Miller Magazine Issue: 152 August 2022

MARKET ANALYSIS 101 MILLER / AUGUST 2022 Argentina's BAGE reported that the corn harvest is 67.2% complete, 8 points below the 5-year average. Production is still estimated at 49MMT. The Argentine government is considering creating a separate peso-dollar exchange rate for the country's agricultural sector to encourage farmers to sell, which is lagging behind last year's levels, local media reported. The unfavorable exchange rate has been cited as one reason for farmers' reluctance to sell despite high world commodity prices, with the official peso/dollar ex- change rate well below the unofficial market rate of close to 200 pesos to the dollar. Any such measure aimed at estab- lishing an intermediate exchange rate between the official rate and the black market rate has not yet been approved by the President. This marketing year, Brazil is set to harvest 87.3 MMT of its second corn crop, up 26.6 MMT from last year, Agrural said. The consulting firm has updated its crop forecasts as it estimates corn harvesting has reached a 62% completion rate in central and southern Brazil on Thursday. This is up from 52.7% the previous week and 39.3% at the same time the previous year. However, lower temperatures and some rain may increase grain moisture levels in the coming days, limiting fieldwork. Brazil's corn exports were 508,000 tons per week on Monday at 5.99MMT, up 2.67MMT or 125% from last year. Brazilian farmers are expected to increase their soybean and corn plantings by 500,000 ha to 1 million ha in the 2022/23 season, Datagro said. Brazil planted 41.6 million hectares of soybeans in 2021/22, up 6.1% from the previous year, and 22.5 million hectares of corn, up 10% from the previous year. Datagro believes that the prospect of Brazilian corn exports to China in 2023 should not affect producers' plans to expand acreage in the near future. Brazil's ag- riculture minister said the country is in discussions with the Chinese government to increase corn exports as early as 2022. The phytosanitary protocol signed by both countries requires monitoring of their entire pro- duction chain and logistics in accordance with Chinese specifications, making it impossible to export the current crop, which has not yet been done. Such actions speak of China's weak confidence in the possibility of exports from Ukrainian deep-sea ports. Recorded high temperatures have caused a sharp dete- rioration in the condition of EU corn crops, as estimates of crops in good-excellent condition decreased by -8 points compared to the previous week and are still at risk of see- ing degradation during the new update. Indeed, by July 18 French corn was 75% good to excel- lent, up from 83% the previous week and 90% last year. The EU Crop Monitoring Service has substantially low- ered its expectations for the bloc's spring crops in 2022 amid continued drier-than-usual conditions across much of the continent while ending winter crops have seen little change. at the EU level and remain close to the 5-year aver- age, according to a monthly update published on Monday. A July report published by the Agricultural Resources Monitor (MARS) shows that high temperatures continue to adversely affect key growing regions of the region. At the EU level, 2022 corn, sunflower and soybean yield forecasts are expected to decline by 8-9%, below the 5-year aver- age. Reservoirs are at very low levels and water availabil- ity for irrigation is not sufficient to support the demand for spring crops. In addition, the high temperatures currently observed and forecast until the end of July are likely to affect crops in the flowering stage, which will reduce flower fertility. The report notes that there is currently little that can be done to reverse the effects as hot and dry conditions con- tinue to prevail. Meanwhile, high temperatures may soon come to Ukraine, which will also negatively affect the corn crop. The USDA released its semi-annual cattle report, and numbers as of July 1 point to a downward trend. All cattle stocks were down 2%, with 98.8 million cattle and calves on farms in the US. Drought is likely a factor as producers elim- inate herds in the hardest-hit states. In addition, the num- ber of slaughtered animals has increased by 14.5% to date as the eradication continues. Overall, CattleFax predicts a 5 percent downward spiral in 2023. The US cattle popula- tion shows cyclical trends about every 10 years. Between 2007 and 2013, the industry saw a decline in the number of livestock, and stocks were low in 2014. The number of cattle reported usually means higher beef prices, prompting producers to expand. There are indications that the impact of the drought on the southern plains intensified sharply in July. The percentage of pastures and pastures in Oklahoma rated as poor and very poor jumped from 18% in early July to 34% in the July 18 Crop Progress Report. Cattle producers are rapidly downsizing as grazing conditions deteriorate rap- idly. Finisher volume at auctions in Oklahoma is up 24% year on year in the past two weeks. Similar processes in the EU may intensify due to the "green" policy. Therefore, the feed market, which depends on meat prices, is not so tense now. Things have gotten a little easier for global consump- tion as the Northern Hemisphere cleanup has cooled prices a bit. At the same time, supplies are still in a difficult position and can be nervous, even hysterical. Trade grain, not headlines!