Evening Report | December 20, 2023

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

Livestock producers: Extend cash feed coverage... Corn and soybean meal futures have eroded technically. While that could lead to more near-term price pressure, current levels are value buys. With current feed coverage lapsing at the end of this month, we advise livestock producers to extend your corn-for-feed and soymeal coverage in the cash market by four weeks through January.  

Private Brazilian crop forecasts below year-ago... Prolonged drought through central and northeastern Brazil is causing some private crop forecasters to cut their soybean production estimates below the 2022-23 record crop. Brazil-based Celeres now forecasts the Brazilian soybean crop at 156.5 MMT. It expect Mato Grosso, the top soybean state to produce a 42.1 MMT crop, a 10.3% decline from last year.

Analysts at Itaú BBA, the wholesale and investment arm of the Itaú Unibanco group, cut their Brazilian soybean production forecast to 153 MMT.

H&P Report expected to show slightly smaller hog herd... Analysts expect USDA’s Hogs & Pigs Report on Friday afternoon to show the U.S. hog herd as of Dec. 1 at 74.475 million head, which would be down 0.5% from year-ago. Fall farrowings are anticipated to have declined 4.8% from last year, resulting in a 1.7% smaller pig crop. Winter and spring farrowing intentions are expected to be down 2.1% and 1.7%, respectively. As is typically the case with the H&P Reports, any revisions to past data will be key, with the fall slaughter rates signaling upward adjustments are likely.

November feedlot placements expected to decline from year-ago... Analysts polled by Reuters expect USDA’s Cattle on Feed Report on Friday afternoon to show the feedlot inventory up 2.2% from year-ago at 11.950 million head. That would be the third straight month of year-over-year increases in feedlot numbers. After two months of placements topping year-ago, analysts anticipate that category will decline 3.8%, while marketings in November are expected to be down 6.7%.

EPA to allow chlorpyrifos use for crops... EPA announced its decision to allow the use of the pesticide chlorpyrifos on crops, including soybeans, following a ruling by the U.S. Court of Appeals for the Eighth Circuit last month. The court determined EPA unlawfully revoked its permission to use the insecticide in 2021. This decision comes after a ban on chlorpyrifos use on food crops was put in place in 2021, following a Ninth Circuit ruling that required EPA to either ban the pesticide’s use on food crops or reduce allowable residue levels within 60 days to protect children. EPA will publish a notice in approximately a week to officially indicate chlorpyrifos can be used again, pending the termination of the Eighth Circuit’s jurisdiction over the case. While EPA will allow all canceled uses of chlorpyrifos to resume, it plans to propose a new rule revoking pesticide residue tolerances for all uses except 11 specified by the court. These 11 uses, which include crops like alfalfa, soybeans, citrus, peaches and tart cherries, rely on chlorpyrifos to control various insects.

EPA is working with pesticide manufacturers to identify additional restrictions that would allow the 11 high-benefit uses of chlorpyrifos to continue while safeguarding farmworkers, vulnerable populations, and endangered species. The agency is also addressing concerns about the impact of chlorpyrifos and other pesticides on threatened or endangered species, such as orcas, salmon and sturgeon, as identified in a 2022 Biological Opinion by the National Marine Fisheries Service.

States with the highest chlorpyrifos use in 2019 included Iowa, Nebraska and Minnesota, with high-use crops including corn, soybeans and various orchards, including grapes.

EU’s China approach and potential impact of hard decoupling examined in new study... Ursula von der Leyen, the European Union chief, describes the EU’s approach to China as “de-risking without decoupling,” a term adopted by the United States. This approach involves diversifying supply chains away from China while maintaining economic ties. However, a new study by the Kiel Institute for the World Economy examines what would happen if a “hard decoupling” occurred between China and Germany, Europe’s largest economy and the world’s third-largest exporter, in the event of a Chinese invasion of Taiwan.

The study models a “Cold War 2.0 scenario” where the global economy splits into three blocs: the Group of Seven (the West), China and its allies (notably Russia) and neutral countries like Brazil and Turkey. In an extreme scenario where trade between the West and China drops to zero due to a Chinese attack on Taiwan, the German economy would contract by 5% in the first year, a comparable impact to the global financial crisis and the Covid-19 pandemic, with a longer-term loss of 1.5%.

While these short-term costs are significant, the study suggests they are manageable. It also highlights that Berlin previously cut trade and energy ties with Russia following Moscow’s invasion of Ukraine in 2022, which still affects German industry and business.

The study’s authors argue it’s better to start reducing dependence on China now, rather than waiting for a more costly “hard decoupling” forced by geopolitical events, likening it to paying an insurance premium.

Vilsack criticizes some conservative lawmakers over SNAP approach... USDA Secretary Tom Vilsack criticized conservative lawmakers for attempting to limit SNAP (Supplemental Nutrition Assistance Program/food stamps) benefits while simultaneously seeking to expand crop subsidies in the new farm bill. He argued they should explore alternative solutions rather than constraining SNAP benefits. 

Vilsack emphasized that SNAP benefits should reflect current conditions and food costs. He said 41 million Americans should not have to sacrifice to fund resources for a smaller group and urged Congress to explore creative solutions to address the issue.

U.S. consumer confidence jumps to five-month high... The Conference Board's consumer confidence index increased to 110.7 this month, the highest reading since July, from a downwardly revised 101.0 in November. The survey’s present situation index, based on consumers’ assessment of current business and labor market conditions, rose to 148.5 from 136.5 last month. Its expectations index, based on consumers’ short-term outlook for income, business and labor market conditions, jumped to 85.6 from 77.4 in November, bouncing above 80, a level historically associated with a recession within the next year.

The jump in confidence reported by the Conference Board occurred across all age groups and household income levels. Though consumers continued to worry about inflation, many were planning to buy motor vehicles, houses and major appliances like refrigerators and clothes dryers over the next six months.