What We're Watching This Week - Dec. 5, 2016

Major Crop Reports Are on Deck This Week

COMMODITIES

StatCan, Conab, and USDA are scheduled to release major crop updates on Tuesday, Wednesday, and Thursday, respectively. Canadians have been concerned with the quality of durum wheat and lentil crops across Western Canada. Average Canadian dry bean prices are also expected to increase in 2017, as overall North American production is down. Further south, the market is anticipating Conab’s latest soybean production forecast for Brazil. Lastly, we will be watching the USDA adjust global crop and US livestock production estimates when they release the December WASDE report.

Before Conab releases its latest soybean production forecast for Brazil, here are its historical balance sheets. (2016 forecasts)

Hog Producers Face a Seasonal Decision

FOOD

With lean hog futures in Chicago up roughly 25% since October, we’re eager to see how American hog producers balance their seasonal production decisions with recent US export strength and rising domestic wholesale prices. On a seasonal basis, producers should start to ratchet back production following the holidays. Despite the fact that American monthly hog production has been roughly 3% higher over the past month, the composite wholesale price is still up around 1%.

Producers typically scale back hog slaughter quantities after the holidays.

Putting Italian Food Exports Into Perspective

POLICIES

Following Italy’s national referendum on Sunday, we used Gro to take a closer look at Italy’s food and agriculture sector. The European press doesn’t see a high probability of “Italexit” (or “Quitaly”), but if we have learned anything in 2016 it is to prepare for the unexpected. We found that while Italy’s food exports as a percentage of total merchandise exports have fallen roughly by half since 1962, food exports relative to total merchandise exports have risen since the financial crisis. What’s more, Italy’s food exports as a percentage of merchandise exports were moderately higher than those of the United Kingdom. On the other hand, Italy and the UK have a similar import profile based on this measure. Of course, there are many different ways to analyze trade data within Gro, but this a first look before the markets digest the political news from Europe this weekend.

Italy's food exports typically make up a slightly larger share of % of merchandise exports than the same measure for the UK.