Evening Report | September 27, 2023

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UN: Ukraine corridor shouldn’t replace Black Sea grain deal... Ukraine’s move to create a shipping channel for grain exports is a positive step for global food security, although efforts continue to reach a new agreement over a broader Black Sea corridor, said Rebeca Grynspan, top United Nations trade official. “We see the alternatives that are being explored to export in a very positive light because the important thing is to get the grain to global markets,” Grynspan told Reuters.

Grynspan said while the new corridor that Ukraine is trying to open is among “very important efforts,” she noted “the risks are higher.” Grynspan added, “The only thing that will take the risk away and stabilize... the situation is an agreement that will be backed by all partners.” She said “options are being discussed” and that “insurance is a big part of the solution,” while noting she couldn’t provide any timeframe for a potential deal.

There will likely be some surprises in Friday’s USDA reports... USDA’s Quarterly Grain Stocks Report on Friday will set final 2022-23 ending stocks for corn and soybeans. The report has a history of surprises, especially for corn, with analysts routinely missing those estimates by a wide margin. The report has historically featured revisions to the previous year’s soybean crop and since 2020 the prior year’s corn production. USDA will also issue its final estimates for 2023 wheat production in the Small Grains Summary. The following estimates are from Reuters surveys:

Hog herd expected to be slightly smaller than year-ago... USDA’s Hogs & Pigs Report Thursday afternoon is expected to show the hog herd down 0.8% from last year as of Sept. 1. Market hogs are expected to decline 0.7%, while the breeding herd is anticipated to be 1.3% smaller. Analysts expect summer farrowings to come in 3.4% smaller than last year, while fall and winter farrowing intentions are anticipated to be down 3.5% and 2.1%, respectively. Also key will be revisions to past data, which are likely after summer slaughter consistently ran above levels implied in the June report.

The one factor that could make or break the farm economy over the next 12 months... Ag economists’ view on the ag economy is starting to erode. The September Ag Economists’ Monthly Monitor from the University of Missouri and Farm Journal shows lower commodity prices, concerns about demand and a negative outlook for China’s economy are all contributing to the changing views, even as the cattle herd and U.S. corn and soybean crops continue to shrink. But the most influential piece of the farm economy might be the price of corn. The biggest story revealed is that all three categories are lower than any of the previous three surveys. 

Economists say there are several factors driving agriculture’s economic health today, and will continue to do so over the next 12 months, including:

• U.S. and global weather creating production challenges
• Decline in many commodity prices
• Below-trend yields for major crops in 2023
• Strong cattle prices offset by lower prices of other livestock commodities
• Generally high interest rates and input costs, despite some lower prices for fertilizer, etc., providing relief
• Variable profitability across farm operations based on production challenges
• Tight farm margins in some instances
• Declining export demand
• Uncertain international grain market factors
• Increased production competition from South America

Click here to view the full report.

Blumenauer proposes crop insurance reforms to save billions and target small farmers... Rep. Earl Blumenauer (D-Ore.) introduced a crop insurance reform bill aimed at reducing costs and better targeting support toward small and mid-sized farmers. The proposed reforms include limiting farmers to a maximum of $125,000 in premium subsidies annually and denying subsidized coverage to farmers with over $250,000 in adjusted gross income. The bill also eliminates premium subsidies for policies with the harvest price option and reduces guaranteed returns to insurance companies and USDA payments to insurers for administrative and operating costs. If implemented, these reforms could save an estimated $2.7 billion annually, significantly reducing the cost of the crop insurance program.

Outlook: The proposal is given very low odds of being part of the coming farm bill debate and/or separate legislation or an amendment to another bill. Says one farm policy analyst: “It didn’t seem possible, but the Blumenauer proposal makes the EWG proposal even worse. The ‘reform’ is a Trojan Horse because it would wipe out all of the pillars that made crop insurance what it is today. Crop insurance would be back in the 1970s barely limping along and ad hoc disaster would once again be the norm.”

Food insecurity persists as pandemic-era benefits cease, hitting SNAP recipients and food pantries... A recent report highlights that food insecurity remains a pressing issue even six months after the conclusion of expanded government assistance programs designed to address pandemic-related challenges. The report, released by Propel Inc., which assists in administering benefits, reveals that among households relying on the Supplemental Nutrition Assistance Program (SNAP/food stamps), 50% are experiencing food shortages, over 30% are turning to food pantries for support and 30% are depending on friends and family for their meals and groceries.

The survey, conducted among 2,584 respondents in early September, primarily consists of individuals from households with incomes at or below the poverty line. Stubbornly high food prices coupled with the expiration of pandemic-era SNAP expansions are cited as contributing factors to the sustained demand for food assistance. This ongoing challenge is also putting significant strain on food pantries across the nation.