Evening Report | January 25, 2023

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Mexico hopes to reduce corn imports 30% to 40% by next year... Mexico will not be able to completely replace all the corn it imports by 2024, Deputy Agriculture Minister Victor Suarez said Wednesday, but the country hopes to reduce its purchases between 30% to 40%. Mexico is already self-sufficient in production of white corn but is highly dependent on imports for yellow corn. Suarez said Mexico is progressing “significantly” in its bid to substitute grain imports, which come almost entirely from the United States. “We are not going to be able to produce another 16 MMT of corn, which is currently imported for the livestock sector,” Suarez said.

The two countries are locked in a battle over Mexico’s imports of GMO corn from the U.S., which it hopes to phase out by Jan. 31, 2024. Officials from the two countries met earlier this week and more meetings are planned. The U.S. has threatened a challenge to Mexico’s GMO corn ban via the U.S.-Mexico-Canada Agreement if the matter isn’t resolved.

 

Southern Plains snow melt unlikely to lead to serious winterkill issues... Warming in the Southern Plains over the balance of this week will remove some of the snow that accumulated recently. That increases the risk of winterkill as arctic air moves south out Canada next week. But World Weather Inc. does not believe temperatures will be cold enough to raise the risk of crop damage since the only bitter cold in hard red winter wheat areas will be in the Nebraska, northern Kansas and northeastern Colorado where some snow will be left behind to protect crops.

 

USDA raises food price forecasts for 2023... USDA’s food price outlook data and forecasting methodology were revised this month. It stated, “The updated primary methods are based entirely on statistical models that are fitted to recent trends in the data. These methods provide wider initial prediction intervals that narrow over the forecast period as more data become available and the degree of uncertainty declines. Discussions of price changes will focus on the midpoint of these forecast intervals (titled “Mid” in the workbooks) and use the lower and upper bounds of a 95% prediction interval (based on past data, the 2023 level of inflation is expected to fall in this interval 19 out of 20 times) to reflect the level of uncertainty (titled “Lower” and “Upper” in the workbooks, respectively).”

In 2022, food prices increased 9.9%. Food-at-home (grocery store) prices jumped 11.4%, while food-away-from-home (restaurant) prices rose by 7.7%. USDA said, “Following an outbreak of Highly Pathogenic Avian Influenza (HPAI), egg prices had the largest price increase (32.2%) of any category tracked by ERS. Beef and veal prices increased the least (5.3%). Eleven food-price categories increased by more than 10%, including fats and oils (18.5%), poultry (14.6%), other meats (14.2%), cereals and bakery products (13.0%), other foods (12.7%), dairy products (12.0%), processed fruits and vegetables (12.0%), nonalcoholic beverages (11.0%) and sugar and sweets (10.4%). All food categories grew faster than their historical average rate, and the 20-year average inflation rate increased for all food categories.”

In 2023, all food prices are predicted to increase 7.1%, with a range from 4.2% to 10.1%. Grocery store prices are forecast to increase 8.0%, with a range from 4.5% to 11.7%. Restaurant prices are expected to increase 8.2%, with a range from 6.7% to 9.7%.

USDA noted: “Egg prices are predicted to increase 27.3% in 2023, with a prediction interval of 6.9% to 52.0%. This wide prediction interval reflects the volatility in retail egg prices. Prices are expected to continue increasing for eight additional food categories that experienced consistent growth throughout 2022. In 2023, prices are predicted to increase for other meats (12.8%), dairy products (8.0%), fats and oils (16.5%), processed fruits and vegetables (9.6%), sugar and sweets (10.6%), cereals and bakery products (12.0%), nonalcoholic beverages (8.7%), and other foods (6.8%). Price decreases are expected for three price categories. Beef and veal prices are predicted to decrease 1.8% in 2023, with a prediction interval of -10.4% to 8.0%; pork prices are predicted to decrease 3.0%, with a prediction interval of -10.3% to 5.1%; and fresh fruit prices are predicted to decrease 1.7%, with a prediction interval of -7.5% to 4.5%.”

 

Cold Storage Report signals potential demand shortfalls... USDA’s Cold Storage Report showed beef stocks rose more than normal during December, while pork stocks increased versus the normal small drawdown in inventories during the month. Given beef production dropped 6% from year-ago last month and pork production was down 7%, the inventory data suggests meat demand didn’t keep pace with supplies during December.

Beef stocks at the end of December totaled 544.0 million lbs., up 20.7million lbs. (4.0%) from November versus the five-year average increase of 4.7 million lbs. during the month. Beef stocks increased 36.8 million lbs. (7.3%) from December 2021 and were 42.6 million lbs. (8.5%) above the five-year average.

Pork stocks stood at 458.1 million lbs., up 6.6 million lbs. (1.5%) from November whereas they declined an average of 3.2 million lbs. over the previous five years. Pork inventories increased 61.7 million lbs. (15.6%) from December 2021 but were still 19.5 million lbs. (4.1%) below the five-year average.

Poultry stocks rose 70.3 million lbs. (6.7%) during December to 1.123 billion pounds. Poultry inventories were 212.1 million lbs. (23.3%) above year-ago levels.

 

Record weekly ethanol stocks increase... Ethanol production increased 4,000 barrels per day (bpd) for the week ended Jan. 20 to an average of 1.012 million bpd. That was down 2.2% from the corresponding week last year.

The big news in the ethanol data was a record weekly increase in stocks of 1.675 million barrels. That pushed ethanol stocks to a nine-month high of 25.082 million barrels.

Of the record weekly build in ethanol stocks, BioUrja Ethanol Trading Manager Jordan Fife said, “Demand has been horrible, production is increasing, there is an embargo in LA on ethanol due to crap weather and exports are awful – a perfect storm.”

 

Argentina raises domestic biofuels price... Argentina’s government raised domestic prices for both sugarcane- and corn-based ethanol, which are required for mixing with gasoline, by nearly 5%. The economy ministry set ethanol prices at 129.309 pesos per liter (about 70 cents), up from the previous 123.422 pesos per liter. Purchasers of ethanol now have 30 days from invoicing to pay off the fuel.

 

Oil World: Germany’s plans to end crop-based biofuels would hit farmers, cut rapeseed output... Any German government plans to stop crop-based biofuel production would severely hit farmers and cut rapeseed output, Thomas Mielke, CEO of Hamburg-based oilseeds analysts Oil World said. The resulting smaller oilseed crush in Germany would lead to a widening of the domestic protein deficit for animal feed and mean increased imports of soybeans and soymeal, Mielke said.

As we previously reported, German Environment Minister Steffi Lemke is proposing an end to production of crop-based biofuels in stages by 2030, increasing the use of biofuels produced from garbage, waste and used edible oil.

“I do not think that it is possible to replace crop-based biofuels in this way because there is not enough waste available to produce the volumes needed,” Mielke said.

About half of Germany’s rapeseed crop, which in 2022 totaled 3.7 MMT, is used to produce biodiesel. About 3 MMT of biodiesel is blended with diesel fuel in Germany each year, with the animal feed rapeseed meal also produced from rapeseed crushings.

 

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