Evening Report | June 30, 2023

Evening Report
Evening Report
(Pro Farmer)

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

 

Your Pro Farmer newsletter is now available... USDA’s June Acreage and Grain Stocks Reports have a history of surprises and major market moves – and this year was no different. We have a breakdown of planted acreage on News page 4 and June 1 grain stocks on News page 1. The best rains of the growing season fell across the Corn Belt over the past week but not all areas received needed precip and the drought footprint continued to spread and intensify. As of June 27, USDA estimated drought covered 70% of corn areas and 63% of soybean acres. The expanding drought is raising concerns about some irreparable damage to crops, prompting some to cut their yield forecasts. With the calendar flipping to July, weather will be even more critical for crop development, especially for corn. USDA’s Cattle on Feed Report showed the feedlot supply contracted versus year-ago levels for a 10th straight month. The Hogs & Pigs Report signaled producers aren’t ready to start expanding the hog herd just yet. We cover all of these items and much more in this week’s newsletter, which you can access here.

 

Independence Day schedule... Grain and livestock markets will be open on Monday, July 3 for a full trading session. Government offices will also be open on Monday. Pro Farmer will run an abbreviated report schedule: First Thing Today published around 8 a.m. CT; After the Bell with a short recap of the day’s price action out shortly after 1:30 p.m. CT; and Evening Report out in late afternoon. Markets and government offices will be closed Tuesday, July 4 for Independence Day.

 

Acreage shocker from USDA... USDA’s June corn plantings estimate jumped 2.1 million acres from March intentions and greatly exceeded traders’ expectations. The sharp increase in planted acres compared with March intentions gives corn some “cushion” to offset any yield reductions due to drought. USDA’s soybean plantings estimate plunged 4 million acres from March intentions. At 83.5 million acres, there’s no “cushion” for soybeans. Other crop acreage also shifted notably from what producers intended to plant in spring. The June 1 stocks for corn, soybeans and wheat all came in lower than expected, but that was overshadowed by the acreage data. Click here for report details.

 

Is smoke from wildfires affecting crop yields?... Mark Jeschke, Ph.D., Agronomy Manager for Corteva’s Pioneer, writes about this topic. Highlights:

  • Wildfires in western North America have gotten worse in recent years and will almost certainly continue to increase in frequency and intensity.
  • In the Corn Belt region, noticeable levels of smoke in the air during summer and fall have now become commonplace.
  • The potential impact of wildfire smoke on crop growth is complex and involves competing effects that can both enhance and suppress photosynthesis.
  • There are three primary factors associated with wildfire smoke with the capability to directly impact crops: reduced total solar radiation and elevated ozone, which are both negative, and increased diffusion of solar radiation, which could potentially be positive.
  • Based on what is known about the effects of reduced solar radiation and ozone on crops, it’s very plausible that wildfire smoke could cause reductions in crop yields.
  • The effects of wildfire smoke on both agricultural and natural ecosystems are likely to be an active area of research in coming years, as smoky days become more common.

 

Russia intensifying its control over global wheat market... Despite a tumultuous political climate internally and internationally, wheat has become a significant power broker for the Kremlin in the international food supply chain. It is estimated that one-fifth of all wheat exports in 2023-24, will originate from Russia, according to USDA. On the other hand, Ukraine is projected to experience a substantial decrease in its wheat export share, expected to shrink to around 5% — a halving from its pre-invasion levels.

 

New Jersey weighs new plan to ban pig crates... New Jersey legislators approved a ban on gestation cages commonly used to confine pregnant sows, sending the bill to Gov. Phil Murphy. This comes about 10 years after his predecessor, Chris Christie, vetoed a similar proposal. The new legislation would obligate the New Jersey Department of Agriculture to implement new rules requiring that pork sold in the state come from pigs born to mothers who had a minimum of 24 square feet of space and were able to lie down and turn around.

Although there aren't many large pig farms in New Jersey, animal rights advocates argue this move would better the conditions for the country’s six million breeding sows. Animal rights activists are hopeful Gov. Murphy will sign the legislation, which they assert has the backing of over 93% of New Jersey residents.

The approval of this bill follows a decision by the U.S. Supreme Court to uphold California’s Proposition 12, requiring all pork sold in the state to meet similar standards regarding the treatment of pregnant sows, despite challenges from the pork industry.

A nationwide ban on pig gestation crates is being proposed by Democrats in Congress, but has been met with opposition from House Republicans in Midwest states who have introduced a counter bill to repeal agricultural commerce restrictions. The Biden administration sided with pork producers in the legal challenge against California’s Proposition 12, claiming it disrupts the national pork market.

 

PCE retreats to 25-month low... The Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge, increased 0.1% in May but dropped to a 3.8% annual increase, marking the lowest point since April 2021. Core PCE, minus food and energy costs, rose 0.3%, with the 12-month core inflation rate at 4.6%.

In response to the PCE data, market projections for a quarter-point rate hike during the Fed’s June 25-26 meeting dipped from 89% to 87%. The probability for an additional quarter-point hike in September is now 21%, down from 27% previously.

 

Consumer sentiment hits highest level since January... U.S. consumer sentiment increased 5.2 points (8.8%) in June to a reading of 64.4, according to the University of Michigan’s Surveys of Consumers. Consumer sentiment jumped 28.8% from June 2022 to the highest level since January. Surveys of Consumers Director Joanne Hsu said, “Overall, this striking upswing reflects a recovery in attitudes generated by the early-month resolution of the debt ceiling crisis, along with more positive feelings over softening inflation. Views of their own personal financial situation were unchanged, however, as persistent high prices and expenses continued to weigh on consumers. Year-ahead inflation expectations receded for the second consecutive month, falling to 3.3% in June from 4.2% in May. The current reading is the lowest since March 2021. Long-run inflation expectations were little changed from May at 3.0%.”

 

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