Pro Farmer Evening Report: Jan. 10, 2022

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Supreme Court rejects appeal to reinstate year-round E15 sales... The Supreme Court rejected appeal by Growth Energy to reinstate an EPA rule that would have permitted year-round sales of fuel containing as much as 15% ethanol. The group asked the court to allow Trump-era rule that would have expanded waivers from summertime volatility limits so that E15 gasoline blends can be sold all year. The rebuff is a victory for oil industry trade groups that sued to challenge 2019 rule and won federal appeals court decision saying EPA had exceeded its authority under Clean Air Act.

The Biden administration urged rejection of appeal even while saying appeals court should have deferred to EPA’s approach.

“Growth Energy will continue to explore all potential avenues to make unfettered access to E15 a reality,” Emily Skor, the group’s chief executive, said in a statement.

Meanwhile, several Midwest states that include Iowa, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wisconsin are inquiring with EPA to allow year-round sales of E15 at the state level.

Vilsack: U.S. to press China on trade... Citing a $16 billion shortfall in its commitment to U.S. agricultural products, the U.S. will enforce its Phase 1 trade agreement with China, according to USDA Secretary Tom Vilsack. “We will enforce the agreements we have,” Vilsack told the American Farm Bureau convention in Atlanta.

U.S. Trade Representative Katherine Tai will be meeting with Chinese officials to make sure the country meets its Phase 1 requirements. In the trade pact signed in 2020, China agreed to additional purchases of U.S. agricultural products by $32 billion over two years, including $12.5 billion above the corresponding 2017 baseline of $24 billion in 2020 and $19.5 billion above the baseline in 2021.

The U.S. will discuss with Chinese officials the country making up its deficit over the next few years. In addition, officials are expected to discuss sanitary and phytosanitary issues such as ractopamine in pork, beef hormones, ethanol tariffs and the ability to purchase distillers’ grains.

“We will continue to press China on the need for complete enforcement and complete implementation of this trade agreement before we discuss the process of the possibility of extensions,” Vilsack said.

Slew of report data coming Jan. 12... USDA’s January crop reports tend to swiftly move markets since there’s so much data. Much of the focus is typically on USDA’s “final” crop estimates for corn and soybeans, though only modest changes are expected this year. Dec. 1 grain stocks have a history of providing market-moving surprises, especially for corn. Given the big (potentially record) 2021 corn and soybean crops, there is risk USDA finds more bushels than traders expect as of Dec. 1. Traders will also get winter wheat seedings, along with monthly U.S. and global balance sheets. The reports will be released at 11 a.m. CT on Wednesday. Following are pre-report estimates from a Reuters survey (except for cotton, which is from Bloomberg).

Omicron reduces meat processing in U.S. plants... Due to increased employee and meat inspector Covid-19 infections last week, several meatpacking plants had to reduce or shift employees. Cargill operated a few plants at a lower slaughtering capacity, including the Dodge City, Kansas, beef plant that had a “skeleton crew.” Perdue Farms also saw Covid-19 cases rise after the holidays. Another chicken company noted they were affected by the Omicron variant, just like all industries.

According to the United Food and Commercial Workers union, there has been an increase in Covid-19 cases, especially in plants that vaccinated workers but did not push booster shots.

Meatpacking inspectors are also increasingly testing positive, according to the union, which represents about 6,400 meat and poultry inspectors. USDA has shifted inspectors to cover short-staffed plants due to the virus, including a beef plant in Green Bay, Wisconsin.

As of Jan. 3, Covid-19 cases had increased over the previous 14 days in 26 of the 30 counties where the nation’s biggest beef production plants are located, according to Steiner Consulting Group.

USDA estimated beef processors killed 112,000 cattle on Friday, down about 6% from a year earlier and matching Jan. 3 levels that were the lowest since October. Hog slaughter, meanwhile, was down about 5% from last year on Friday, USDA said.

China, Philippines stop Canadian beef imports over BSE... China and the Philippines have suspended imports of Canadian beef due to Canada’s detection in December of a cow infected with bovine spongiform encephalopathy (BSE), according to Canada’s ag department.

The moves follow a suspension of Canadian beef imports by South Korea last month after Canada’s first BSE case in six years, though it was atypical.

China is the world’s biggest importer of beef and veal, and Canada’s third-biggest export market, according to the Canadian Cattlemen’s Association (CCA). South Korea had previously suspended Canadian beef imports.

The three countries that have suspended Canadian beef imports are seeking more information about the case, said Dennis Laycraft, the CCA’s executive vice-president. He said that the disruption has not had any noticeable impact on Canadian prices.

“We expect these (suspensions) to be short in duration,” Laycraft said. “We’ve been able to manage through it.”

Indian textile industry seeks cotton price relief... Last week, a leading Indian textile player asked the Indian Prime Minister to stop hedging and trading cotton by speculators on commodity exchanges such as Multi Commodity Exchange and New York Cotton Exchange (NYCE).

He alleged that the price hike of cotton is primarily due to the speculative trades by multi-national companies holding the stocks and Indian speculators indulging in money-making at the cost of the textile industry, The Hindu Business Line reported.

The request came after a trade group, Tirupur Exporters’ Association, asked the Indian government to remove cotton’s 11% import duty.

Fertilizer-maker Yara to stop buying potash from Belarus by April 1... Yara, a Norwegian fertilizer company, said it would wind down purchases of potash from Belarus by April 1 as international sanctions made it impossible to continue the trade. Yara buys an estimated 10% to 15% of annual output of state-owned Belaruskali, one of the world’s largest producers of potassium and primary foreign currency earner for Belarus.

Yara sources potash from nine suppliers globally, according to a company sustainability report filed last year. Beleruskali was Yara’s single biggest potash supplier. “As part of our risk management work, we continue to map alternative supply options to be able to respond to supply chain disruptions,” a company spokesperson said.

Thailand rejects allegations of ASF cover-up... Thailand denied accusations it has covered up an outbreak of African swine fever (ASF) after a university lab test conducted last month indicated a pet pig had died from the disease. For years, Thai authorities have denied a local outbreak of the disease that has swept through Europe and Asia in recent years and killed hundreds of millions of pigs.
Previously, authorities have attributed most farm pig deaths to another viral disease, porcine reproductive and respiratory syndrome (PRRS).

Speculation has grown in recent weeks that an ASF outbreak was decimating Thai hog herds, fueled by a sharp increase in pork prices due to lower domestic pig supplies. Authorities have started collecting blood samples from farm pigs and slaughterhouses in swine-raising provinces to look for the disease. This year, authorities anticipate a lower pig supply and suspended exports of live pigs until April 5.

Argentina’s strategy toward IMF deal hits a wall... Argentina’s insistence on five more years to run deficits and printing money puts the country on a collision course with the International Monetary Fund (IMF), which says the government needs to reduce the monetizing of its fiscal deficit and raise interest rates above inflation.

The Argentina finance minister’s optimistic plan predicts economic growth at almost double the rate of the current market consensus, which IMF shares. Inflation is forecast to reach only 33% in 2022, while many expect it to remain above 50%.

Without a strong rise in agricultural prices, “it’s not clear where growth is going to come from, absent a credible policy framework,” said Stuart Culverhouse, head of sovereign & fixed income research at Tellimer in London.

However, an IMF program is widely seen as Argentina’s only option to avoid economic meltdown. Failure to reach an agreement would trigger a default with the Paris Club of state lenders. With Argentina’s sovereign bonds in dollars yielding close to 20% across various maturities, the government already finds itself shut out of international debt markets. Printing more money would be one of the last options to fund the deficit. Last week, Argentina’s central bank raised rates on its 28-day note by 200 basis points to 40%, an implied 48.3% annualized rate and still below inflation forecasts of 50% and beyond.

Analysts agree that a deal is likely to happen eventually.