Good morning. Below is a roundup of last week's developments in the agriculture sector.
Rising Demand for Biofuels
The US biofuel industry is revving up, fueled by a surge in feedstock consumption and growing production capacity. According to a recent report by Argus, usage of key feedstocks like canola oil, soybean oil, and distillers corn oil all saw significant increases in November compared to both the previous year and month.
Canola oil shines: Consumption more than doubling year-over-year, indicating its rising popularity as a biofuel source. Additionally, tallow and yellow grease, often considered "waste" products, are finding new life as feedstocks, with their consumption witnessing substantial growth compared to 2022.
Renewable fuel capacity expands: The increased appetite for feedstocks aligns with the expanding production capacity of renewable fuels. The industry saw a 40% year-over-year jump in its ability to produce renewable diesel, heating oil, jet fuel, naphtha, and gasoline. (source: Argus)
Argentina's Farms: Heatwave Followed by Scattered Rains
Argentina's agricultural regions are bracing for a heat wave in the coming week, which will precede rains benefiting the northern, western, and southern areas but sparing the central-eastern zones, according to the Buenos Aires grains exchange.
Rain distribution: Northern, western & southern regions to receive moderate to abundant rainfall, but central & eastern areas largely missed.
Concerns: This comes after last year's drought and recent optimistic harvest forecasts, prompting worries about potential impact on crop yields if rains don't reach key areas. The grains exchange cautions that the recent optimistic production forecasts for corn and soy are contingent on continued favorable rain patterns in the forthcoming weeks. (source: Reuters)
Mexico to See Lower Corn and Wheat Harvest, Boost Imports
Dry weather conditions in Mexico are expected to lead to a reduction in corn and wheat output for the 2023-24 marketing year, as reported by the Global Agricultural Information Network of the US Department of Agriculture's Foreign Agricultural Service.
Corn: Production forecast down 9% to 25.5 million tonnes, compared to 28.1 million tonnes last year.
Wheat: Production forecast down 3% to 3.5 million tonnes.
Imports: Corn imports expected to increase slightly (1%) to meet demand, while wheat imports projected to rise 4% to 5.5 million tonnes.
Due to trade advantages, the US is expected to supply nearly all of Mexico's grain imports in the coming year. (source: World Grain)
Egypt Breathes Easy on Wheat as Prices Dip, Skips Hedging Strategy
Egypt has decided to hold off on its plan to hedge wheat imports for the upcoming year, opting for a less risky approach as global wheat prices simmer down. In an interview with Bloomberg, the country's Supply Minister pointed out that prices are nearing pre-pandemic and pre-war levels, making hedging unnecessary in the current market climate. Hedging was initially contemplated to protect the nation from potential price increases.
Confidence in stockpiles: This decision comes despite Egypt's status as a major wheat importer, where the grain underpins heavily subsidized bread programs for a large portion of its population. However, with sufficient stockpiles (covering 4 months) and stable annual imports, the government feels confident navigating the market without hedging.
Beyond Wheat: This news also bodes well for other essential goods in Egypt's pantry. The country boasts reserves of vegetable oil and sugar that last for 5 months, offering some comfort in a world often fraught with supply chain uncertainties. (source: Bloomberg)