Evening Report | July 13, 2021

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La Nina re-emergence could spell trouble for Brazilian producers, opportunity for the U.S.… Last week, the National Oceanic and Atmospheric Administration indicated there were 55% odds of La Nina reemerging during the September through November period and 66% odds of a re-emergence during the November to January timeframe. Should that occur, that would be bad news for south-central Brazil, according to South American Crop Consultant Dr. Michael Cordonnier. He says, “A return of La Nina could aggravate an already exceptional drought in south-central Brazil that has resulted in one of the driest periods in over 90 years.”

Cordonnier details that the development of La Nina could delay the start of the summer rains again in September and October, with the south-central states of Mato Grosso do Sul, Parana, Sao Paulo and Minas Gerais most at risk.

Cordonnier continues that corn prices are already high and are expected to remain so into early 2022. If La Nina reemerges and disrupts weather in 2021-22, Brazil could be facing short supplies for another one to two years. That, in turn, could allow the U.S. to ship more corn. Prolonged high feed costs could also cause Brazil’s livestock sector to rein in production.

Brazil raises mandatory biodiesel blend… Brazil’s government raised the mandatory blend of biodiesel into diesel from 10% to 12%, which is still shy of this year’s 13% target. In a statement, Brazil’s Mines and Energy Ministry said its national energy policy council raised the blend to 12% “in order to avoid an excessive increase in the final price of diesel to the final consumer.” On April 9, the government lowered the biodiesel blend mandate from 13% to 10% in order to lower fuel prices. The bulk (around 70%) of Brazil’s biodiesel is produced from soyoil and prices of soybeans have soared amid strong demand.

A similar story for corn and a slow start for the country’s sugarcane crop means there has also been a push to lower the amount of ethanol blended into fuel from the current 27%. Roughly 90% of Brazil’s ethanol is made from sugar cane and the remainder from corn.

Argentine soybean sales percentage still running a bit ahead of last season… Argentine producers sold another 831,300 MT of soybeans the week ended July 7, pushing total sales to 24.5 MMT for 2020-21, according to the country’s ag ministry. That represents 56.3% of this year’s expected 43.5 MMT crop, as estimated by the Buenos Aires Grains Exchange. Last year at this time, 54.9% of the 49 MMT crop had been sold. There has been concern about farmers holding onto the oilseed as an inflation hedge rather than selling their bean crop.

SovEcon cuts Russian wheat crop forecast, citing disappointing early yields… Ag research firm SovEcon lowered its Russian wheat crop estimate by 2.3 MMT to 82.3 MMT. Andrey Sizov, head of SovEcon, says: “Weather conditions were friendly for the new winter wheat crop in Russia. However, it seems that plants couldn’t fully recover after a very dry fall, especially in the South. We feel that the market could be too optimistic about the new Russian wheat crop.” Recent heavy rains in the South have also slowed harvest and fueled some concern about yield losses and quality issues. Yesterday, USDA lowered its Russian wheat crop forecast for 2021-22 by 1 MMT to 85 MMT. Russia is the world’s largest wheat exporter.

China to auction Ukraine corn… China will auction another 23,488 MT of imported non-GMO corn from Ukraine on July 16, the country’s state grain stockpiler Sinograin said. This latest auction will involve 2020-crop supplies. The country has held a series of auctions of state reserves of imported grain from the U.S. and Ukraine in recent weeks to help cool domestic prices.

Revival of Indian monsoon rains… As expected, monsoon rains have picked up in India, covering the entire country as of Monday—five days later than usual, according to the state-run India Meteorological Department. The rains got off to a timely and ample start, but slowed earlier this month, sparking concerns about delays planting crops highly dependent on these rains.

U.S. inflation rose 5.4% in June, marking the highest annual rate since 2008… U.S. consumer prices rose 5.4% in June from a year ago, keeping inflation at the highest annual rate in 13 years as the economic recovery gained steam. The higher-than-expected consumer price index reading will rekindle debates about whether inflation is temporary as the Federal Reserve maintains. On average, analysts expected the CPI to climb 5.0% from year-ago.

USDA provides some details on animal depopulation/disposal assistance… Livestock and poultry producers who suffered losses during the Covid-19 pandemic due to insufficient access to processing can now apply for assistance for those losses and the cost of depopulation and disposal of animals, USDA announced today. This is part of the Pandemic Livestock Indemnity Program (PLIP) unveiled by Ag Secretary Tom Vilsack in Wisconsin Dells. Producers can apply for aid from July 20 through Sept. 17.

PLIP payments will be based on 80% of the fair market value of the livestock and poultry and for the cost of depopulation and disposal of the animal from March 1, 2020 through Dec. 26, 2020. Payments will be based on a single payment rate per head. USDA details, “PLIP payments will be calculated by multiplying the number of head of eligible livestock or poultry by the payment rate per head, and then subtracting the amount of any payments the eligible livestock or poultry owner has received for disposal of the livestock or poultry under the Natural Resources Conservation Service Environmental Quality Incentives Program or a state program. The payments will also be reduced by any Coronavirus Food Assistance Program (CFAP 1 and 2) payments paid on the same inventory of swine that were depopulated. To be eligible for payments, a person or legal entity must have an average adjusted gross income (AGI) of less than $900,000 for tax years 2016, 2017 and 2018.

Also of note, USDA says it has set aside “up to $50 million in pandemic assistance funds to provide additional assistance for small hog producers that use the spot market or negotiate prices. Details on the additional targeted assistance are expected to be available this summer.” Find more details here.

RMA authorizes emergency procedures to help drought-impacted producers… To help producers dealing with drought in the West, Northern Great Plains, Caribbean and other areas, USDA’s Risk Management Agency is working with crop insurance companies to streamline and accelerate the adjustment of losses and issuance of indemnity payments to crop insurance policyholders in impacted areas.

USDA says, “Emergency procedures allow insurance companies to accept delayed notices of loss in certain situations, streamline paperwork, and reduce the number of required representative samples when damage is consistent. These flexibilities will reduce burdens on both insurance companies and producers to help mitigate drought effects.”

Producers should contact their crop insurance agent as soon as they notice damage. Once an insured crop has been appraised and released, or representative strips have been authorized for later appraisal, the producer may cut the crop for silage, destroy it or take any other action on the land including planting a cover crop. Find FAQs about the procedures here.

World hunger on the rise… After five years of relatively stable numbers, world hunger shot up last year amid the Covid pandemic, according to a new United Nations report. The number of people facing hunger rose by 118 million to around 768 million in 2020 — 10% of the world’s population. Nearly one in three people worldwide didn’t have access to adequate food last year — 320 million people more than in 2019. Unless the world takes “bold action,” the UN’s goal of zero hunger by 2030 will be unachievable, according to the U.N. agencies responsible for the report. World Food Program Chief Economist Arif Husain said, “Reversing such high levels of chronic hunger will take years if not decades.”