Evening Report | August 8, 2023

Evening Report
Evening Report
(Pro Farmer)

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

 

UAC warns of reduced Ukrainian wheat quality... The share of milling wheat in Ukraine’s 2023 wheat crop could fall to 40% from 70% in previous years because of poor weather, the Ukrainian Agrarian Council (UAC) said, warning of “problematic” global food-grade supplies.

UAC said, “The key problem with the new harvest was its poor quality. Due to weather conditions, the grain has a low protein content.” The council added that other European states also had a large volumes of feed wheat and 2023-24 “will be problematic with the supply of food grains worldwide.”

 

Ukraine grain crop about the same size as last year... Ukraine’s 2023 grain crop may reach 50 MMT to 55 MMT compared to 53 MMT in 2022, first deputy agriculture minister Taras Vysotskiy said. The ministry previously said grain production would be about 46 MMT. The increase was drive by higher-than-expected yields.

Vysotskiy said Ukraine’s domestic consumption would be about 18 MMT, implying the rest could be exported, without giving an official export forecast.

 

Ukraine plans transshipments via Danube River amid backlogs... Ukraine has started work on alternative export opportunities for its grain crop by organizing transshipments near the mouth of the Danube River, ports authorities said. The port authority said the Ukrainian had adopted a resolution to formally expand the boundaries of one of the country’s Danube ports.

“The document was supplemented with new geographical coordinates for the location of anchorages near the mouth of the Bystre, to organize roadside transshipment of grain cargo from the sea ports of Ust-Dunaisk and Izmail to Panamax vessels,” the authority said.

This would make it possible to transship cargo from one vessel to another when vessels are anchored rather than at the port berth.

Dozens of ships are backed up around critical Danube arteries close to Ukraine’s river gateways after Russian drone attacks on the country’s ports of Izmail and Reniports last week. At least 30 ships had dropped anchor around Musura Bay in the Black Sea, which leads into a channel that links up with Izmail further along the waterway, tracking data from analytics company MarineTraffic showed on Tuesday. There were at least 20 ships anchored leading up to Izmail.

In addition, there were at least 20 commercial ships waiting close to the Romanian port of Constanta, the MarineTraffic data showed.

Meanwhile, some marine insurers have started to restrict the amount of cover they are providing for Danube shipments after pausing insurance provisions for Ukraine ports that were part of the grain corridor initiative, insurance sources said.

 

Putin clears way for ag trade in rubles... Russian President Vladimir Putin on Tuesday signed a decree enabling buyers of Russian farm exports to pay in rubles rather than dollars, a move Moscow casts as a tool to alleviate Western sanctions pressure on “friendly” countries. Moscow has long demanded its state agricultural bank be reconnected to the international SWIFT payment network from which it was shut off after Russia invaded Ukraine last year. Its failure to get reinstated was one of the reasons Russia cited last month for exiting the Black Sea deal.

 

NASS to review small grain acreage data for August crop report... USDA’s National Agricultural Statistics Service (NASS) will review all available data, including survey data and the latest information from USDA’s Farm Service Agency and Risk Management Agency, for planted and harvested acreage for barley, oats, durum wheat, other spring wheat and winter wheat. If the data review justifies any changes, NASS will publish updated planted and harvested acreage estimates in the Aug. 11 Crop Production Report.

NASS will review available data for chickpeas, corn, cotton, dry edible peas, lentils, peanuts, rice, sorghum, soybeans and sugarbeets in September; and canola, dry edible beans and sunflowers in October.

 

Ag trade deficit widens in June... The U.S. exported $12.799 billion of ag goods during June against imports of $15.955 billion, resulting in an ag trade deficit of $3.156 billion. Through the first nine months of fiscal year (FY) 2023, ag exports stood at $141.365 billion against imports of $148.180 billion for a deficit of $6.815 billion. USDA forecasts FY 2023 ag exports at $181.0 billion and imports at $198.0 billion, which would imply a deficit of $17.0 billion.

 

U.S. trade deficit narrows in June... The U.S. trade deficit contracted 4.1% to $65.5 billion in June, as imports dropped to the lowest level in more than a year-and-a-half. Imports of goods and services declined 1.0% to $313.0 billion, the lowest level since November 2021. Goods imports tumbled 1.2% to $253.3 billion, the lowest level since October 2021. Exports dipped 0.1% to $247.5 billion. Goods exports also slipped 0.1% to $165.1 billion.
 

Update on new farm bill developments... Pro Farmer Washington Policy Analyst Jim Wiesemeyer provides the following update on key farm bill issues.

  • No one thinks a new farm bill will come by Sept. 30, the end of fiscal year 2023 – when some farm bill provisions expire.
  • Most think Congress will not push for a farm bill extension until later this year but prior to Jan. 1 to avoid what’s dubbed “the dairy cliff.” Eventually, most see at least a one-year extension.
  • “This farm bill is not going to be about the policy, this farm bill is going to be about the politics,” said Rep. Kat Cammack (R-Fla.) during an address before a sugar industry meeting in Napa Valley. She predicted the debate over the farm bill “will be the biggest political dog fight in modern history.” She revealed she told House Ag Chair Glenn “GT” Thompson (R-Pa.) the farm bill needs to be “managed as a national security package,” or it will get picked apart. “Food security is national security,” she said.
  • Democrats on the House Agriculture Committee issued a stern warning that meddling with the Supplemental Nutrition Assistance Program (SNAP) by Republican leaders could lead to the defeat of the new farm bill. They made reference to floor votes, which delayed the passing of the 2014 and 2018 farm bills. This recent commentary is the second warning the committee’s Democrats have offered against making further cuts in food stamps after amendments were made to the debt limit deal in June. The 25 Democrats urged caution in a letter to the House Speaker, Kevin McCarthy (R-Calif.), explaining the potential pitfalls of leadership intervening with the intricacies of the farm bill, especially when the issue concerns SNAP, a crucial support system for America's working poor and elderly populations. They also reminded McCarthy of the upheaval in rural communities due to the initial failures of the 2014 and 2018 House versions of the farm bill.
  • Some but not all commodities may get a boost in reference prices. Some sources signal rice could get a bump of at least 20%.
  • Sources are split on any update to base acres. Most say this issue will be duked out once the farm bill is marked up in the House and Senate Ag panels. Compromises are possible, with some signaling grassland acres will not get a base, thereby decreasing the acres getting potential farm program payments. Also, there may be a funding level cap on updating some base acres. There appears to be widespread support for getting base acres for new and beginning farmers.
  • Regarding payment limits, eventual farm bill text could increase the pay caps relative to the levels seen in Covid-related payments.

 

Phillips 66, ADM in talks on biofuels joint venture... U.S. oil refiner Phillips 66 and grain trader Archer-Daniels-Midland are discussing a biofuels joint venture with an aim toward producing lower-carbon jet fuel, three people familiar with the matter told Reuters. The two companies are discussing putting ADM’s dry corn mill operations into a venture that would convert grain-based alcohol to jet fuel, the people said.

 

Smithfield closing 35 hog units in Missouri... Smithfield Foods, the world’s biggest pork processor, is permanently closing 35 hog farm sites in Missouri and laying off 92 employees in October. Murphy-Brown LLC, a division of Smithfield Foods, is “reducing its hog farming operations” across the state and “must reduce its workforce accordingly,” the company said in the notice. The notice to the state’s Department of Higher Education and Workforce Development, dated Aug. 2, identified 35 hog farm operation sites. They included 13 sites in Newtown, Missouri; 12 in Lucerne, Missouri; and 10 in Princeton, Missouri.

 

ERP Phase 2 sign up ended July 14... USDA provided 30 days for county offices to clean up any producers that may have come in at the last minute and were put on registers due to workload. That signals Aug. 11 to get those loaded. The messaging provided on payout is late summer... but note summer truly doesn’t end until September.

 

Moody’s downgrades some banks... Credit ratings agency Moody’s has downgraded the credit ratings of numerous small and mid-sized U.S. banks due to mounting concerns regarding the U.S. banking sector. Major lenders, including Bank of New York Mellon, U.S. Bancorp, State Street, Truist Financial, Cullen/Frost Bankers and Northern Trust, have also been placed under review with the potential for future downgrades. Furthermore, Moody’s modified its outlook to negative for 11 banks such as Capital One, Citizens Financial and Fifth Third Bancorp. The agency expressed warnings that under particular circumstances, these banks may still be vulnerable to sudden market losses or diminished consumer confidence, especially in an environment with high interest rates.

 

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