Diplomatic Boycott of Olympics Under Consideration and Long-Range 45 Day Outlook
Update for November 19th, 2021
In an attempt to demonstrate disapproval of China’s treatment of the country’s Uyghur Muslim minority community President Biden is considering a diplomatic boycott of the 2022 Beijing Olympics. According to U.S. Secretary of State Anthony Blinkin the Uyghurs are being held in “internment camps” and he has referred to their treatment as “genocide”. Exact details regarding these camps are very difficult to verify but the reports indicate severe mistreatment and abuse of these individuals at the hands of the Chinese government. The mention of a possible diplomatic boycott adds nervousness to the market as to whether such an action would further strain the relationship between U.S./China and our export program.
While exports of corn are strong we are still roughly 20% behind the pace in 2020. The U.S. harvest season is now 91% complete with only a few eastern states running behind: Ohio, Indiana, Kentucky and Tennessee. With the 2021 harvest season wrapping up attention has turned to next year and the enormous increase in input prices. Many producers in the U.S. are finding anhydrous prices that have climbed in to the range of $1,200 to $1,400 which has some analysts forecasting that some corn acres will switch to other, less expensive crop options while others expect U.S. producers will stick with their typical crop rotations and we will not see a major shift. Also keep in mind that supply vs price may also play a role in those decisions a well. These large input prices are also present in Brazil which is beginning to raise questions whether or not producers in SAM will decide to plant as many 2nd season corn acres as usual this next year.
The EPA is proposing to allow U.S. oil refiners more time to prove compliance with the biofuel blending laws for 2020 and 2021. Of course, this news was viewed as negative to the corn market and prices were under pressure yesterday as a result. Several oil refiners have reduced or completely halted purchases of compliance credits (RINS) in hopes that the EPA will rule to ease the current requirements. This news isn’t expected to have much influence on current ethanol prices since currently margins are strong and production is ramped up but the long-term repercussions will hinge on the EPA’s final and lasting decision.
Bio-fuel producers are waiting on a decision from U.S. lawmakers regarding a new bill that would qualify soybean-oil based jet fuel for an unprecedented tax credit. Such a move would help attain the 20% lower aviation emissions goal by 2030 that the current administration has set. Biofuel groups argue that this is an impossible target without the use of ethanol and soybean oil.
President Biden and Chinese President Xi met virtually for several hours Monday. While trade was not the focus of the meeting there was some discussion on the subject, talk in the trade suggests that China may soon be back in the market for more U.S. soybeans. Some sales made last week were confirmed this week along with a flash sale of 132,000 mt of beans this week and rumors suggest they may be back for another 2-3 mmt in the next 6 weeks.
Weather conditions across central Brazil and Argentina have improved significantly following the dryness that started their spring planting season. Since then, rainfall has been plentiful, with more in the forecast and moisture deficits that were present in many of these widespread areas is now gone. Southern portions of Brazil have not been as fortunate and crop health in these areas is starting to suffer.
Looking at the U.S. long range forecast that will take us through December into early January we see that much of the country will have colder than normal temps and wet conditions through much of the period. The EURO model long range MJO forecast calls for mild temps until December 6th when forecasts indicate the weather will transition into a Phase 7 (shown in the illustration below) and could possibly even trend closer to the much colder Phase 8 (bottom right). If the MJO progresses as forecast, many northern states can expect to see several days of bitter cold temps during the period. Much of the rest of the country should also plan for lower-than-normal temps during most of December.
The map above gives us an idea what to expect for temps through January 3rd based on which MJO phase we are in at that particular time. The colorful map below indicates the amount of precipitation (snow) that is predicted to fall during the same time-frame. Keep in mind this is a long-range forecast which is much more difficult to predict but it gives us some idea of what the potential precipitation could be.