Evening Report | December 21, 2023

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Farm, rail companies urge reopening of U.S./Mexico crossings... Dozens of major U.S. agricultural groups urged the U.S. to reopen two rail crossings on the Texas/Mexico border in an effort to restore the trade routes shuttered due to increased migrant crossings. In a sharply worded letter to U.S. Homeland Security Secretary Alejandro Mayorkas, the growers – representing corn, milk, rice and soybean producers, among others – said the crossings could be easily reopened. “Each day the crossings are closed we estimate almost 1 million bushels of grain exports are potentially lost along with export potential for many other agricultural products,” the groups wrote, adding that blocking food heading to Mexico could lead to inflation or food insecurity there.

Railroad companies and business groups, including the U.S. Chamber of Commerce, in recent days have pressed U.S. Customs and Border Protection (CBP) to reopen the two rail bridges in Eagle Pass and El Paso, Texas, after U.S. border authorities closed them on Dec. 18 in order to “redirect personnel” to process migrants crossing the border.

USDA lowers 2024 food price outlook amid an anticipated decline in grocery store prices... USDA forecasts all food prices will increase 1.2% in 2024, with food away from home (restaurant) prices expected to rise 4.9% while food at home (grocery store) prices seen declining 0.6%. The all food and grocery store price forecasts are down from expected gains of 2.9% and 1.6%, respectively, last month, while the restaurant price outlook is up from the November forecast for a 4.3% rise. That would be the smallest annual increase in overall food prices since they rose 0.9% in 2017 and the steepest decline in grocery prices since they fell 1.3% in 2016.

The decline forecast for grocery prices in 2024 comes as several downward revisions were made to the outlooks for various products. Meats, poultry and fish are now seen up 1.5%, a sharp decline from an increase of 4.6% forecast in November, reflecting down revisions for the categories of meats, beef and veal, pork, other meats and poultry. Pork prices are now seen falling 1.3% in 2024, a major downward revision from the increase of 3.6% expected in the November outlook. Beef prices are seen up 4.8% (7.8% in November), other meats are seen up 2.9% (3.1% in November), and poultry prices are expected to rise 2.2% (3.3% in November).

Egg prices are seen declining 12.7%, which is less of a decline than the 14.7% forecast in November. But USDA cautioned the confirmation of highly pathogenic avian influenza (HPAI) in table egg layer flocks, which started in November and has continued in December, is something to be “monitored closely.”

For 2023, USDA predicted all food prices up 5.8% (unchanged), with restaurant prices rising 7.1% (unchanged) and grocery prices increasing 5.0% (5.2% previously).

One-third of U.S. winter wheat area facing drought stress... As of Dec. 19, the U.S. Drought Monitor showed 55% of the U.S. was covered by abnormal dryness/drought, down one percentage point from the previous week. USDA estimated 32% of U.S. winter wheat areas were covered by drought, unchanged from the previous week and well below 71% at this time last year.

In HRW areas, dryness/drought covered 86% of Kansas (4% D3, no D4), 65% of Colorado (2% D3, no D4), 62% of Oklahoma (virtually no D3 or D4), 65% of Texas (6% D3 or D4), 42% of Nebraska (11% D3 or D4), 26% of South Dakota (no D3 or D4) and 46% of Montana (no D3 or D4).

For HRW areas, the Drought Monitor noted: “In parts of southern Colorado, south-central and eastern Nebraska, and much of Kansas, moderate to heavy precipitation amounts fell this week. Improvements to ongoing drought and abnormal dryness occurred in a north-to-south band across central and western Kansas, where this week’s precipitation lessened precipitation deficits and improved soil moisture. Localized improvements to drought also occurred in south-central Nebraska, where this week’s rain was enough to alleviate precipitation and soil moisture deficits somewhat. A soaking rain event occurred this week in parts of the western Great Plains, especially in the Texas and Oklahoma Panhandles and adjacent western Oklahoma and western north Texas. In these areas, precipitation deficits and soil moisture improved enough for widespread improvement to abnormal dryness or drought.”

In SRW areas, dryness/drought covered 99% of Missouri (1% D3, no D4), 60% of Illinois (no D3 or D4), 99% of Indiana (no D3 or D4), 45% of Ohio (no D3 or D4), 59% of Michigan (no D3 or D4), 87% of Kentucky (no D3 or D4) and 100% of Tennessee (29% D3 or D4).

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NASS reviewing crop reporting... USDA’s National Agricultural Statistics Service (NASS) conducts a comprehensive review of its estimating programs every five years following the Census of Agriculture. The objective is to ensure the annual estimating programs focus on the most relevant commodities and states within U.S. agriculture. This review considers various sources of information, including data from the agricultural census and public input.

NASS has initiated the program review process and is inviting public feedback. To provide comments or information for consideration regarding a specific NASS program, individuals can email nass@nass.usda.gov with “NASS Program Review” in the subject line. The deadline for submitting feedback is Jan. 5, 2024.

U.S. Q3 GDP trimmed from prior estimate... Gross domestic product increased at a 4.9% annualized rate in the third quarter, down from the previously reported 5.2% pace. That was well above 2.1% growth in the second quarter and the strongest figure since the fourth quarter of 2021. Consumer spending increased less than initially anticipated in the third quarter, with a growth rate of 3.1% compared to the 3.6% reported in the second estimate, though it still marked the most significant gain since the fourth quarter of 2021. The slowdown in consumer spending was primarily driven by a decrease in services spending.

Rice prices supported by rising demand, supply concerns... The jump in rice prices is due to growing concerns about rising demand and the potential impact of El Niño on the grain supply, which is a staple food for many people in Asia and Africa. Specifically, Thai white rice, a benchmark for Asian markets, has surged 2.5% to reach $650 per ton, marking the highest level since October 2008. This surge follows a previous rally in August, triggered by export restrictions imposed by leading rice exporter India and threats to the Thai rice crop due to dry weather. Although prices dipped in September and October, they accelerated their upward trajectory in November.

India, another major rice producer, is grappling with rising rice prices, despite export restrictions and good harvests. Rice costs have risen by approximately 12% annually for the past two years, leading officials to urge rice millers to reduce retail prices.

Additionally, Indonesia has announced plans for significant rice purchases from Thailand, causing local millers to hold off on sales in anticipation of higher prices. The strength of the Thai currency has also played a role in driving prices up.

While there may be potential limitations to further price increases due to looming supplies from Vietnam and Thailand, the market is expected to maintain relatively high price levels into the early months of the following year. This is due to lingering concerns about food security and India’s export restrictions.

Trade relations with China emerging as significant issue in 2024 presidential election... Former President Donald Trump had made confronting China a central theme of his presidency, and during his campaign, he argued President Joe Biden’s clean energy initiatives would ultimately benefit China. Some other Republicans have also attempted to portray President Biden as being lenient on China. Robert Lighthizer, who played a key role in shaping trade policy during the Trump administration and continues to advise the former president, has been in contact with congressional Republicans regarding trade matters, according to sources familiar with the situation. Lighthizer has testified before the House select committee on China, where he advocated for the U.S. to increase tariffs on Chinese imports.