Evening Report | August 16, 2023

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

U.S. calls for Russia to ‘immediately return’ to Black Sea grain deal, looking for alternative routes... The U.S. condemned Russia’s continued attacks on Ukraine’s grain infrastructure and said it was working with partners to identify alternative options to ensure Ukrainian grain exports. “The United States ... calls for Russia to immediately return to the Black Sea Grain Initiative,” State Department deputy spokesperson Vedant Patel said, though he noted Moscow has given no indications it intends to restart the deal. Patel said the U.S. was seeking “to possibly find ways and corridors in which we can continue to get grain to the places it needs to go,” without providing details.

Firm raises Ukraine grain production, export forecasts... APK-Inform raised its Ukraine grain production forecast 4.2 MMT to 53.1 MMT, citing favorable weather. The consultancy expects the grain crop to include 20.6 MMT of wheat, 25.5 MMT of corn and 5.5 MMT of barley.

APK-Inform forecasts Ukraine will export 32.3 MMT of grains in 2023-24, including 12 MMT of wheat and 18 MMT of corn.

FOMC minutes signal ‘most’ Fed officials wanted to raise rates... Federal Reserve officials were divided over the need for more interest rate hikes at the U.S. central bank’s July 25-26 meeting, with “some participants” citing the risks to the economy of pushing rates too far even as “most” policymakers continued to prioritize the battle against inflation, according to minutes of meeting. Officials also “discussed several risk-management considerations that could bear on future policy decisions,” the minutes said. Though a majority kept inflation as the paramount risk, “some participants commented that even though economic activity had been resilient and the labor market had remained strong, there continued to be downside risks to economic activity and upside risks to the unemployment rate.”

In general, the minutes stated Fed policymakers agreed the level of uncertainty remained high, and that future interest rate decisions would depend on the “totality” of coming data to “help clarify the extent to which the disinflation process was continuing.”

Placements key in Cattle on Feed Report... Traders expect USDA’s Cattle on Feed Report Friday afternoon to show the feedlot inventory as of Aug. 1 down 1.6% from year-ago at 11.044 million head, which would be the 11^th consecutive month of year-over-year declines. Placements are expected to have declined 5.5%, though that category has topped expectations the past couple of months, making it key. July marketings are expected to have dropped 5.2%.

EPA denies petitions for CAFOs changes, will evaluate program... EPA denied two petitions from environmental groups that sought to tighten water quality and pollution regulations for large farms. The petitions sought revisions to regulations under clean water laws, specifically the Concentrated Animal Feeding Operations (CAFOs) program, which falls under the National Pollutant Discharge Elimination System (NPDES). The two petitions were submitted in 2017 and 2022, and in October 2022, EPA agreed to respond to the 2017 petition by a court-approved deadline. The 2017 petition called for an expansion of operator coverage under the rules, better compliance monitoring, and improved nutrient management plans.

Instead of granting the petitions, EPA has decided to conduct a thorough assessment of the CAFOs program. This evaluation will involve a detailed study of CAFOs’ effluent limitation guidelines and the establishment of a new federal advisory committee under the existing EPA subcommittee for farms, ranches, and rural communities. The advisory committee will include a diverse range of stakeholders to provide input on improving the CAFOs program. EPA believes that a comprehensive evaluation is necessary before determining whether any regulatory revisions are required. 

EPA will convene an Animal Agriculture and Water Quality (AAWQ) subcommittee under the existing Farm, Ranch, and Rural Communities Federal Advisory Committee to hear from farmers, community groups, researchers, state agencies, and others about the most effective and efficient ways to reduce pollutants generated from CAFOs. 

EPA plans six to nine public subcommittee meetings over the next 12 to 18 months which will alternate between in-person sessions in Washington, DC, and virtual meetings. After the detailed study and the AAWQ effort, “EPA will consider whether to revise its regulations,” the agency said, adding that it would specifically “assess whether it can address water quality concerns related to CAFOs through improvements to implementation, enforcement, and other non-regulatory initiatives, or whether regulatory revisions are appropriate.” EPA said it wants to have a “strong indication that such revisions are the most effective and appropriate way to reduce discharges from CAFOs before undertaking such an effort.” 

Of note: EPA acknowledged that the regulatory actions to revise the rules “raises complex legal issues,” indicating the agency fully expects that if there are any regulatory changes pursued, they will likely be challenged in court.

Eased water restrictions on Colorado River... Federal authorities are adjusting water restrictions on the Colorado River for the upcoming year following a substantial winter season that has helped stabilize water levels during critical shortages. The U.S. Bureau of Reclamation announced on Tuesday that Lake Mead and the Lower Colorado River will operate under Tier 1 water shortage conditions in 2024. This decision will ease water restrictions in Arizona, Nevada and Mexico, allowing these states to retain billions of gallons of Colorado River water and build up their water reserves instead of relying heavily on other regions. This change in policy follows last year’s winter season, which brought a series of atmospheric rivers to drought-affected areas in the western United States, effectively reversing the decline in water levels at Lakes Mead and Powell, the two largest reservoirs in the country. As a result of these improved conditions, Lake Mead’s water level has increased by approximately 20 feet compared to August 2022.

USTR responds to WTO panel ruling on steel, aluminum... Statement from U.S. Trade Representative Spokesperson Sam Michel: “The United States is pleased with the World Trade Organization (WTO) panel report released today, that the U.S. Section 232 actions on steel and aluminum are security measures, and the People’s Republic of China (China) illegally retaliated with sham ‘safeguard’ tariffs.

“China’s decision to pursue this dispute highlights its hypocrisy by both suing the United States in the WTO and at the same time unilaterally retaliating with tariffs. The panel rightly rejected China’s argument that the U.S. Section 232 actions are safeguard measures that may be ‘rebalanced’ under WTO rules. 

“China’s use of the WTO dispute settlement system to challenge the U.S. Section 232 national security actions has caused grave systemic damage to the WTO. The WTO does not have the authority to second-guess a WTO Member’s response to threats to its security, and WTO reform must ensure that issues of national security cannot be reviewed in WTO dispute settlement. Furthermore, the WTO has proven ineffective at addressing non-market excess capacity from China and others that is an existential threat to market-oriented steel and aluminum sectors and, through the effects on imports, a threat to U.S. national security, including by eroding U.S. steel and aluminum manufacturing capacity.

The United States condemns China’s refusal to correct its severe and persistent non-market excess capacity for steel and aluminum that is at the heart of a global crisis that led to the U.S. Section 232 national security actions.”

Brazilian grain giant begins soybean-based ethanol sales... Brazilian food and fuel processor Caramuru Alimentos, one of the country’s largest grain crushers, has started selling soybean-based ethanol at one of its plants in center-western Brazil. Caramuru is one of the first companies in the world to produce at scale and sell hydrous ethanol made from soy molasses, a soybean by-product, the company said in a statement. Hydrous ethanol can be used as automotive fuel in Brazil, where most vehicles can run on 100% ethanol.

Soybean-based ethanol is now sold at Caramuru’s plant in the center-western town of Sorriso, which can produce up to 9.5 million liters of hydrous ethanol per year, according to the company. It expects to sell 72% of that volume in the domestic market, while the remaining will be used by the firm at the plant to make soy protein concentrate.