Evening Report | November 10, 2023

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Your Pro Farmer newsletter is now available... USDA raised its corn crop estimate more than anticipated to a record 15.234 billion bushels. Its bigger soybean and cotton production forecasts were counter to market expectations. The bigger crop forecasts pushed projected 2023-24 ending stocks higher for all three commodities. Wheat ending stocks also increased as USDA cut use. Despite an erratic start to the growing season weatherwise, Brazil raised its soybean crop estimate, as planted area is expected to be higher than previously thought. A flurry of daily soybean sales to China and “unknown destinations” signals some global end-users are more concerned than the Brazilian government with the country’s crop potential. While it’s early and Brazil could still produce a record soybean crop, it’s likely supplies won’t be as big as thought when the planting season started. In Argentina, recent rains came too late for the wheat crop, with production forecasts being cut. But the rains will help the soybean and corn crops. On the economic front, a bevy of data sparked more concerns with China’s economy. In Washington, the clock is ticking on getting another continuing resolution in place to keep the government funded beyond Nov. 17. Meanwhile, even those that had said a new farm bill was possible yet this year have now conceded an extension will be needed, though there is disagreement over what language should be in a likely one-year extension of the 2018 Farm Bill. We cover all those topics and much more in this week’s newsletter, which you can access here.

Thank you, veterans... Pro Farmer salutes all those who served in the military so we can enjoy the freedom of our great country. Happy Veterans Day.

Central Corn Belt sees 5% annual gain in farmland values... Central Corn Belt farmland values continued to increase in the third quarter amid signs of leveling off, according to the Federal Reserve Bank of Chicago. The bank’s quarterly survey of ag bankers found the value of “good” agricultural land rose 5% versus a year earlier but only a slim 1% versus the previous quarter. That 5% annual increase is the smallest yearly gain recorded in three years, the bank notes.

Looking ahead, 72% of survey respondents anticipate district farmland values will be stable during the fourth quarter of 2023. The remaining 28% are nearly evenly split in their outlook – 13% anticipate them to rise, while 15% expect them to decline.

The bank’s district includes the northern two-thirds of Illinois and Indiana, all of Iowa, lower Michigan and southeast Wisconsin.

Indiana led the way with a year-over-year gain in farmland values of 16%; Illinois and Wisconsin had annual growth of 6% and 9%, respectively. Iowa’s farmland value was stagnant in nominal terms. On a quarterly basis, Illinois, Iowa and Wisconsin values rose 1% versus the second quarter while Indiana saw no change between quarters.

The bank’s David Oppedahl, who conducts the survey, says: “An Iowa banker expressed surprise that ‘farmland has not retreated in value.’ In contrast, one Wisconsin banker cited ‘competition among large dairy operations’ as the impetus for pushing farmland values higher there, and another noted that ‘nonfarm investors continue to push land prices higher.’”

After being adjusted for inflation with the Personal Consumption Expenditures Price Index (PCEPI), district farmland values were up less than 2% in the third quarter of 2023 relative to a year ago.

The bank says district agricultural credit conditions weakened in the third quarter of 2023 versus a year earlier, as repayment rates for non-real-estate farm loans were no longer higher relative to the same quarter of the previous year. Moreover, renewals and extensions of such loans were slightly higher than a year ago. In the third quarter of this year, demand for non-real-estate farm loans was down relative to a year ago for the 13th quarter in a row.

As of Oct. 1, the district’s average nominal interest rates on new operating loans (8.50%) and feeder cattle loans (8.47%) were at their highest levels since the second quarter of 2007; its average nominal interest rate on farm real estate loans (7.70%) was last as high in the second quarter of 2007.

Russia’s wheat export tax inches up... Russia’s wheat export tax for Nov. 15-21 will be 4,544.9 rubles ($49.27) per metric ton based on an indicative price of $253.10. That’s up modestly from a rate of 4,529.7 rubles per metric ton the previous week.

USDA unveiled new initiatives aimed at bolstering specialty crops industry... These efforts include the creation of a Specialty Crops Resource Directory, intended to serve as a comprehensive resource for the specialty crop sector. USDA is actively seeking feedback from stakeholders in the specialty crop industry through a Request for Information (RFI) published on Nov. 9, with comments due by March 8, 2024.

Additionally, USDA announced $70.2 million in new investments through the Specialty Crop Research Initiative to support research in the sector. Specialty crops are expected to be a key focus in the upcoming farm bill, indicating the government’s commitment to enhancing the specialty crop industry in the United States.

Consumer sentiment drops again in November, inflation expectations... U.S. consumer sentiment fell for a fourth straight month in November, and households' expectations for inflation rose again, with their medium-term outlook for price pressures shooting to the highest in more than a dozen years. The University of Michigan’s preliminary reading of its Consumer Sentiment Index dropped to 60.4, the lowest since May, from October’s final reading of 63.8. The survey’s preliminary gauge of current conditions fell to 65.7 from last month's final level of 70.6, while the expectations index slid to 56.9 from 59.3 in October. Like the headline index, both subindexes were the lowest since May.

Year-ahead inflation expectations inched up to 4.4%, extending the large increase between September’s 3.2% reading and October’s 4.2%. That’s the highest reading since November 2022. Long-run inflation expectations also rose, from 3.0% last month to 3.2% this month, the highest reading since 2011.

American’s spending habits have changed... The way Americans spend their money has been significantly reshaped by the work-from-home trend during the pandemic. Even though the economy has reopened, Americans are still allocating a larger portion of their spending on physical goods compared to before the pandemic. This shift in consumer behavior has had a lasting impact, the Wall Street Journal (WSJ) reports.

In the early stages of the pandemic, when people were confined to their homes, there was a surge in buying goods. As restrictions eased and the economy reopened, there was a temporary reversal with increased spending on dining out and various services. However, it appears the rebound in spending on services has stalled.

This shift towards buying more goods and fewer services has implications for retailers, WSJ notes. The demand for physical items continues to be robust, suggesting the trend of purchasing goods is likely to persist. This change in consumer spending habits is significant, as it influences various sectors of the economy and the retail industry, in particular.

China is making too much stuff — and other countries are worried... Chinese factories facing overcapacity in a challenging economic environment are attempting to address their problems by increasing exports, which is causing concerns and trade tensions with other countries. Manufacturers of products like electric vehicles and solar panels are lowering prices and intensifying their efforts to expand into international markets due to reduced demand within China. The Wall Street Journal reports this strategy, while aimed at survival and growth, is unsettling competitors who perceive it as a threat to their own profitability. The situation underscores the complexities of global trade and the challenges posed by overcapacity in China’s manufacturing sector, which has broader implications for international trade relations.