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USDA reports a ‘yawner’ as expected... We expected a yawner from USDA’s Supply & Demand Report this month and that’s exactly what it delivered. U.S. ending stocks didn’t change, aside from wheat, though that increase was expected. The biggest surprise was a bigger-than-expected increase to global wheat production, which pushed world wheat ending stocks up more than anticipated.
To view the report details, click here.
Dryness continues and intensifies in the Southern U.S.... The amount of winter wheat area covered in drought was up one percentage point to 53% as of Dec. 7, according to USDA and the U.S. Drought Monitor.
Warm, dry weather dominated the southern two-thirds of the U.S. over the past week. With record-setting warmth dominating areas from the Pacific Coast to the Mississippi Valley, weekly temperatures averaged at least 10 to 20°F above normal throughout the Rockies, Plains, interior Northwest, and western Corn Belt.
While the warm weather favored late-season fieldwork, it reduced soil moisture for winter grains and cover crops. As of Dec. 3, only 6% of the continental U.S. was covered by snow — the lowest on record for that date going back to 2003, according to the USDA and the National Drought Monitor.
Historically warm weather developed across the western and central U.S. before spreading eastward, resulting in dozens of monthly record highs in early December.
Drought-affected areas expanded and intensified on the Drought Monitor map in areas of the South including Louisiana, Arkansas and Texas as well as in the Southern Plains.
In Texas, the amount of area in drought increased 10 percentage points to 81%. Oklahoma is now 93% covered by drought, up six points from the previous week.
Argentina corn farmers launch a late planting blitz to avoid summer dryness... Argentine corn farmers are set for a late season planting blitz. It is hoped this strategy will propel both a record harvest and exports. The country is facing a La Nina cycle, which typically means reduced rainfall in some areas of the country. That has made producers wary about possible dryness during the Southern Hemisphere summer, despite generally good rainfall so far this season.
Fear of dry weather ahead has driven a shift towards late-season planting from December onwards, with some 55% to 60% of expected corn planting to come in that period, according to local corn industry chamber MAIZAR, up from 52% last season. Late planting has already begun on Argentina’s Pampas grains belt.
Early-planted corn in Argentina is harvested in March through April, while harvesting of late-planted crops goes through July, when the La Nina phase is expected to have passed.
Argentine ranchers propose added cattle weights for more beef exports... CICCRA, Argentina’s beef industry chamber, proposed increasing cattle weights as a way to directly raise meat production. Currently, Argentine cattle must weigh at least 300 kilograms (661 lbs.) in order to be slaughtered. The chamber argues that increasing the weight limit would free up more beef for domestic consumption, thus allowing Argentina to export more.
Argentina’s main agricultural association leaders planned on pushing for more beef exports when they meet with Agriculture Minister Julian Dominguez.
Since mid-year the government has limited beef exports in a bid to curb domestic food price inflation. The limits have been relaxed but there is still some beef that cannot be exported and limits on shipments to Israel and the European Union remain.
“Meat exports have to be 100% open,” said Nicolas Pino, president of Argentine Rural Association said.
Mexico inflation hits 20-year high... Mexico’s annual inflation grew faster than expected in November to its highest level in over two decades, official data showed on Thursday, reinforcing bets the central bank will raise its benchmark interest rate again when it meets next week.
INEGI, the national statistics agency, reported inflation in Latin America’s No. 2 economy jumped to 7.37% last month from 6.24% in October. That compared with the consensus forecast of a Reuters poll for 7.22%. The core rate of inflation, which strips out some volatile items, reached 5.67%.
Last month, The Bank of Mexico raised its benchmark interest rate by 25 basis points to 5%, the fourth consecutive hike. It also revised up its expectations for Mexican inflation at the close of this year. Banxico’s final monetary policy meeting for the year is Dec. 16. The bank targets inflation of 3%, with a one percentage point tolerance range above and below that.
EU biofuels use predicted to peak in 2023... In its 2021-2031 Agricultural Outlook, the European Commission projected EU biodiesel use will fall 24% to 14.3 billion liters in 2031 after a peak at 18.9 billion liters in 2023. Ethanol use would be less affected as it also has non-fuel applications, but it would still shed 10% to 6.4 billion litres in 2031 after rising to 7.1 billion liters in 2023.
The decline in biodiesel would affect palm oil the most, while rapeseed oil use is expected to remain stable. Due to the anticipated drop in biodiesel, palm oil imports in the EU are expected to decline to 4.0 MMT by 2031 from 6.5 MMT in 2021.
The EU is expected to remain a net importer of biofuels but biodiesel imports are also likely to be limited by countervailing duties from Argentina and Indonesia.
For ethanol production, the Commission expects corn to remain the principal feedstock, with a share of around 44% while use of wheat is set to fall and other cereals and sugar beets would remain relatively stable.
Tyson Foods plans to invest in meat plant automation... To boost production and reduce labor costs, Tyson Foods Inc. plans to spend more than $1.3 billion to increase automation in meat plants over the next three years, Chief Executive Donnie King said.
The company will increasingly use machines, instead of people, to debone chicken, one of its most labor-intensive jobs and a position with high turnover, said David Bray, group president of Tyson’s poultry division. A capital investment of $500 million in the area through fiscal year 2024 will generate labor savings equal to more than 2,000 jobs, he said. The company expects a cumulative savings of more than $450 million by fiscal year 2024.
Profitability in Tyson’s chicken unit has declined partly due to the labor shortage and because processing plants are operating below full capacity.
USDA publishes notice outlining supply chain loan guarantees... USDA’s Rural Business Cooperative Service announced $1 billion in loan guarantees under the Food Supply Chain (FSC) Guaranteed Loan Program for fiscal year (FY) 2022. “Loan guarantees will be made to lenders to facilitate financing to qualified borrowers and projects for the start-up or expansion of activities in the middle of the food supply chain, particularly the aggregation, processing, manufacturing, storage, transportation, wholesaling, or distribution of food, to increase capacity,” the notice in the Federal Register said.
Applications start Dec. 9 and awards under the effort will come after Feb. 7. Applications will be accepted until the funds are gone. The notice said that those applying for the loan guarantees should consider projects aimed at assisting rural communities in recovering from the pandemic, particularly disadvantaged communities; projects that ensure rural residents have equitable access to Rural Development programs; and those that reduce climate pollution and increase resilience to the impacts of climate change via economic support in rural communities. The maximum loan guarantee is $40 million and there will be a 90% guarantee.
House passes Ocean Shipping Reform Act... The Ocean Shipping Reform Act, introduced by Reps. John Garamendi (D-Calif.) and Dusty Johnson (R-S.D.), would:
- Establish reciprocal trade to promote U.S. exports as part of the Federal Maritime Commission’s (FMC) mission.
- Require ocean carriers to adhere to minimum service standards that meet the public interest, reflecting best practices in the global shipping industry.
- Require ocean carriers or marine terminal operators to certify that any late fees — known in maritime parlance as “detention and demurrage” charges — comply with federal regulations or face penalties.
- Shift burden of proof regarding the reasonableness of “detention or demurrage” charges from the invoiced party to the ocean carrier.
- Prohibit ocean carriers from declining opportunities for U.S. exports unreasonably, as determined by the FMC in new required federal rulemaking.
- Require ocean common carriers to report to the FMC each calendar quarter on total import/export tonnage and 20-foot equivalent units (loaded/empty) per vessel that makes port in the United States.
However, ocean carriers have warned the legislation could have complicating effects. The Biden administration has ordered carriers to get empty containers loaded on ships in a bid to ease port congestion, while the legislation would order loaded containers to be given priority.
The U.S. Dairy Export Council and the National Milk Producers Federation, which support the bill along with other U.S. agricultural interests, said, “If passed by the Senate and signed into law, the legislation will help alleviate delays and disruptions at U.S. ports that have cost the U.S. dairy industry well over $1 billion this year. American dairy exporters since late 2020 have faced unprecedented challenges in securing shipping container accommodations on ocean vessels while contending with record-high fees and shipping access volatility, most of which has been driven by foreign-owned ocean carriers.”
U.S. spends a smaller share of national output on R&D than many other countries... China is notably ambitious in spending on research and development, essentially copying the American blueprint for building a strong economy, even as the U.S. has abandoned that strategy. In the Wall Street Journal this week, Graham Allison, a Harvard professor, and Eric Schmidt, the former CEO of Google, wrote, “In each of the foundational technologies of the 21st century — artificial intelligence, semiconductors, 5G wireless, quantum information science, biotechnology and green energy — China could soon be the global leader.”
