Morning Comments – May 25

Headlines

  • Private exporters reported to the U.S. Department of Agriculture export sales of 20,000 metric tons of soybean oil for delivery to unknown destinations during the 2017/2018 marketing year.

Brazil Ends Trucker Strike

  • Brazil’s government struck a deal with truck drivers on Thursday to suspend a four-day protest. Truckers agreed to immediately suspend the strike for 15 days

  • Under the deal, a 10% price cut for diesel will be extended to 30 days. But normalization of trucking & logistics will take weeks to recover because of the magnitude of disruptions across numerous industries.

  • At Paranaguá port, Brazil’s second-largest grain export hub, the protests impeded 1,000 trucks from delivering goods over two days, Brazil’s largest cooperative Coamo Agroindustrial said on Thursday.

South America Crops Continue to Slip

  • Brazil’s AgroConsult pegged the 2nd season corn crop at 57 MMT, down from their previous estimate of 60 MMT based on their ongoing crop tour. If realized it would be a 10 MMT shortfall relative to last year.

  • They also estimate the country will only export 24 MMT of corn, a far cry from USDA’s estimate of 30 MMT.

  • In Argentina, the Ag Ministry lowered their latest old-crop soybean production estimate to 36.6 from 37.2 MMT and off from USDA at 39.0

Argentina Government May Renege on Export Taxes

  • In a political bait-and-switch, Argentina may halt the gradual lowering of soybean export taxes to bail out the government ballooning budget woes.

  • President Macri was elected in 2016 on a populist support from ag by promising to gradually reduce the 35% export tax on soybeans and outright elimination of the tax on corn and wheat. The soybean tax currently stands at 27.5% and was expected to be eliminated by the end of 2019.

  • It’s not clear that the budget coffers would benefit much in the short-run as the country has been crippled from drought creating limited excess supplies to export.

  • Nonetheless, if the tax policies are rolled back it will likely lead to aggressive selling by Argentina farmers to front-run any new enacted taxes

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