Evening Report | December 9, 2024

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Modest changes expected in USDA’s December crop reports... USDA will update its cotton production estimate in Tuesday’s Crop Production Report. There will be no updates to corn and soybean production this month. Analysts expect USDA to mildly reduce its cotton production forecast. Modest changes are also expected to ending stocks for corn, soybeans, wheat and cotton. The following pre-report expectations are from Reuters; Bloomberg for cotton.

Excess moisture to prevail for at least a week in southern Brazil... Excess rains fell through central Parana, Santa Catarina, northern Rio Grande do Sul and far southern Sao Paulo, Brazil, during the weekend. A short-term bout of drying is expected Tuesday into Thursday before more rain falls across much of the same region, according to World Weather Inc. Some crop damage is expected. Other areas of Brazil are expected to receive scatters showers this week.

Russian analysts say winter crops may not be in as poor condition as data suggests... The condition of Russian winter crops may not be as bad as data suggests as those figures do not adjust for the fact that many plants sprout later due to climate change, leading Russian agriculture analysts said. Data from the state weather forecasting agency last week indicated that over 37% of winter crops are in poor condition or have not sprouted due to low moisture levels.
“Crops in parts of the South were still vegetating in late November this year, something that was not typical a decade ago. This may not have been fully captured in the agency’s assessment,” SovEcon said. However, SovEcon said it was likely to slightly downgrade its 2025 wheat production forecast of 81.6 MMT.
The head of IKAR consultancy, Dmitry Rylko, said crops in an early sprouting stage with one leaf per sprout in November were classified as being in a “poor state” by the state weather agency, while they had a good chance of surviving the winter. “Farmers like this stage of crop development, as it is quite conducive to overwintering. However, the weather forecasting agency classifies such crops as ‘in poor condition,’” Rylko said. According to IKAR’s data, nearly all winter crops in the European part of Russia were in the one-leaf sprouting stage.

Another HPAI case in northwest Iowa... The Iowa Department of Agriculture and USDA announced highly pathogenic avian influenza (HPAI) in a commercial layer flock in Sioux County. This is Iowa’s sixth detection of HPAI in poultry this year and the third since last Friday.

EU, Mercosur bloc finalize trade deal... The European Union and South America’s Mercosur bloc finalized a free trade agreement last Friday after 25 years of negotiations. The deal still faces a lengthy process to be ratified and go into effect, which could take years. It could get blocked with France a staunch opponent, in part over fears of increased South American farm goods arriving in Europe.
South American farmers and exporters are keen to have greater access to the huge European market. However, fears that environmental clauses will limit trade and opposition from some EU countries to the agreement have dampened expectations.
Among the European demands are limits on the use of genetically modified seeds and deforestation, which have been common practices in South America in recent decades.
Argentina’s grain exporters and processors’ chamber CIARA-CEC said that while the agreement was a positive step for the bloc, its real impact would not be immediate. Products such as oil or biodiesel, will only see significant tariff reductions starting in seven to ten years, CIARA-CEC president Gustavo Idigoras told Reuters.

NY Fed: Consumers expect higher inflation, better economy... U.S. consumers were bracing last month for higher levels of inflation in coming years even amid expectations their personal financial situations would improve markedly, the New York Federal Reserve reported. Respondents to the regional Fed bank’s survey of consumer expectations in November see inflation a year from now at 3%, versus the 2.9% expected in October. Inflation in three years is seen at 2.6%, compared to 2.5% in the previous month. Inflation five years from now is expected to be 2.9%, compared to 2.8% in October.
While households’ view of their current financial situation was stable and their sense of access to credit little changed, year-ahead expectations of those respondents who see a better financial situation jumped to the highest level since February 2020. Meanwhile, the share of those who expect to be worse off dropped to the lowest level since March 2021.