Evening Report | July 27, 2021
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ADM says China will need to import an additional 2 MMT of soybeans to counter canola losses… On an earnings call today, Archer Daniels Midland CEO Juan Luciano said the world lost 15 MMT of crop production due to bad weather over the past two to three weeks, drawing specific attention to the drought’s toll on Canada’s canola crop. Drought and heat in Canada’s Southern Prairies and the U.S. Northern Plains have sliced canola production potential, despite what official U.S. and Canadian production forecasts signal. To offset the gap in canola supplies, Luciano commented that China will need to import an additional 2 MMT of soybeans.
Chinese livestock producers are currently feeding “a lot of wheat” given price differentials, suppressing demand for soybean meal, Luciano acknowledged. But he also said he expects Chinese producers to shift back to feeding livestock more soymeal over time, translating to a rise in soybean imports. Luciano expects ADM’s core ag services and oilseeds unit to boost profits this year, citing strong global demand for vegetable oil and high North American crush margins.
Those high crush margins paired with strong exports of corn to China helped shoot ADM’s third quarter profits 52% higher. ADM says high Chinese prices have driven prices to record levels, lifting domestic production and likely tempering export demand moving forward.
Argentine farmer sales still running ahead of year-ago… So far this marketing year, Argentine producers have sold 25.8 MMT of their soybean crop, with sales advancing 757,600 MT the week ended July 21, according to the country’s ag ministry. That represents 59.3% of this year’s 43.5-MMT crop, as estimated by the Buenos Aires Grain Exchange. Last year at this point in the season, farmers had sold 27.9 MMT (56.9%) of the 49 MMT crop.
The ministry reports Argentine producers have sold 34.6 MMT of the corn crop, which the exchange estimates at 48 MMT. That’s 3 MMT ahead of last year at this time when the country’s corn crop totaled 51 MMT.
SovEcon cuts its wheat export forecast for Russia… SovEcon lowered its Russian wheat export forecast by 1.3 MMT to 37.1 MMT, citing sluggish demand to start the season and its smaller crop estimate issued earlier this month. Data out earlier this week signals the country will likely export 1.9 MMT of wheat in July, a 19% drop from year-ago and the slowest start to the season since July 2017. Harvest has been slowed by both rainy weather and late planting, plus week-to-week changes in export taxes have presented a challenge for exporters.
Andrey Sizov, head of SovEcon, says, “Domestic wheat market is relatively firm despite the new harvest pressure and large carry-in. Many farmers still prefer to postpone sales hoping that the current export tax could be lifted in several months. In our view, this looks like wishful thinking but it does slow down exports.”
Chinese pork prices well under year-ago during June… Chinese pork prices across 16 provincial regions tracked by the country’s ag ministry dropped 16.6% compared with the month prior during June to 20.01 yuan ($3.10) per kilogram, according to the country’s ag ministry. The index was down 54.1% from June 2020, when the country was still working to rebuild its herd in the wake of African swine fever.
RMA pushes back payment deadlines, waives interest accrual to aid producers dealing with drought… USDA announced its Risk Management Agency (RMA) would authorize approved insurance providers (AIP) to extend deadlines for premium and administrative fee payments, defer and waive the resulting interest accrual and allow other flexibilities to help farmers and ranchers through widespread drought conditions in many parts of the nation. Producers will now have an additional 60 days to pay premiums and administrative fees with interest to be waived for 60 days or until the policy’s termination date — whichever comes first. RMA also authorized AIPs to waive interest for another 60 days for written payment agreements due between Aug. 1 and Sept. 30, 2021. Find more details here.
RFA pledges ethanol will reach net zero emissions by 2050 or sooner… In a letter to President Joe Biden, the Renewable Fuels Association pledged to achieve a net-zero carbon footprint for ethanol, on average, by 2050 or sooner. The association also pledged to ensure ethanol reduces greenhouse gas emissions by at least 70% on average, when compared directly to gasoline.
“Today’s ethanol already reduces GHG emissions by 52%, on average, when compared directly to gasoline. … But given the urgency of the climate crisis and the need to reasonably decarbonize, we can—and must—do more,” RFA said in the letter.
It concluded, “We look forward to working with your administration on the policy and regulatory actions—which include development of a national Clean Fuel Standard, support for CCUS, and deployment of more flex-fuel vehicles—that can make this ambitious vision a reality.
