Evening Report | January 18, 2023

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Brazil crop tour: Day 2 results... Day 2 of AgResource’s crop tour through Mato Grosso, Brazil, featured much better yield potential than the first day but confirmation that Brazil’s top producing state is struggling with diseases currently unknown by agronomists and for which there are currently no solutions. This along with cloudy days and regionally excessive rainfall continues to cap yield potential, but the firm says a record crop in Mato Grosso is certain. AgResource noted harvest is ongoing and will accelerate this week. Combines and safrinha corn plants “are active.”

AgResource collected samples from the Nova Maringá and Ponte de Pedra areas of Mato Grosso on Day 2, with estimated yields ranging from 60 bu. to 80 bu. per acre.

The two-day average yield from AgResource’s samples was 62 bu. per acre. Conab (Brazilian equivalency of USDA’s NASS) in its report last week estimated Mato Grosso’s state-wide yield at 53.5 bu. per acre.

Day 3 of the tour will take place in Campo Novo do Parecis and surrounding areas.

Brazilian soybeans heading to Argentina in early February... Cargill and Viterra appear as charterers of two vessels to be loaded with Brazilian soybeans for delivery in Argentina over coming weeks, according to shipping data, Reuters reported. Cargill’s Interlink Fortuity vessel is expected to arrive on Jan. 25 at the port of Santarem in northern Brazil and set sail on Feb. 5, loaded with 27,000 MT of soybeans for Argentina. Viterra’s Indigo Garland is due to arrive in three days at the same port. It will set sail on Feb. 8 with a 44,000-MT bean cargo also to be delivered in Argentina. The timing of the shipments and the port of departure are both atypical. Normally, Brazilian soybeans are sent via river on barges from Murtinho port in Mato Grosso do Sul, and arrive at Argentina’s Rosario hub directly.

Brazil can increase grain planting 5% a year without deforestation... The Brazilian government believes it is possible to increase grain plantings 5% per year for several years without deforestation, Agriculture Minister Carlos Favaro told Reuters. Favaro said this would occur within a new government plan to encourage the expansion of planted area using millions of hectares (acres) of degraded pastures, which can be converted into cropland. For this, the government will offer credit with adequate interest rates.

Favaro said Brazil currently has about 150 million hectares (370.66 million acres) of pastures with low productivity, that’s degrading or is already degraded. The plan is to convert around 40 million hectares into cropland in areas suitable for agricultural production.

IEA: China reopening to boost oil demand to new high... The lifting of Covid-19 restrictions in China is set to boost global oil demand this year to a new record high, the International Energy Agency (IEA) said on Wednesday, while price cap sanctions on Russia could dent supplies. Despite possible but likely mild recessions in Europe and the United States, China’s reopening is set to fuel rebounds in nearby Asian economies and see it take the lead from India as the world’s leader in oil demand growth, IEA said. The group says China will account for nearly half of 2023 oil demand growth, which it forecasts will rise 1.9 million barrels per day (bpd) to a record 101.7 million bpd.

Meanwhile the main growth in oil supply is set to come from the U.S. as output from OPEC+ will decline by 870,000 bpd, led by Russia.

PPI posts largest monthly decline since April 2020... U.S. producer prices dropped 0.5% in December, the largest monthly decline since April 2020. That was less than the 0.1% fall economists expected, adding to signs inflationary pressure cooled sharply last month. Goods prices dropped 1.6%, led by a 7.9% slump in energy costs, while services prices were slightly up. On a yearly basis, the producer price index (PPI) increased 6.2% in December, the least since March 2021.

U.S. retail sales fell more than expected in December... U.S. retail sales last month fell 1.1% from November but rose 6.0% from December 2021, according to the Commerce Department. Sales at gasoline stations recorded the biggest decrease (-4.6%), followed by furniture stores (-2.5%), motor vehicle dealers (-1.2%), electronics and appliances stores (-1.1%), miscellaneous (-1.1%) and nonstore retailers (-1.1%). In contrast, sales were up 0.3% in building materials and garden equipment stores (0.3%) and sporting goods, musical instruments and book sellers (0.1%). Sales at food and beverage stores were flat.

Excluding sales at gasoline stations, retail sales were down 0.8%, in another sign of a weaker-than-expected holiday shopping as consumer spending slowed amid high inflation and interest rates.

Ukraine seeks to add steel to grain export deal... Ukraine wants to expand the grain-export agreement to include steel shipments as a way to support its economy battered by Russia’s war, Economy Minister Yuliia Svyrydenko told Bloomberg News. “It’s essential for us to add more ports, to enlarge export volumes,” Svyrydenko said. “We will focus on building more storage for agricultural goods, but what we need to do from a strategic point of view is to open sea ports,” she said. “It’s not just about agriculture, it’s about steel.”

Sen. Hoeven outlines new farm bill priorities... At the North Dakota Grain Dealers Association’s annual convention, Sen. John Hoeven (R-N.D.) outlined his efforts to maintain strong farm policy to benefit both agriculture producers and American consumers. Some items he listed:

• Ensure North Dakota farmers and ranchers have the opportunity to give direct input as work begins on the next farm bill.
• Address supply chain constraints to ensure access to reliable transportation services, including rail and ocean carriers. “The delays we’ve experienced in both rail and ocean carrier service represented a real challenge for our farmers and agri-businesses. That’s why we sponsored and passed our Ocean Shipping Reform Act to help this nation’s exporters, while also pressing the Surface Transportation Board and railways to ensure reliable rail service continues for North Dakota’s shippers.”

Hoeven recently hosted Sen. John Boozman (R-Ark.), Ranking Member of the Senate Agriculture Committee, in North Dakota for a discussion with local producers and commodity groups on the following priorities for the next farm bill:

• Maintaining strong crop insurance, the primary risk management tool for many producers.
• Improving the farm safety net, including the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs.
• Strengthening livestock disaster programs, including the Livestock Indemnity Program (LIP), the Livestock Forage Program (LFP) and the Emergency Livestock Assistance Program (ELAP).
• Cutting red-tape and ensuring programs are farmer-friendly.
• Improving Access to Reliable Transportation Services.

USDA developing impact statement on bird flu control efforts... USDA’s Animal and Plant Health Inspection Service (APHIS) announced it will prepare an Environmental Impact Statement (EIS) to examine “potential environmental effects” from its control efforts for highly pathogenic avian influenza (HPAI). EPA is seeking public comment to “further define the scope of the EIS, identify reasonable alternatives and potential issues, as well as relevant information, studies, and/or analyses that APHIS should consider in the EIS.” The agency said it wants, where possible, “references and data sources supporting the information provided in the comment,” which could include scientific data, studies or research.

APHIS outlined potential environmental impacts as being those to “soil, air, and water quality; humans (including effects on health and safety; agricultural lands; industries and the economy; public perception; cultural and historic resources; equity and environmental justice; children's health; and Tribes); and wildlife and plant populations, especially birds of conservation concern, eagles, and threatened and endangered species.”

The agency is also seeking comments on impacts related to climate change.

Comments on this phase of the process are due by Feb. 17. APHIS intends to release a draft EIS in November 2023 with a 45-day public review and comment period, with a final EIS expected to be made public by Oct. 30, 2024, with a record of final decision no later than Dec. 1, 2024.

Rise in CFAP 2 payouts... Payments under the Coronavirus Food Assistance Program 2 (CFAP 2) increased to $19.31 billion as of Jan. 16, up from $19.16 billion previously, reflecting USDA’s announced effort to push out additional payments under the program. The increase reflected a rise in original payments to $14.44 billion ($14.33 billion prior) and top-up payments to $4.87 billion ($4.83 billion prior). There was essentially no change in CFAP 1 payments.

Payments under the Emergency Relief Program (ERP) increased to $7.33 billion in the latest week ($7.31 billion prior) as non-specialty crop payments edged up to $6.24 billion ($6.23 billion prior) and specialty crop payments were essentially unchanged at $1.09 billion.

Wall Street’s biggest banks set for Fed climate impact exercise... Wall Street banks including Goldman Sachs Group, JPMorgan Chase and Wells Fargo will begin a Federal Reserve pilot program to measure how hurricanes, drought and other extreme weather events can affect their portfolios. The central bank on Tuesday released details on how the new “climate scenario analysis exercise” will work. The measures mark the Fed’s most concrete steps yet to ensure that banks are ready for risks brought on by a changing climate and severe weather events.