India's Ethanol Demand Upends Corn Trade

Plus: US corn farmers brace for losses, Ukrainian wheat faces drought, and Cargill profits tumble.

Grains & Oilseeds

Drought threatens 2025 Ukrainian wheat harvest

Ukrainian farmers have begun planting winter grains for the 2025 harvest, but extremely dry conditions across key growing regions are raising concerns about the upcoming crop. State weather forecasters warn that the severe drought intensified in August across southern, central, and eastern regions, impacting 60-70% of the country's fields. While farmers remain hopeful for a wet winter and favorable spring conditions, the drought poses a significant risk to production. Ukraine, a major global supplier of wheat, has only planted 27,700 hectares of winter wheat to date. Winter wheat typically accounts for 95% of Ukraine’s total wheat production. 

US corn farmers face mounting losses as prices fall

A decline in corn prices is projected to push US farmers deeper into the red for the 2024-25 season, with per-acre losses estimated at $111.86 before accounting for government assistance, according to analysis by Argus Media. New-crop corn futures have tumbled more than 10% since May, eroding sales revenue projections by $1.77 billion. Record yield estimates and above-average inventories have weighed on prices, forcing farmers to liquidate supplies at a loss. While lower acreage in other major corn-producing countries like Argentina and Brazil could offer some support, the outlook for US corn farmers remains bleak. 

Softs

Cocoa prices plummet as West African weather improves

Cocoa prices experienced a sharp two-day decline as beneficial rains in West Africa alleviated concerns over drought-stricken crops. December ICE NY cocoa futures plunged 5.34% on Wednesday, while December ICE London cocoa #7 futures tumbled 3.61%, reaching a 6-1/2 month low. Improved crop conditions in Ivory Coast and Ghana, the world's leading cocoa producers, have eased supply fears that drove prices to multi-month highs last week. The recent rainfall is expected to bolster crop yields in the region. 

Major sugar producer hedges against Brazil fire

MSM Malaysia Holdings Bhd, a leading sugar producer, has assured investors that it is unaffected by the recent sugarcane crop fire in Brazil. The company, which sources 60% of its raw sugar imports from Brazil, proactively hedged all of its 2024 raw sugar requirements in the wholesale segment. This strategy insulates MSM from the recent price volatility in the global sugar market. 

Biofuel

India's ethanol drive turns corn exporter into a net importer

India's ambitious ethanol blending program has transformed the country from a major corn exporter to a net importer for the first time in decades. The government's push to boost ethanol production from corn, coupled with drought-reduced sugarcane availability, has fueled a surge in domestic corn prices, squeezing poultry producers and disrupting global supply chains. India, traditionally an exporter of 2 to 4 million metric tons of corn, is projected to import a record 1 million tons in 2024, primarily from Myanmar and Ukraine, while exports are expected to plummet to 450,000 tons. 

GM to launch ethanol-capable hybrid vehicles in Brazil

General Motors has announced plans to begin production of its first-ever hybrid-flex vehicles in Brazil, capable of running on 100% ethanol or gasoline, in addition to battery power. The move comes as major automakers increasingly target the Brazilian market, where most cars are already compatible with 100% biofuel due to the country's robust ethanol industry. GM will produce two hybrid-flex models at its Sao Paulo factories, with the first expected to hit the market in 2025. This initiative is part of GM's 7 billion real ($1.42 billion) investment plan for Brazil. 

Agribusiness & Finance

Cargill’s profits slashed as commodity boom fades

Cargill, the largest privately held company in the US, has reported a sharp decline in profits as the boom in agricultural commodity prices subsides, as reported by Bloomberg. The agricultural trading giant's net profit for the fiscal year ending May 2024 plummeted to $2.48 billion, down from a record $6.7 billion in the previous year. Lower wholesale prices for wheat, corn, and soybeans, while beneficial for consumers and central banks battling inflation, have significantly eroded Cargill's earnings. The company is implementing a restructuring plan, streamlining its business units and cutting costs, to navigate the increasingly challenging market environment. 

EU under pressure to overhaul €387 billion farm subsidy program

The European Union is facing calls for a major overhaul of its Common Agricultural Policy (CAP), with a proposed shift from land-based subsidies to an income-based support system. The recommendations come in response to widespread farmer protests and aim to address the multiple crises afflicting the sector, including climate change, inflation, and competition from low-cost producers. The proposed reforms, which would significantly reshape the €387 billion CAP, are expected to face strong opposition from the powerful agricultural lobby. Source: Financial Times

Louis Dreyfus receives approval for Namoi Cotton takeover

Louis Dreyfus has secured approval from Australia's Foreign Investment Review Board for its proposed acquisition of Namoi Cotton, clearing a major hurdle in the takeover bid. The approval follows Louis Dreyfus' agreement to address competition concerns by divesting its stake in cotton lint classing service ProClass Pty Ltd. and terminating its joint venture with WANT Cotton Pty Ltd. The acquisition, if successful, would significantly expand Louis Dreyfus' presence in the Australian cotton industry. Source: BNN Bloomberg

(Sources: Reuters, Argus Media, Barchart, The Edge, Bloomberg, Financial Times)

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