Evening Report | July 12, 2023

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

Livestock producers: Extend corn-for-feed, meal coverage... The corn and soymeal markets had a bearish reaction to USDA’s report data. We recommend livestock producers use the price setback to cover remaining July feed needs in the cash market. You were hand-to-mouth on corn-for-feed needs and had half of your meal needs for both July and August previously covered in cash. Be prepared to use additional price pressure to further extend coverage.  

Bearish reaction to USDA’s reports... Grain and soy futures traded sharply lower in reaction to USDA’s July crop reports. Soybeans faced pressure as old-crop ending stocks increased more than anticipated and USDA didn’t cut new-crop carryover as much as expected. For wheat, both new-crop ending stocks and the first all-wheat crop estimate came in higher than traders expected. Corn sold off despite the report data being generally neutral. The reaction to the report data likely put in a short-term top for the soybean market and weakened the technical outlook for both corn and wheat. Click here to view the full report details.

UN asks Russia to extend Black Sea grain deal in exchange for concessions... United Nations Secretary-General Antonio Guterres has proposed to Russian President Vladimir Putin that he extend the Black Sea grain deal in exchange for connecting a subsidiary of Russia’s agricultural bank (Rosselkhozbank) to the SWIFT international payment system, sources told Reuters. Rosselkhozbank was cut off from SWIFT by the European Union in June 2022. However, the EU is considering connecting a subsidiary of Rosselkhozbank to SWIFT to allow only grain and fertilizer transactions, three sources familiar with discussions told Reuters.

Guterres has proposed to Putin that Russia allow the Black Sea grain deal to continue for several months, giving the EU time to connect the subsidiary to SWIFT, two sources said.

“The objective is to remove hurdles affecting financial transactions through the Russian Agricultural Bank, a major concern expressed by the Russian Federation, and simultaneously allow for the continued flow of Ukrainian grain through the Black Sea,” UN spokesman Stephane Dujarric said, without providing any details of the reported proposal.

USDA raises pork export forecast, trims outlook for beef shipments... USDA trimmed its pork production forecast 5 million lbs., though output is still anticipated to rise 1.4% from last year. For 2024, USDA forecasts a modest 0.1% increase in pork production. USDA raised its pork export outlook 110 million lbs. and now expects a 9.0% increase from last year. The 2024 pork export projection was increased 60 million lbs. and now reflects a 1.0% increase from this year.

USDA raised its 2023 beef production forecast 75 million lbs. from last month, though it is still expected to fall 4.0% from last year. USDA cut its beef production projection for next year and it is now expected to fall another 9.0%. USDA’s 2023 beef export outlook was trimmed 10 million lbs. and is now expected to fall 9.3% from last year. USDA kept its 2024 beef export forecast unchanged this month, though it still calls for another 8.2% decline.

U.S. consumer prices continue to ease... The U.S. consumer price index (CPI) rose 3.0% annually during June, according to the Labor Department, the smallest year-over-year gain since March 2021. Core CPI, which excludes food and energy costs, slowed to a 4.8% annual gain.

Despite easing inflation, the Fed is widely expected to raise interest rates 25 basis points later this month, though odds of an any increase beyond that are now down to around 25%.

USDA to enhance data on GHG emissions, carbon sequestration... USDA is set to spend $300 million on enhancing the measurement, monitoring, reporting and verification of greenhouse gas emissions and carbon sequestration within climate-smart agriculture and forestry. This decision aims to encourage more confidence and participation from the private sector. The funding for this venture will be sourced from the Inflation Reduction Act.

The program, part of a broader Federal Strategy for Greenhouse Gas Measurement and Monitoring within the agriculture and forestry sectors, will be open for public comment.

The strategy, developed by several federal agencies including USDA, EPA, NASA and more, centers on five areas, involving enhanced greenhouse gas and soil carbon monitoring, research alignment and advancement, usage of updated models and tools and quick and accurate conservation data collection through remote sensing data. USDA asserts that this will result in more precise estimates and confidence in these figures, driving continuous improvement in their climate-smart agriculture and forestry initiatives.

USDA has also outlined seven key areas of focus on climate and carbon sequestration, which underpin the federal strategy and were constructed based on substantial input from stakeholders. These key areas range from advancing the Soil Carbon Monitoring and Research Network to strengthening the USDA’s Greenhouse Gas Inventory and Assessment Program.

To discuss these plans further, a webinar for stakeholders and technical experts has been scheduled for July 21 at noon CT.

Ag water act introduced... Senators Michael Bennet (Colo.), Jerry Moran (Kan.) and Martin Heinrich (N.M.) introduced the Voluntary Groundwater Conservation Act, legislation aiming to provide family farmers and ranchers with more flexibility to protect groundwater resources while maintaining their agricultural lands. This act will establish a voluntary groundwater easement program within USDA’s Natural Resource Conservation Service (NRCS). It will take inspiration from Colorado Open Lands, which pioneered the first groundwater easement in 2022 for the Rio Grande River Basin.

The Act aims to:

• Set up a Groundwater Conservation Easement Program at USDA, encouraging voluntary reductions in groundwater use on agricultural land to meet local, regional, or state groundwater goals.
• Enable the NRCS to refund transaction costs up to 5% and mandate advance payment for limited resource producers for covering these expenses.
• Provide farmers with long-term management flexibility to continue farming, giving them the liberty to decide how to reduce water use, as long as they meet their annual commitment to conserve.
• Guarantee fair compensation for farmers, basing the payment on the market value of the water right instead of a per-acre payment.
• Proposes that easement funds should not affect a farm's adjusted gross income, and producers earning an adjusted gross income above $900,000 should be eligible for a waiver to partake in groundwater conservation easements from the secretary.

Sen. Bennet emphasized that this legislation draws from the experiences of Colorado’s San Luis Valley inhabitants who first implemented voluntary easements to uphold groundwater conservation, thus sustaining local agriculture and wildlife habitats. This provides a fresh instrument for farmers to voluntarily minimize groundwater usage while continuing with farming operations.