Evening Report | December 11, 2023

Evening Report
Evening Report
(Pro Farmer)

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Center-west Brazil to see return of hot, dry weather after recent light relief... Timely rains fell on dry areas of west-central Brazil recently but, “drier-biased conditions are set to return,” according to World Weather Inc. The forecaster says crops will have “limited” soil moisture reserves to support new growth during the next several days, with aggressive drying expected as temperatures again surge near or above 100 degrees Fahrenheit. Soybeans will likely be stressed.” Center-south and northeastern Brazil will also trend drier than normal this week.

World Weather says, “Aggressive drying is slated for Mato Grosso, Mato Grosso do Sul and Goias this week due to the lack of significant rain and warm to hot daytime temperatures. The ground will remain or become too dry to support ideal soybean and first-season corn development. Plant stress will increase later in the week and weekend as well when the warmest weather occurs. The boost in rain during the second week of the outlook will be welcome and should gradually improve development conditions.”

 

Biden administration to release SAF subsidy guidance by end of week... The Biden administration expects the Treasury Department to release guidance by the end of this week on whether to make it easier for sustainable aviation fuel (SAF) made from corn-based ethanol to qualify for subsidies, multiple sources familiar with the administration's thinking told Reuters. It is unclear what the administration’s guidance will say.

Ethanol producers argue the U.S. needs to use corn-based SAF to quickly reduce carbon dioxide emissions to meet climate-change goals. Environmental groups are using crops to produce fuel won’t achieve climate objectives.

 

Vilsack: Final COP28 declaration won’t focus on ag and food... USDA Secretary Tom Vilsack revealed the final COP28 declaration would not focus on agriculture and food. This decision was influenced by a request from the G7 group of developing countries for additional review and participation related to agriculture and food, leaving no time for negotiations. While Vilsack highlighted the importance of a special day dedicated to agriculture and food policy and the participation of U.S. farm and food leaders, he considered the Emirates Declaration on Sustainable Agriculture, Resilient Food Systems, and Climate Change, signed by 152 nations, and commitments by countries and companies to reduce greenhouse gas emissions and fund related projects as significant achievements. However, some observers were disappointed because this would delay progress until June 2024. Vilsack mentioned the Agriculture Innovation Mission (AIM) for Climate, a joint initiative between the U.S. and the United Arab Emirates aimed at addressing climate change and global hunger through increased investment in climate-smart agriculture and food systems innovation. Regarding reducing meat consumption, Vilsack said he had not heard much about that goal but instead emphasized strategies for reducing methane emissions related to livestock. The U.S. is taking a leadership role in methane reduction through research, feed additives, recapturing methane for energy production and managing manure.

 

‘Tariffs are for Losers’... In an opinion article in the Wall Street Journal titled “Tariffs Are for Losers” by Andy Kessler, the author criticizes the idea of imposing tariffs on imports as a policy approach. He argues against the use of tariffs for several reasons:

  • Bipartisan support for tariffs: The author highlights that there is bipartisan support for tariffs as a policy to protect American industries and jobs, citing examples like J.D. Vance and Senator Josh Hawley.
  • Economic consequences: Kessler contends tariffs impose costs on all Americans by raising prices and that they subsidize a few jobs at the expense of the broader economy.
  • Misallocation of capital and resources: The author argues tariffs lead to misallocation of capital and human resources by diverting entrepreneurs and businesses towards artificial opportunities created by tariffs. This, in turn, hinders innovation.
  • Impact on manufacturing: While domestic manufacturers may benefit from tariffs by raising prices, consumers are forced to pay more for goods, and manufacturers can become complacent.
  • Trade deficits and profitability: Kessler notes trade-deficit figures do not necessarily reflect the profitability of manufacturing industries and tariffs may not be the solution to addressing these issues.
  • Inflation and elasticity: The article points out tariffs contribute to inflation and can hinder economic growth by reducing elasticity, which is the ability of lower costs to drive higher sales.
  • Government’s role: The author is skeptical of the government’s ability to pick winners and losers in the economy through industrial policies and subsidies, citing past failures in areas like steel, EVs and renewable energy.
  • Strength of the economy: Kessler concludes by asserting that tariffs are a sign of weakness and argues for a free-market approach, allowing markets, rather than politicians, to determine which industries thrive.

    Bottom line: Kessler criticizes tariffs as an ineffective and counterproductive economic policy, suggesting they lead to unintended consequences and hinder economic growth and innovation.

 

NY Fed: Near-term expected U.S. inflation at more than 2-year low... The path U.S. consumers expect inflation to take over the next year softened in November to the lowest level in more than two years, amid retreating projections of higher gasoline and rental costs, a New York Federal Reserve survey showed. Consumers expect inflation to be at 3.4% a year from now, down from an expectation of 3.6% in October and the lowest reading since April 2021, the regional Fed bank said in its latest Survey of Consumer Expectations. The rise in fuel costs is seen at 4.5% a year from now, down from the expected 5% in October, while rent was seen at 8%, a drop from an expected increase of 9.1% in October. The year-ahead expected rise in rent was the lowest since January 2021.

The report said inflation at the three- and five-year horizons was steady at 3.0% and 2.7%, respectively.

 

China’s leaders meet to discuss growth targets for 2024... China’s leaders started a closed-door meeting on Monday to discuss economic targets and map out stimulus plans for 2024, four sources familiar with the matter told Reuters. The annual Central Economic Work Conference, during which President Xi Jinping and other top officials chart the course for the world’s second-largest economy next year, is likely to end on Tuesday, the sources said.

China’s government advisers have told Reuters they would recommend economic growth targets for 2024 ranging from 4.5% to 5.5%, with the majority favoring a target of around 5% -- the same as this year.

“We are likely to set a growth target of around 5%,” said a policy insider who spoke on condition of anonymity. “We need to step up policy support for the economy.”

 

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