Evening Report | October 12, 2023

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Bullish reaction to USDA’s October crop reports... USDA cut its corn and soybean crop estimates more than anticipated, which resulted in lower-than-expected 2023-24 ending stocks for those commodities. The wheat ending stocks forecast came in higher than anticipated, but wheat followed the other markets to the upside. Click here to view the full report details.

U.S. consumer prices rise more than expected... The consumer price index (CPI) increased 0.4% last month, down from the 0.6% increase in August, which was the largest in 14 months. The monthly increase was driven by higher costs for rent and gasoline. CPI increased 3.7% on an annualized basis, the same as in August. Economists expected increases of 0.3% and 3.6%, respectively. Core inflation, excluding food and energy prices, rose 0.3% from August and 4.1% annually, the lowest reading since September 2021.

Food prices increased 3.7% from year-ago in September, with food at home (grocery prices) up 2.4% and food away from home (restaurant prices) up 6.0%. Food price inflation cooled from the 4.3% rise in August.

Another downward revision to Argy wheat crop forecast... The Buenos Aires Grain Exchange cut its 2023-24 Argentine wheat crop estimate by 300,000 MT to 16.2 MMT. USDA left its Argentine wheat crop estimate at 16.5 MMT. As we reported in “First Thing Today,” the Rosario Grain Exchange lowered its Argentine wheat crop forecast to 14.3 MMT.

El Niño threatens rice market with production losses and price rally... The rice market is facing increased concerns as the latest El Niño weather phenomenon starts to impact countries like Indonesia, Vietnam and the Philippines, potentially affecting rice output. Any reduction in production could lead to a tightening of global supply and reignite a rally in prices, which had recently eased after reaching their highest levels in nearly 15 years. As we reported earlier this week, India is considering extending a 20% export duty on parboiled rice as a measure to control domestic prices in anticipation of upcoming elections. This move may contribute to keeping the rice market constrained and heighten the risk of elevated food inflation.

EPA withdraws appeal of injunction on WOTUS rule... EPA withdrew its appeal of a court injunction that had prevented the enforcement of the March Waters of the United States (WOTUS) rule in 24 states. EPA made this choice based on its recently finalized revised rule in September, which the agency believes aligns the WOTUS rule with the requirements set by a U.S. Supreme Court decision that had necessitated the rewriting of the original March rule.

Vilsack expects Congress to pass farm bill by year-end... USDA Secretary Tom Vilsack expressed confidence Congress will meet the Dec. 31 deadline to pass the farm bill or temporarily extend the current legislation, but he emphasized the need for creativity to address the deadlock over farm group demands for a larger safety net.

Key points:

• Vilsack urged lawmakers to think innovatively and beyond the conventional boundaries of the farm bill to address rural America’s pressing issues.
• The original goal for enacting the new farm bill was Sept. 30, the date when some provisions of the 2018 Farm Bill officially expired. However, leaders of the Senate and House Agriculture committees say the real target is Dec. 31.
• An end-of-year deadline is essential to avoid the “dairy cliff” on Jan. 1, when the government-guaranteed price of fresh milk would significantly increase. Dairy would be the first major commodity to be affected if a reversion to the 1949 statute is triggered.
• Vilsack called the consequences of inaction unacceptable and indicated a belief that Congress will either extend the life of the 2018 farm bill or pass a new one.
• Vilsack highlighted the need for a broader view of government tools available to support rural America, including the $30 billion borrowing authority via USDA’s CCC Charter Act, and the $20 billion allocated in the 2022 climate, healthcare and tax law for USDA conservation programs focusing on climate mitigation.
• The challenge lies in drafting the bill, as there isn’t sufficient funding in the existing farm bill to increase reference prices, which farm groups are advocating for to offset high production costs.
• Vilsack also noted the importance of retaining climate funds for conservation programs, as they align with farmers’ climate support efforts.
• He emphasized the necessity of not limiting his department’s ability to use the $30 billion CCC reserve appropriately, as Republicans have proposed strict limits on access to it.
• Vilsack pointed out that attention should be paid to effective reference prices (ERPs) in addition to statutory reference prices (SRPs) in the farm bill discussions. ERPs would have a significant impact on crops like corn, soybeans and wheat.

Comments: It appears if there are indeed going to be some creative funding ideas for any new farm bill, one potential path could be via the CCC Charter Act. Farm-state lawmakers have already signaled Vilsack to tap the fund for trade promotion and food aid. There could be creative avenues to tap the fund for farmer safety net (Title I) provisions seeking funding. Recall that Congress replenishes the $30 billion borrowing authority once it gets near being depleted. It’s been called USDA’s ATM machine by some. A caveat could be how the Congressional Budget Office (CBO) would score such creativity. ARC and PLC are already funded through CCC so this could be presented as an expansion of that authority. Plus, if lawmakers restrict what USDA can do with CCC authority, that could open up more room to use it for the Title I safety net. If they don’t restrict, then there could be a question of the need to update the borrowing authority and expand it since it has not been updated since 1987.

SCOTUS rejects GOP states’ challenge to rule estimating social cost of carbon... The U.S. Supreme Court (SCOTUS) has declined to hear a lawsuit from Republican-led states challenging the Biden administration’s attempt to assign a social cost to carbon. No explanation was given and SCOTUS merely listed Missouri v. Biden on Tuesday as one of the petitions for writ of certiorari that were denied. SCOTUS similarly refused earlier this year to hear another challenge to the estimates.

Besides Missouri, 10 states requested SCOTUS take up the issue: Tennessee, Utah, Ohio, Oklahoma, South Carolina, Kansas, Indiana, Arkansas, Nebraska and Montana.

Social Security Administration announces 3.2% COLA for 2024... These adjustments are made annually to help benefits keep pace with inflation. Recipients will see the increase reflected in their January checks. On average, Social Security retirement benefits will increase by more than $50 per month starting in January, with more than 66 million Social Security beneficiaries getting the 3.2% cost-of-living adjustment (COLA). Increased payments to approximately 7.5 million people receiving SSI will begin on Dec. 29, 2023. (Note: some people receive both Social Security and SSI benefits).

UAW expanding its strike... The United Auto Workers (UAW) union significantly escalated its strikes against “Detroit Three” automakers Wednesday by going on strike against a major Ford truck plant in Louisville, Kentucky. In a surprise move, the 8,700 members left their jobs about 6:30 p.m. at the plant, which makes heavy-duty F-Series pickup trucks and large SUVs.

UAW President Shawn Fain said in a statement the union has waited long enough “but Ford hasn’t gotten the message” to bargain for a fair contract.

Ford called the strike expansion “grossly irresponsible” but said it wasn’t surprising given UAW leadership’s statements that it wanted to keep Detroit automakers wounded with “industrial chaos.”