Evening Report | July 6, 2023

Evening Report
Evening Report
(Pro Farmer)

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Drought footprint modestly recedes in corn/soybean areas, expands for spring wheat... As of July 4, the Drought Monitor showed 52% of the U.S. was covered by abnormal dryness/drought, down two percentage point from the previous week. Drought also eased a little across corn and soybean areas. USDA estimated drought (D1 or higher) covered 67% of corn production areas and 60% of soybeans, both down three points from the previous week. Drought expanded in spring wheat areas, with 19% now covered (up four points). USDA estimated 18% of cotton areas were covered by drought (unchanged).

For the Midwest, the Drought Monitor noted: “This week’s weather in the Midwest region varied substantially, with heavy rain falling from St. Louis across much of central and northern Illinois, Kentucky, and parts of Indiana and Ohio to continued dry conditions in southern Missouri, eastern Wisconsin, and central and northwest Minnesota. Widespread changes occurred, as precipitation deficits grew and streamflow and soil moisture issues continued in locations that missed out on the rain, while drought and abnormal dryness improved to varying degrees in areas that saw more rain. In southwestern portions of Missouri, major agricultural damage continued to occur as significant spring dryness has continued into the summer, and drought expanded and worsened. Localized worsening of conditions happened in parts of Iowa, which missed out on heavier rainfall. Large-scale improvements occurred in parts of southern Iowa, northern Missouri, central Illinois, Chicago, southern Indiana and central and eastern Kentucky, as well as parts of Ohio, where rainfall was sufficient to put a significant dent in precipitation deficits, increase streamflow and improve soil moisture.”

For the Plains, the Drought Monitor stated: “Much of the Great Plains, with the exception of eastern Kansas, northern North Dakota and western Colorado, saw widespread precipitation, some of it heavy. Much of southeast and northwest Nebraska, northeast South Dakota and along the Wyoming-South Dakota border saw rainfall of at least 2 inches over the last week. In western Nebraska, eastern Wyoming and the Dakotas, this led to widespread improvements to the drought depiction in areas where the heaviest rains fell. Nebraska saw the most improvements in the High Plains with continued improvement in the Panhandle, the Sandhills up to the South Dakota border and the southeast near Nebraska City. Meanwhile, conditions continued to worsen in a majority of Kansas, particularly in the east and southeast where mostly dry weather continued. Given continued decreases in soil moisture and groundwater, and growing short- and long-term precipitation deficits, degradations were made from Manhattan to Fort Scott.”

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SovEcon expects record Russian grain exports in 2023-24... SovEcon raised its 2023-24 Russian grain export forecast to 58.9 MMT, including 47.2 MMT of wheat – both would be record totals. The Black Sea consulting firm now expects Russia to ship an additional 1.5 MMT of wheat and another 200,000 MT of corn above its previous forecasts.

SovEcon said, “Based on the results of the 22-23 season, we can state that the Russian infrastructure can already handle about 60 MMT of grain. Carry-in stocks for the new season are record-high, the total supply – even taking into account the reduction of the new crop – will decrease only marginally, the infrastructure continues to expand and shipments at the start of the new season are likely high. Globally, the expected significant reduction in supplies from Ukraine and Australia will support Russian wheat exports in the new season. This could be partly offset by larger EU exports.”

SovEcon expects Ukraine’s wheat export will fall from 17 MMT in 2022-23 to 10 MMT this year. The firm notes USDA projects a 10-MMT drop in Australian wheat exports in 2023-24, while EU shipments are expected to increase 4 MMT.

 

Low levels on Rhine River could slow transport again... Rhine River water levels are on track to fall to critically low levels again this summer, as extreme heat scorches parts of Europe, testing energy and transport networks. Low water last year contributed to a diesel shortage in southern Germany, with barges unable to ship the usual volumes inland. Concerns of supply crunch are again emerging — Austria’s OMV AG halted diesel supply from a storage facility in Munich, while separately a fire occurred at the Bayernoil complex in the region. Barges passing the Lower Rhine near the town of Duisburg, Germany — north of Cologne — are able to carry around 2,125 MT, slightly less than a full load of 2,500 tons, broker Riverlake Barging said in a report. Those operating only in the Upper Rhine are also operating at reduced capacity. Vessels going to the Upper Rhine are now having to sail half full, operator Interstream Barging said.

 

U.S. trade deficit declines to $69.0 billion in May... The U.S. trade deficit narrowed to $69.0 billion in May, down from $74.4 billion the previous month. Imports of goods and services dropped 2.3% to $316.1 billion, the lowest level since December 2021. Goods imports fell 2.7% to $256.1 billion, the lowest level since October 2021. Exports fell 0.8% to $247.1 billion. Goods exports declined 1.5% to $164.8 billion.

A major factor influencing export weakness in May was a $2 billion drop in soybean shipments. This marks the most significant drop in any end-use category and resulted in the overall food & feed section falling the most drastically in over 40 years.

 

 

Ag trade deficit widens in May... The U.S. exported $13.93 billion of ag trade goods during May against imports of $16.95 billion, resulting in a deficit of $3.02 billion. Through the first eight months of fiscal year (FY) 2023, U.S. ag exports totaled $128.49 billion against imports of $132.17 billion for a deficit of $3.68 billion, up from $660 million in April. USDA forecasts FY 2023 ag exports at $181.0 billion and imports at $198.0 billion, which would imply a deficit of $17.0 billion.

 

New report examines a future without glyphosate... Aimpoint Research, a global strategic intelligence firm, published a new report titled “A Future Without Glyphosate,” examining the repercussions that could emerge from the discontinuation of glyphosate, currently the most commonly utilized herbicide in the United States. The report, commissioned by Bayer, stresses that while the American agricultural system and farmers would adapt over time, the immediate impacts to the economy, environment and farmers will be extensive and costly.

Colonel (retired) Mark Purdy, Aimpoint Research Chief Operations Officer, expressed that their study engaged diverse research methods to envisage a scenario without glyphosate. Meanwhile, Gregg Doud, Aimpoint Research Chief Economist, highlighted the significant economic cost and dramatic greenhouse gas emissions that would result in the herbicide's absence.

Key findings from the study suggest that the unavailability of glyphosate would:

  • Lead to more tilling and fewer cover crops, which could result in the release of up to 34 million tons of CO2, equivalent to the emission of approximately 6.8 million cars or nearly 36.5 million acres of forests.
  • Cause a 2 to 2.5 times surge in input costs for farmers due to the limited supply and high prices of alternative products, affecting smaller farms disproportionally.
  • Increase production costs by over $1.9 billion due to increased tillage.
  • Add inflationary pressure to food prices over the long term for consumers.
  • Reduce the global competitiveness of U.S. agriculture, especially corn.
  • Eventually lead to the development of more alternatives, but this would require several years and substantial investments amidst regulatory uncertainty and a lull in crop protection innovation.

 

EFSA indicates no reason to block glyphosate renewal... The European Food Safety Agency (EFSA) stated there are no “critical areas of concern” that would hinder the renewal of glyphosate’s usage within the European Union (EU). Although there were identified data gaps in the understanding of consumer dietary risks, EFSA affirmed that experts believe glyphosate renewal would not pose any threats to consumers. The next steps involve the European Commission considering EFSA’s recommendation and a report from four EU countries to decide whether to propose renewing approval for glyphosate. Finally, the EU member countries will vote on this approval.

 

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