ministry data. Soybean sales as of last week from the 2021-2022 harvest totaled 80.4% of the crop, just below the 81% sold from the previous season at the same time. Farmers sold only 142,500 MT of soybeans between Dec. 29 and Jan. 4. Farmers had sold 75.9% of last year’s corn crop, behind the 78.1% pace the previous year.

Wheat sales from the 2022-23 crop reached 6.7 MMT last week, amounting to half of expected production, which was greatly reduced by drought and late-season frosts.

Exchange warns of potential big Argentine crop cuts but expects change in weather pattern... The Buenos Aires Grain Exchange warned it may have to cut its production forecasts for soybeans and corn for the 2022-23 growing season by up to 25% due to a prolonged drought. The worst-case scenario for production would be 35.5 MMT for soybeans and 37.8 MMT for corn if drought persists.

But the extended forecast calls for the drought to break in coming months, though it could be March before rain and soil moisture levels fully return to normal, the exchange said. La Nina is expected to fade and El Nino could evolve by late March. Unlike La Nina, an El Nino pattern could cause higher-than-usual rainfall in Argentina’s agricultural provinces.

“Precipitation will pick up, improving soil moisture reserves and moderating the intensity of heat waves, but the process will be slow,” the exchange said in its monthly climate report. “Only towards the end of March will the soils replenish their moisture reserves in most of the agricultural area.”

Update on meeting of ‘three amigos’... The North American Leaders’ Summit announced commitments to build the semiconductor industry in the region, hit their climate goals and tackle the flow of fentanyl into the United States. President Joe Biden met earlier this week in Mexico City with Mexico President Andrés Manuel López Obrador and Canadian Prime Minister Justin Trudeau. They agreed to organize a semiconductor forum with industry representatives and government officials in early 2023 and coordinate on semiconductor supply chain needs and investments. Semiconductor companies building new manufacturing facilities in the U.S. would like to put parts of their supply chain in Mexico.

The countries also committed to reducing methane emissions from the solid waste and wastewater sector by at least 15% by 2030 compared with 2020 levels, and to develop a proposal to cut food loss and waste in half by 2030. They will also create a plan for standards and installation of electric vehicle chargers along their international borders. Mexican officials are in consultations with the U.S. to avoid a U.S.-Mexico-Canada Agreement (USMCA) dispute panel over Mexican energy policy. The U.S. Trade Representative’s office says the policy puts billions of dollars in U.S. investments at risk. Canada has also joined in the complaint. Canada also has concerns over the implementation of an electric-vehicle provision in the Inflation Reduction Act signed by Biden last year. Biden said Trudeau has “always been there” when he reached out. He also said he intends to travel to Canada in March.

López Obrador thanked Biden for not building “even one meter of wall,” something the Associated Press (AP) said was “a not so subtle dig at Biden’s Republican predecessor, Donald Trump. The warmth during their joint press conference stood in stark contrast to the more brusque exchange a day earlier.” Still, López Obrador prodded Biden to “insist” Congress regularize undocumented Mexican migrants who work in industries where American employers are struggling mightily to find enough workers. López Obrador challenged Biden to improve life across the region, telling him that “you hold the key in your hand… This is the moment for us to determine to do away with this abandonment, this disdain, and this forgetfulness for Latin America and the Caribbean,” López Obrador said.

Federal gov’t on track to max out $31.4 trillion borrowing authority as soon as this month... That begins what will be one of the major battles for the new Congress. The Treasury Department projects when the U.S. government won’t be able to borrow any more money to fund its operations. At that point, Treasury officials will deploy what are called “extraordinary measures” to help stave off the debt-limit deadline. Once those measures run out, probably mid-summer, the government could be at risk of defaulting unless lawmakers and the president agree to lift the limit on the U.S. government’s ability to borrow, AP reports (link).

Yellen to remain as head of Treasury... President Joe Biden asked Treasury Secretary Janet Yellen, 76, to stay in her post, and she agreed, a White House official familiar with the matter told Bloomberg. Biden reportedly made the request in mid-December and is preparing for turnover in his Cabinet. The development ensures stability at the Treasury ahead of a fight in Congress over raising the debt ceiling and a looming threat of a recession as the Federal Reserve raises interest rates to ease inflation. It also gives Yellen more time to see through some of her key priorities, including a revamp of the Internal Revenue Service, reforms at the World Bank and adding pressure on Russia over its Ukraine war via sanctions and the oil price cap. She is scheduled to attend this year’s first Group of 20 finance ministers meeting next month in India, after a visit to Africa later this month.