Evening Report | August 10, 2023

Evening Report
Evening Report
(Pro Farmer)

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

 

Drought recedes in corn, soybean areas but expands for spring wheat... As of Aug. 8, the U.S. Drought Monitor showed 51% of the U.S. was covered by abnormal dryness/drought, unchanged from the previous week. USDA estimated drought (D1 or higher) covered 49% of corn production areas and 43% of soybeans, down eight percentage points each. Drought expanded to cover 52% of spring wheat areas (up eight points). USDA estimated 21% of cotton areas were covered by drought (up one point).

For the Midwest, the Drought Monitor noted: “Heavy rainfall (2 to 8 inches, locally more) during the first week of August prompted widespread improvements to Missouri, southern Iowa, Illinois and Indiana. A few 2-category improvements were justified across Missouri and Illinois where more than 6 inches of rainfall occurred and there was support from the short to long-term indicators. Despite widespread, heavy rainfall (more than 1.5) across western Iowa this past week, improvements were limited given the longer-term drought indicators and a reassessment can be made in subsequent weeks. Severe (D2) to extreme (D3) drought was expanded across Wisconsin based on continued dryness dating back to the late spring.”

For the Plains, the Drought Monitor stated: “Above-normal precipitation since the beginning of July and a lack of support from the long-term indicators led to a 1-category improvement to west-central Nebraska and bordering areas of Kansas. Recent beneficial precipitation also resulted in improving conditions across parts of the Dakotas and Wyoming. Short-term drought was expanded across northeast North Dakota, which remained to the north of the storm track.”

Click here for additional information and related maps.

 

Conab raises Brazilian corn crop, export forecasts... Brazilian crop estimating agency Conab raised its official Brazilian corn crop estimate 2.2 MMT to a record 129.9 MMT, as safrinha production is expected to be higher than previously forecast. Conab raised its 2022-23 Brazilian corn export forecast to 50 MMT, up 2 MMT from its prior outlook. The Brazilian soybean crop estimate inched up 100,000 MT to a record 154.6 MMT. Conab kept is 2022-23 Brazilian soybean export forecast at 95.6 MMT.

 

SovEcon raises Ukraine grain production, corn export forecasts... SovEcon increased its Ukraine grain production forecasts for corn (up 2 MMT to 25.9 MMT), wheat (up 1.3 MMT to 19.2 MMT) and barley (up 400,000 MT to 4.8 MMT) due to stronger-than-expected yields for wheat and barley, along with favorable weather for corn development. The Black Sea consulting firm raised its 2023-24 Ukrainian corn export forecast by 1 MMT to 19 MMT amid the bigger crop estimate. SovEcon also noted: “As the main buyer of Ukrainian grain, the EU could prioritize buying corn over other grains.” It left the 2023-24 wheat and barley export forecasts at 10 MMT and 1.3 MMT, respectively, “as shipments may be limited by infrastructure bottlenecks and recent attacks on the Danube ports.” SovEcon said it believes Danube ports could ship up to 2 MMT to 2.5 MMT of Ukrainian grains per month.

 

U.S. consumer inflation edges up in July... The U.S. consumer price index (CPI) rose 3.2% annually in July, up from a 3.0% increase in June – breaking a streak of 12 straight months of declines. Almost all of the monthly inflation increase came from shelter costs, which rose 7.7% from a year ago. Excluding food and energy costs, core prices rose 4.7% annually, down from a 4.8% increase the previous month.

Following are annual changes versus last year for key foods:

  • Ground beef: +3.1%
  • Bacon: -10.7%
  • Eggs: -13.7%
  • Fish & seafood: -0.8%
  • Bread: +9.5%
  • Pork: -3.7%
  • Milk: -3.0%
  • Rice: +6.5%
  • Chicken: -2.5%
  • Fats & Oils: +6.3%

 

New farm bill update... The following comes from Pro Farmer Washington Analyst Jim Wiesemeyer:

  • Timing: House Ag Chair Glenn “GT” Thompson (R-Pa.) previously said he plans to circulate a draft in early September, with a possible panel markup by mid-September. But he may push those plans back depending on when he can secure floor time. The Senate signals their farm bill draft won’t be ready until October at the earliest, but Sen. Amy Klobuchar (R-Minn.) this week said the Senate will likely go before the House regarding a vote on a new farm bill.
  • Reports note meetings have taken place intraparty to make sure there will not be a similar push-and-pull scenario whenever House leaders decide to vote on the omnibus measure. But some hardline GOP conservatives are already questing the farm bill price tag estimated at $1.51 trillion over 10 years. The GOP mavericks also want further policy changes for the food stamp program, something Thompson is trying to avoid.
  • This farm bill like most others will be a blend of policy and politics. For example, if efforts to boost reference prices fail, lawmakers like Sen. John Boozman (R-Ark.) will be pressed to pull their support for the measure. 
  • Key word for this farm bill debate: creative. That is the word several lawmakers have used recently relative to funding constraints in improving some features of the farm bill, especially the Title I safety net programs. That appears to be the case with ongoing staff and lawmaker work regarding possible changes relative to updating acreage bases, which could lead to some savings to be moved elsewhere.
  • Sources signal to watch for farm bill changes to improve ag insurance programs, for both crops and livestock.

 

Wynnewood Refining challenges RFS... Wynnewood Refining Co., an Oklahoma-based crude oil refinery, is contesting EPA’s rejection of its request for a small refinery exemption under the Renewable Fuel Standard for the 2022 compliance year. The company filed a petition for review with the U.S. Court of Appeals for the Fifth Circuit, citing the Clean Air Act. EPA denied the exemption due to the refineries’ failure to prove that complying with their RFS obligations would cause disproportionate economic hardship. The RFS mandates a minimum level of renewable fuels in transportation fuel sold in the United States. Wynnewood Refining Co. has previously opposed other aspects of the RFS and lost a fight against an EPA rule in July. EPA has refrained from commenting on the matter.

 

Why Fitch’s downgrade matters... Fitch Ratings recently downgraded the U.S. credit rating, a move that has been previously dismissed as insignificant due to past instances of downgrades. However, the Wall Street Journal notes the rise in bond yields following this downgrade indicates it’s worth paying attention to. It says this downgrade highlights the significant change in the nation’s fiscal circumstances. The main concern is that deficits and interest rates could create a feedback loop, leading to negative effects on economic growth and increased costs for both taxpayers and the economy.

 

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