Evening Report | December 28, 2022
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SovEcon raises Russian wheat crop forecasts... SovEcon raised its 2022-23 Russian wheat crop estimate by 300,000 MT to a record 101.2 MMT due to “slightly higher yields in the Center and Siberia.” Its 2023-24 wheat crop forecast was raised 400,000 MT to 86 MMT amid “good crop conditions after ample rains in recent months. The consultancy says, “Winter wheat is in better-than-average shape in the Center and the Volga Valley (#2 and #3 growers), and its condition is close to average in the South (#1).
SovEcon expects Russian winter wheat acreage to decline 500,000 hectares to 16.2 million hectares, as some farmers switched wheat to other crops amid high export taxes and some couldn’t seed winter wheat due to heavy fall rains.
Argentina soy sales near 80% of harvest... soybean sales spiked last month after the government revived a policy that provided farmers a preferential exchange rate for soybean transactions. However, the policy is set to end Friday. Between dec. 15 and Dec. 21, producers in Argentina sold 730,300 MT of the 44 MMT 2021-22 soybean crop, indicating one of the highest weekly figures in recent months.
Soybean futures extend rally, close above $15.00… Soybean futures extended a post-holiday rally to six-month highs behind rallying soymeal, dry weather in Argentina and ideas easing Covid restrictions in China will boost the country’s commodity demand. March soybeans jumped 25 1/4 cents to $15.14 1/4, the contract’s highest close since June 17. Corn also gained, with the March contract up 8 cents to $6.82 3/4, a seven-week high.
“The Impact of Long-Run Declines in Gasoline Use on the U.S. Corn Market”... That’s the title of a report written by University of Illinois Agricultural and Consumer Economics Ph.D. student Shahadat Hossain and edited by Professor Joe Janzen Link to the full report.
Bottom line: “U.S. ethanol production faces uncertainty related to adoption of electric vehicles and a resulting decrease in gasoline use. We quantify the impact on corn markets between now and 2050, assuming ethanol use remains proportional to EIA’s projections for gasoline use over time. We find relative declines in ethanol production would decrease corn prices by about 4%, but this price forecast assumes corn production and other uses continue current trends. The development of new uses for corn may substantially alter future corn prices.”
With EV supplies limited, buyers are crossing brand lines... Nearly 80% of people who bought Kia’s EV6 electric crossover since it went on sale early this year traded in something other than a Kia, according to Edmunds, compared with 61% for all its models. More than two-thirds of Ford Mustang Mach-E electric-sport-utility buyers had non-Ford trade-ins, compared with Ford’s 42% brand-wide average. The Wall Street Journal reports Rivian Automotive said its customers are coming from such a wide spectrum of car buyers that purchasers of its trucks and SUVs — which start around $70,000 — are about as likely to own a $30,000 Subaru Outback station wagon as they are a $100,000 Porsche 911.
Gasoline prices to ease but could spike above $4 at points in 2023... Gas prices will likely be significantly cheaper next year — but the national average could still climb back above $4 per gallon as soon as May, according to GasBuddy projections shared exclusively with CNN. The price-tracking website doesn’t expect a repeat of this year’s wild swings that at one point sent gas prices above $5 a gallon for the first time. The national average for regular gas is expected to drop to $3.49 a gallon in 2023, down roughly 50 cents from the average this year, according to GasBuddy.
Natural gas output posts record decline in the Appalachia region... Natural gas production in Appalachia, the top gas-producing basin in the U.S., dropped by a record amount as Winter Storm Elliott swept through Pennsylvania and Ohio, freezing wells and some equipment and creating mechanical issues at pipeline infrastructure. The Appalachia basin saw natural gas supply drop by 27%, or by 9 billion cubic feet, compared to the typical levels, according to estimates by BloombergNEF, based on pipeline flows. The decline was the steepest on record in data since 2013, Bloomberg notes. In Pennsylvania, natural gas production fell by more than 20%, due to well freeze-offs. In Ohio, output more than halved, according to Bloomberg’s estimates.
Natural gas prices in Europe at pre-war levels... Dutch front-month gas futures continued to decline heading into the end of the year, falling to 77 euros per MWh, which is the lowest level since February 21, before the war in Ukraine started, amid mild weather and ample supplies. Natural gas prices in Europe are more than 75% below record levels of nearly 350 euros hit in August, as record LNG imports, increased wind generation, and fuller-than-normal stockpiles ease concerns about shortages. Storage facilities in Germany were 88.6% full as of Dec. 26 and the EU average held at 83.2%, above the five-year seasonal average.
Holiday-related debt soars 24% to an eight-year-high... Shoppers frequently used their credit cards this holiday season, a new debt survey shows. And now they plan to take longer than ever to pay it back, according to a LendingTree survey of 2,050 adults conducted from Dec. 16-19. The average debt hit $1,549, spiking 24% this year compared to 2021, the survey showed. It’s the highest spike and debt level in the eight years that the online lender has been tracking the data.
Exxon Mobil sues EU in move to block new windfall tax on oil companies… The moves come in a bid to force the EU to scrap the bloc’s new windfall tax on oil groups, arguing Brussels exceeded its legal authority by imposing the levy. The lawsuit is the most significant response yet against the tax from the oil industry, which has been targeted by western governments amid a surge in energy prices following Russia’s invasion of Ukraine. The Financial Times first reported the lawsuit on Wednesday.
Windfall profits tax “counter-productive”… An Exxon Mobil spokesman said a windfall profits tax is counter-productive, discourages investments and undermines investor confidence. Exxon will factor in the tax as it considers future multibillion-euro investments in Europe’s energy supply and transition, he said. “Whether we invest here primarily depends on how attractive and globally competitive Europe will be,” the spokesman said. Windfall profit taxes imposed by Europe could cost at least $2 billion through the end of 2023, Chief Financial Officer Kathryn Mikells said in a call to analysts on Dec. 8.
Exxon said it invested $3 billion in the past decade in refinery projects in Europe… The projects are helping it deliver more energy products at a time when Europe struggles to reduce its imports from Russia. "We will continue to work with EU leaders to address these issues. Thoughtful policy is critical," the company said.
U.S. to require Covid tests for travelers coming from China… The Biden administration announced Wednesday that it will require anyone arriving by air from China to provide a negative Covid test, following a surge of Covid-19 cases across China as Beijing has eased its strict zero-Covid rules. Under the new rules, which will take effect on Jan. 5, anyone two years and older will need to show a negative result from a test taken within two days of their departure from airports in mainland China, Hong Kong and Macau, administration officials said in a briefing.
