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Brazilian farmers soybean start harvest in Mato Grosso... Farmers are beginning to harvest soybeans in the largest soybean producing state in Brazil. Ideal weather should translate into strong yields in the state. But some northern parts of the country have received too much rain and the southern part of the country has been in drought.
The earlier-than-normal start to harvest should allow soybean exports to hit the global market earlier and compete with U.S. soybeans. Mato Grosso farmers expect to be done with harvest by Feb. 20. The early harvest also will allow farmers to plant safrinha corn within the ideal planting window.
High Covid-19 cases around the world cause economic fears... Global Covid-19 cases continue to rise around the world. According to Reuters data, global Covid-19 infections hit a record-high over the past seven-day period. Many countries in Europe, along with Australia and the U.S. have posted a record number of cases.
Governments are increasingly concerned by the increased number of people being forced into self-isolation because they had been in contact with the virus. The numbers might keep enough workers at home and businesses might struggle to continue operations. Some countries such as the U.S. and Italy have revised their quarantine rules. However, other countries like China stuck to its zero-tolerance policy, keeping 13 million people under lockdown.
The surge in cases coincides with many countries’ New Year holidays, usually a period of parties and travel. Some countries, such as Italy, have canceled public celebrations, while authorities in other countries have warned residents to keep New Year gatherings small.
China may be on a major buying binge (hoarding) of ‘strategic products’... At China’s central economic work conference earlier this month, Beijing identified securing the supply of primary goods such as agricultural products and minerals as one of five significant issues to prepare for amid global challenges. The leader of the Chinese Communist Party (CCP) Xi Jinping said China must establish a “strategic baseline” to ensure self-sufficiency in key commodities, for securing the supply of primary products will help advance the country’s long-term agenda. Analysts say that tensions with the U.S. and its allies such as Australia, another major food exporter to China, could prod the communist regime to dramatically raise food reserves.
Another strategic product is computer chips, with some believing China’s nationwide hoarding played a role in the global chip shortage. They note that China’s State Administration for Market Regulation in August launched a probe into hoarding and other speculative practices as the regime found it disrupted its own market. The U.S. Commerce Department requested global major semiconductor manufacturers to provide their sales data in September. The information it sought included who were the top three buyers of the firms’ products in each of the last three years. Some analysts said Washington needed the data to figure out to what extent China’s storing caused the chip scarcity. One China watcher notes that China began hoarding chips in 2019 when the Trump administration imposed sanctions on its telecom giant Huawei. Fearing they could be next, Chinese companies, many of which are state-run, purchased a large number of chips – enough to cover their needs for the next few years.
Garnering the world’s cobalt supply is another top China priority. As the leading country in electric vehicle (EV) manufacturing, China is aggressively sourcing cobalt, a key metal in making EV batteries, from overseas. In the past five years, the second-largest economy has acquired most of Congo’s cobalt-producing mines, which produces two-thirds of the world’s supply. As of last year, 15 of the 19 mines in Congo were owned or financed by Chinese companies, according to a recent New York Times report.
The list does not stop with the products mentioned, as China has been on a buying tear for lithium and liquid natural gas, locking up production and/or supply agreements for years.
China warns of ‘drastic measures’ if Taiwan provokes on independence... China will take “drastic measures” if Taiwan makes moves towards independence, a Beijing official warned, adding that Taiwan’s provocations and outside meddling could intensify next year. Ma Xiaoguang, Taiwan Affairs Office spokesman, said China was willing to try its utmost to seek peaceful reunification with Taiwan but would act if any red lines on independence were crossed
“If separatist forces in Taiwan seeking independence provoke, exert force or even break through any red line, we will have to take drastic measures,” Ma said. In the coming months, provocation by pro-independence forces and “external intervention” could grow “sharper and more intense.”
“Next year, the Taiwan Strait situation will become more complex and severe,” he warns.
New Xinjiang chief expected to maintain policies, boost economic focus... China’s leadership change in Xinjiang could mean a greater emphasis on economic development in the region. However, the security crackdown targeting minority Muslims is unlikely to see a significant change in direction.
Ma Xingrui, who was governor of Guangdong, replaced Chen Quanguo, whose heavy-handed security campaign in the western region drew international sanction.
Ma plans to “persist in taking social stability and long-term stability as the general goal of Xinjiang’s work,” according to state media reports.
Ma said “high quality” economic growth would be a focus of his tenure. “We must modernize supply chains,” Ma said. “We must deepen reform of ‘decentralization and management of services,’ promote tax and fee reduction, create a good market-oriented, rule-of-law, and international business environment.”
The U.S. and a few other countries plan a diplomatic boycott of the Beijing Winter Olympics in February over the human rights issues in the region. President Joe Biden signed legislation banning imports from Xinjiang such as cotton goods, tomatoes and parts to make solar panels, over concerns about forced labor.
USDA recalculates DMC payment formula... USDA has recalculated the Dairy Margin Coverage (DMC) feed cost used to determine the program payments to now base it on premium alfalfa versus blended alfalfa. FSA has recalculated the national average margin for each month going back to January 2020 to reflect the change.
Based on the recalculation, it appears most DMC payments would be increased by around $0.20 per cwt. per month. The recalculation in some cases triggered a DMC payment for a new margin trigger level. Producers will receive any additional payment based on covered production history and the margin level selected for 2020 and 2021.
USDA looking to recognize Lithuania as eligible to export egg products... USDA’s Food Safety and Inspection Service (FSIS) announced it is looking to recognize Lithuania as a country eligible to export egg products to the United States. FSIS has reviewed Lithuania’s laws, regulations, and egg products inspection system. It audited the system as implemented, determining that it is equivalent to U.S. inspection requirements under the Egg Products Inspection Act (EPIA).
The announcement comes years after Lithuania first requested approval to export egg products to the U.S. in 2014. FSIS is now looking for comments by Feb. 28 on the matter.
“Should FSIS make a final determination to list Lithuania as eligible to ship egg products to the United States, only egg products produced in certified Lithuanian establishments would be eligible for export to the United States,” the agency said. Only one establishment from the country is currently seeking to certify to export egg products to the U.S. Any Lithuanian egg products would also still be subject to inspection at the U.S. point of entry, the agency said.
Saudi Arabia may cut crude oil prices for Asia in February... Saudi Arabia may implement deep price cuts for the crude it sells to Asia in February after Middle East benchmarks and spot prices slumped this month, industry sources said. The top oil exporter is expected to cut official selling prices (OSPs) of all grades by more than $1 in February from the previous month, dropping prices back to their lowest levels in three to four months. Saudi Arabia will set February prices after a Jan. 4 meeting of OPEC+ to decide whether they will increase in February.
Saudi crude OSPs set the trend for Iranian, Kuwaiti and Iraqi prices, affecting about 10 million barrels per day of crude bound for Asia.
Oil firms predict higher output, costs in 2022... U.S. oil and gas executives are predicting higher production and drilling activity next year as oil prices climb, but say they face sharply higher costs, according to a poll released by the Federal Reserve Bank of Dallas. Some 49% of executives aim to expand output next year, while 15% said their main focus would be to maintain existing production levels and 13% plan to focus on reducing debt. Six-month outlooks remained positive, but the index declined to 53.2 from 58.9 the previous quarter.
Publicly traded oil company executives largely plan to keep production flat or expand output at low single-digit percentage rates next year and focus on improving shareholder returns.
The index for input costs among service firms hit a record high in the survey, from 60.8 to 69.8 in the last quarter. Oilfield service firms reported higher costs during the fourth quarter, and lease operating expenses jumped to 42 from 29.4 during the quarter, also the highest reading since the Federal Reserve began the survey five years ago.
Factors such as supply-chain disruption, inflation and finding qualified works might delay drilling or completion in 2022.
The executives expect December 2022 prices for oil and natural to be close to current prices, $75 per barrel for oil and $4.06 per million British thermal unit (MMBtu) at the Henry Hub.
