Evening Report | May 19, 2023

Check our advice monitor on ProFarmer.com for updates to our marketing plan.

Your Pro Farmer newsletter is now available... Grain and soy markets faced heavy fund-led selling pressure as the Black Sea grain deal was extended, export demand remained poor and the daily price charts turned even more bearish. With corn and soybean planting remaining ahead of average and a generally favorable extended weather forecast, the price slide could continue without a bullish catalyst to excite traders. In Washington, much of the focus remains on the debt limit. That needs to be cleared up before the congressional Ag panels can start work on a new farm bill. On the policy front, EPA sent its final RFS proposals to the Office of Management and Budget, with a June 14 deadline for finalizing those figures. One the keys will be whether EPA adjusted upward the levels for biodiesel and renewable diesel from its proposed levels, which were lower than expected in the original proposal. Our page 4 feature this week is a look at what might lie ahead for the U.S. pork industry and agriculture in general in the aftermath of the Supreme Court upholding California’s Proposition 12 rule. We cover all of these items and much more in this week’s newsletter, which you can access here.

Ukraine would only allow Russian ammonia exports if gets expanded grain deal... Ukraine would consider allowing Russian ammonia to transit its territory for export on condition the newly renewed Black Sea grain deal is expanded to include more Ukrainian ports and a wider range of commodities, a government source told Reuters. The source said the language of the current deal does not cover the transit of Russian ammonia across Ukraine.

Russia has pressed for ammonia supplies to resume through a pipeline from Russia’s Togliati to the Black Sea port of Pivdennyi, near Odesa, which is designed to pump up to 2.5 MMT of ammonia annually.

Neutral Cattle on Feed Report... USDA estimated there were 11.608 million head of cattle in large feedlots (1,000-plus head) as of May 1, down 414,000 head (3.4%) from year-ago, which was virtually in line with pre-report expectations. April placements declined 4.2%, while marketings fell 10.1%, with both figures slightly lower than the average pre-report estimates.

Placements declined in all categories except heavyweights (1,000-plus lbs.), which were steady with last year. Placements declined 1.4% for lightweights (under 600 lbs.), 9.3% for 6-weights, 1.2% for 7-weights, 7.3% for 8-weights and 2.4% for 9-weights. Placements fell 20,000 head in Colorado, 10,000 head in Kansas, 20,000 head in Nebraska and 25,000 head in Texas. “Other states” placed 1,000 fewer head of cattle into feedlots during April.

On the surface, the report data is neutral. But the underlying numbers are bullish, as this marked the eighth straight month of year-over-year declines in feedlot inventories.

White House drops plan for renewable natural gas credits – for now... The Biden administration has dropped, for now, a plan that would have awarded automakers credits for using renewable natural gas to power electric vehicles. That proposal was excluded from drafted regulation setting biofuel-blending quotas for the next three years that is undergoing final review at the Office of Management and Budget, according to a report from Bloomberg, citing people familiar with the matter.

Under the proposal, carmakers would be folded into the 18-year-old Renewable Fuel Standard that requires refiners to blend biofuels into gasoline and diesel. Electric vehicle manufacturers would be able to claim new, tradeable credits in exchange for using electricity generated from natural gas harvested from landfills or farms.

USDA announces farmer aid programs... USDA has announced a series of financial assistance programs for farmers, totaling several billion dollars.

• Emergency Relief for Crop and Livestock Losses: USDA is allocating $3.7 billion to compensate for disaster-related losses in 2022. The funding comes from the 2023 Disaster Relief Supplemental Appropriations Act and will be delivered under the Emergency Relief Program (ERP) and Emergency Livestock Relief Program (ELRP). Payments for crop losses will be determined using insurance data, while livestock relief will focus on increased supplemental feed costs due to grazing losses from wildfire or drought.
• Regional Conservation Partnership Program: $500 million is being made available for the Regional Conservation Partnership Program (RCPP). This program involves partnerships with private organizations to support projects that promote conservation and sustainable use of natural resources. Priority will be given to climate-related projects, urban agriculture projects, and initiatives that benefit underserved farmers and ranchers.
• Organic Dairy Marketing Assistance Program: USDA has also launched a new program to help organic dairy producers deal with increased costs and market instability. The Organic Dairy Marketing Assistance Program (ODMAP) will provide $104 million to cover projected marketing costs in 2023, based on each producer's costs in 2022.

These aid efforts aim to mitigate the effects of natural disasters, promote conservation and sustainability, and support specific sectors like organic dairy that are facing unique challenges.

NCBA outlines its priorities for the 118th Congress... During a hearing with a House Ag subcommittee on Wednesday, Todd Wilkinson, President of the National Cattlemen’s Beef Association (NCBA), listed the following NCBA priorities:

• Pass the 2023 Farm Bill
• Nullify USDA’s Harmful Packers & Stockyards Rules
• Defend the Beef Checkoff
• Promote Animal Health and Disease Preparedness
• Correct the Record on Cattle’s Climate and Conservation Benefits
• Develop New and Existing Export Markets for U.S. Beef
• Reduce Regulatory Burdens for Cattle Producers
• Reauthorize Livestock Mandatory Reporting
• Expand Beef Processing Capacity

NCBA said these recommendations are to promote a robust and resilient cattle industry, supporting risk management, conservation, and health initiatives, while avoiding potential regulatory pitfalls.

Regarding the 2023 Farm Bill, NCBA is urging Congress to consider the following key elements:

1. Protect Animal Health: NCBA emphasizes the importance of tackling animal diseases that threaten the livestock industry. In this regard, it proposes:

• Mandatory funding for the National Animal Vaccine and Veterinary Countermeasures Bank (NAVVCB) at $153 million per year to boost response to disease outbreaks.
• Allocation of $70 million per year for the National Animal Disease Preparedness and Response Program (NADPRP) at USDA's Animal and Plant Health Inspection Service (APHIS).
• Providing $10 million per year in mandatory funding for the National Animal Health Laboratory Network (NAHLN), with additional authorization for appropriations of $45 million per year. This program helps in disease surveillance and diagnosis.

2. Promote Voluntary Conservation Programs: NCBA supports programs like the Environmental Quality Incentives Program (EQIP) and the Conservation Stewardship Program (CSP) that directly aid cattle producers in their conservation efforts. It calls for the reinstatement of the EQIP livestock-related set-aside removed by the Inflation Reduction Act. It also suggests amendments to the Conservation Reserve Program (CRP) to allow grazing as a mid-contract management tool and for emergency haying.

3. Reinforce Disaster Programs: NCBA recommends maintaining the Livestock Indemnity Program (LIP) and Livestock Forage Program (LFP) which help farmers and ranchers recover from catastrophes like natural disasters and livestock predation.

4. Support Risk Management Programs: NCBA advocates for continued backing for risk management programs like the Livestock Risk Protection (LRP) and Pasture, Rangeland, Forage (PRF) programs that help cattle producers handle market volatility. It advises Congress to resist attempts to withdraw support for these resources.

5. Oppose a Standalone Livestock Title: NCBA requests that Congress avoid creating a separate livestock title in the Farm Bill, fearing that such a move could introduce unwanted mandates or obstacles during conference negotiations.

Democrats rip GOP appropriations package for USDA, FDA... The fiscal year (FY) 2024 Agriculture, Rural Development, Food and Drug Administration, and Related Agencies spending plan has been cleared by the House Appropriations Agriculture Subcommittee. However, it faced criticism from Democrats, particularly Ranking Member Sanford Bishop of Georgia, who argued the spending reductions in the package would negatively affect healthcare and other services in rural areas. Bishop also condemned the withdrawal of $2 billion in aid intended for financially distressed farmers.

The proposed plan, which features a discretionary funding mark of $25.3 billion (2.1% below the FY 2023 mark), also includes $8 billion in rescissions from the FY 2022 budget reconciliation package and unspent Covid funds.

Bottom line: The spending plan will now proceed to the full panel and is expected to pass the House. But veteran congressional watchers say the focus should be on the Senate, which will eventually clear a bipartisan bill. Of note, House Republicans did not cut funding from the previously passed Inflation Reduction Act but instead cut from other areas, including rural electric funding.

GOP negotiator: Debt limit talks on ‘pause’... The group that has been meeting behind closed doors to try to agree on legislation to raise the nation’s borrowing cap broke off talks on Friday, at least temporarily. Proxies for House Speaker Kevin McCarthy (R-Calif.) and President Joe Biden have been meeting, with initial reports saying both sides wanted to reach an agreement by Monday. But Rep. Garret Graves (R-La.), one of McCarthy’s chief negotiators, told reporters after leaving a meeting at the Capitol on Friday morning things weren’t going well.

“We decided to press pause because it’s just not productive,” Graves said, adding he didn’t know yet if the negotiating team planned to meet again, a refrain other sources said was an overstatement. Graves said the House passed a “strong bill” to pair a debt limit increase with spending reduction measures, but the White House didn’t appear to be moving towards their position. “Until people are willing to have reasonable conversations about how you can actually move forward and do the right thing, we aren’t going to sit here and talk to ourselves,” Graves said in video posted on Twitter by a CBS reporter.

As any sensitive issue gets close to being resolved in Washington, twists and turns at the 11th hour are the rule, not the exception. Expect talks to continue after positioning, again, by both sides.

Some Fed officials are hawkish again... The case for a rate pause is unclear, Dallas Fed President Lorie Logan said, expressing disappointment in the lack of progress on inflation. The voting member added she has an open mind ahead of the June meeting as new data trickles in. While the Fed has made some progress on inflation, Logan said there’s still a long way to go.

St. Louis Fed’s Jim Bullard made similar points in an interview with the Financial Times. He was more direct, however, saying he would be inclined to raise interest rates further in June. (Bullard doesn't get a vote until 2025).

Meanwhile, Fed Governor Philip Jefferson said he’s watching for any delayed effects from past hikes. Jefferson said that “progress on inflation remains a challenge,” but didn’t indicate whether he would support a hike or a pause next month. Several other Fed officials have appeared in public since late last week. Fed Gov. Michelle Bowman and Cleveland Fed President Loretta Mester argued the Fed hasn’t made enough progress on inflation to stop now. Minneapolis Fed President Neel Kashkari said the Fed has “more work to do on our end.”

Bottom line: As Fed officials’ comments have shown, the June decision will be the most contentious in a long time.