Evening Report | February 6, 2023

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 Modest changes expected in Wednesday’s S&D Report... USDA is expected to make minor adjustments to its U.S. balance sheets in Wednesday’s Supply & Demand Report. Focus will be on shifts in usage forecasts for 2022-23, especially for corn as both exports and ethanol use could be lowered. The following pre-report estimates are from Reuters; Bloomberg for cotton.

The bigger focus for traders in Wednesday’s reports will be any changes to USDA’s global production forecasts and the impact that has on world ending stocks. Traders are expecting USDA to lower its Argentine corn and soybean crop forecasts, with little change anticipated for the Brazilian projections.

Many farmers say insurance program is the farm program... With revenue assurance options in crop insurance established before the farm bill started aiming for something similar, farmers are increasingly blending marketing with their crop/livestock insurance programs. That is why most farmers (both crop and livestock/dairy producers) focus more on the fate of the insurance programs, including possible negative amendments relative to Congress, than discussions about the Title 1 safety net talks in the ongoing farm bill debate. Plus, farmers have some skin in the game relative to the checks they write for insurance premiums.

Deese: EU, other allies have ‘nothing to fear’ with IRA... Europe and other U.S. allies have nothing to fear from the Inflation Reduction Act (IRA) and its investments in clean energy and energy security, and could actually benefit from it, President Joe Biden's top economic adviser Brian Deese said. Many EU leaders are worried the local content requirements in the new law will encourage companies to relocate, making the U.S. a leader in green technology at Europe’s expense. U.S. investment in clean energy would accelerate reductions in the cost of next-generation technologies that are critical for the world, he said.

China warns of extreme weather in 2023... China’s regions have been warned to prepare for more extreme weather this year after record-breaking temperatures and a lengthy drought played havoc with the country’s power supplies and disrupted harvests last summer. China’s southern regions need to brace for more persistent high temperatures and ensure that energy supplies are available to meet the summer demand peak, while northern regions need to prepare for heavy floods, said Song Shanyun, spokesman at the China Meteorological Administration said. Song called the climate “increasingly unstable” amid accelerated global warming.

China to restart rice auctions... China will restart old-crop rice auctions for feed use beginning in March to rotate out older stocks and temper rising feed grain prices USDA’s Foreign Ag Service says the rumored volume of older rice to be auctioned is around 18 MMT, less than half the amount offered in 2021 and 2022. FAS says rice reserves have dwindled from previous years as old-crop rice was auctioned in an attempt to relieve pressure on corn prices and outdated stocks were replaced.

Tyson ‘hit in the mouth’ in Q1... Tyson Foods was “hit in the mouth” as larger-than-expected U.S. beef and pork supplies reduced demand for its chicken, company executives said on Monday. At the same time, its costs for feed and livestock climbed. As a result, Tyson fell shy of expectations with its quarterly earnings. Tyson was caught wrong footed by expectations for chicken demand to increase at supermarkets in the face of tightening supplies of beef and pork. Instead, meat supplies were ample and the company had to sell chicken at lower prices when demand fell short, executives said. Tyson also grappled with excess domestic supplies of chicken as the outbreak of bird flu triggered export restrictions, the company said. “This is the first time I’ve seen all markets work against us, all at the same time,” CFO John R. Tyson said.

Tyson warned the second quarter also will likely be weaker.

Walsh: West Coast port talks getting through tricky issues... Labor Secretary Marty Walsh said the Biden administration is actively involved in West Coast port-labor talks, with the parties slowly making progress on some of the biggest sticking points. “I’ve been in steady contact… I talked to all sides,” Walsh said Friday in an interview on Bloomberg Television. “They were able to work through some of the more tricky issues out there.”