Evening Report | January 5, 2024

Evening Report
Evening Report
(Pro Farmer)

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

 

Your Pro Farmer newsletter is now available... The new year kicked off where 2023 ended... with funds remaining sellers of most ag commodities. It would likely take a significant bullish event for managed money accounts to switch from sellers to buyers on a broad scale. But with funds nearly all on the short side of the ag markets, some selective buying seems likely in early 2024. Soybean traders ignored declining crop estimates in Brazil as Argentina will see a major rebound in production after last year’s historic drought and the total South American soybean crop is expected to rise nearly 10%. Some market-moving news could come Jan. 12 when USDA releases a barrage of data. Much of the focus is typically on USDA’s “final” crop estimates for corn and soybeans. But Dec. 1 grain stocks have a history of providing market-moving surprises, especially for corn. Traders will also get winter wheat seedings, along with global production forecasts and updates to the U.S. and global balance sheets. In this week’s News page 4 feature, we look at some bigger-picture issues that could impact agriculture this year and beyond. We cover all of these items and much more in this week’s newsletter, which you can access here.

 

Brazil soybean, corn exports slow but remain strong... Brazil exported 3.829 MMT of soybeans during December, according to official government data. That was down 1.367 MMT (26.3%) from November but nearly double the December 2022 figure. The December soybean shipments pushed Brazil’s 2023 total to a record of more than 101.8 MMT. Brazilian grain exporters group Anec expects the country to ship at least 1.3 MMT of soybeans this month, with the total as high as 2.7 MMT.

Brazil shipped 6.064 MMT of corn last month, down 1.342 MMT (18.1%) from November and 199,000 MT (3.2%) less than December 2022. Anec forecasts Brazil’s corn exports will reach 3.33 MMT this month.

 

GOP: Shut down border – or gov’t... That is the message from House GOP leaders regarding funding the government for fiscal year (FY) 2024. Shutting down the government rarely is a “win” politically for those that “cause” it. However, some say any shutdown this time would not be about spending, but instead about policy. And that is a big difference going into 2024 elections.

With not enough time to complete the four spending measures with a Jan. 19 deadline (including USDA), there may well be a partial government shutdown. If this occurs, pressure will grow ahead of the Feb. 2 deadline impacting 80% of government funding needs. Then it will be a test of who folds first.

Note: If negotiators can’t reach agreement on full-year FY 2024 funding by the January and February deadlines, Congress could enact another continuing resolution (CR). If they take this path and a CR is in place after April 30, across-the-board cuts to discretionary spending would go into effect May 1.

 

USDA impacts if gov’t shuts down... USDA’s contingency plan if there’s a Jan. 19 shutdown includes:

  • Foreign Agricultural Service (FAS): Export sales data is considered an operation exempted from a shutdown. However, the data would not be released as scheduled, with a timeline for release determined once any shutdown ends.
  • Food Safety and Inspection Service (FSIS): Inspection of meat, poultry and egg products are excepted functions.
  • Animal and Plant Health Inspection Service (APHIS): APHIS may charge user fees for the costs incurred in inspecting and quarantining animals imported into and exported from the U.S.; performing certain laboratory veterinary diagnostics and select agency services; and issuing phytosanitary certificates for plant materials for export.
  • Agricultural Marketing Service (AMS): Market News is no longer considered an exempted activity. Federal Grain Inspection Service would continue.
  • National Agricultural Statistics Service (NASS): Statistical reports would be delayed during any shutdown.
  • World Agricultural Outlook Board (WAOB):  Only the WAOB Chair and USDA Chief Economist would be exempted. Monthly WASDE Reports would be delayed.

 

 

CBO analysis: Year-long CR could result in significant spending cuts... A recent analysis by the Congressional Budget Office (CBO) indicates that passing a year-long continuing resolution (CR) could result in significant spending cuts, particularly on non-defense expenditures. The extent of these cuts would depend on the timing of the CR’s passage. In this scenario, the Office of Management and Budget (OMB) would ultimately determine the specific amount of cuts.

 “Significant uncertainty surrounds the effects of the limits on discretionary funding contained in section 102 and section 101 of the FRA. Ultimately, funding will depend on the actions of lawmakers and on OMB’s decisions about sequestration,” CBO Director Phillip Swagel told House Budget Committee Chair Jodey Arrington (R-Texas) and Rep. Brendan Boyle (D-Pa.), the ranking member.

Details: The set of caps that applies to discretionary funding depends on the timing of the enactment of appropriation acts and the duration for which funding is provided. The caps specified in section 102 were triggered because discretionary funding was provided by the continuing resolution that was in place on Jan. 1, 2024. Unless all full-year appropriations have been enacted by April 30, 2024, OMB will use the section 102 caps to determine whether sequestration is required.

 

Non-farm payrolls unexpectedly rise in December... Non-farm payrolls increased 216,000 in December, up from a downwardly revised 173,000 the previous month and well above expectations for a 170,000 rise. The unemployment rate held at 3.7% and average hourly earnings increased by 4.1% annually. Traders eased bets on the Fed starting to cut interest rates in March following the stronger-than-expected jobs data.

 

Montana okays E15; California only state to hold out... State officials said fuel retailers in Montana can sell E15, leaving California as the only state to hold out against the blend. Growth Energy CEO Emily Skor said the move “is great news for Montana drivers who will soon have access to a lower-cost fuel option at the pump… By simply updating its fuel regulations, Montana has become the 49th state to give consumers the chance to save money with E15 while using more renewable fuel made in America and increasing our energy independence.”

 

Norfolk Southern aims to slash emissions with greater use of biofuels... Fuel management and consumption will be a key means to reduce GHG emissions, as fuel accounts for over 90% of Norfolk Southern’s scope 1 and 2 GHG emissions, the rail company said when releasing its inaugural Climate Transition Plan. Scope 1 emissions pertain to emissions directly from company operations while scope 2 emissions generally originate from sources not controlled by the company.

 

Triumph Foods has not withdrawn lawsuit challenging Mass. Q3 animal welfare law... Massachusetts’ state animal welfare law known as Question 3 (Q3) mandates that pork sold in the state must meet certain animal welfare standards that came into effect on Aug. 24. Triumph Foods alleges Q3 violates the Commerce Clause and other provisions of the U.S. Constitution. While a judge has already dismissed several parts of Triumph’s lawsuit, Massachusetts is now seeking to have the remaining claim thrown out, arguing that Triumph has no legal standing since all sales of its pork products are controlled by Seaboard Foods under an agreement dating back to 2004. However, Triumph contends the state’s argument is irrelevant, as the law broadly prohibits anyone involved in the sale of pork products and clearly applies to them.

 

Consumers defy rising restaurant prices in 2023, opt for cheaper dining in 2024... In 2023, consumers defied expectations as rising restaurant menu prices did not deter them from dining out. Instead, they continued to enjoy meals at restaurants while cutting back on discretionary spending in areas like clothing and furniture. However, it appears as the new year begins, consumers may be inclined to opt for more affordable dining choices. There is already evidence of this trend in late 2023, with same-store sales at quick-service restaurants increasing 3.8% in November compared to the previous year, while casual dining sales only rose 0.4%, as reported by Black Box Intelligence. Even though the cost of dining out has increased 5.3% compared to the previous year, it is expected that menu prices will stabilize in 2024. This is partly because food commodity prices reached their peak in 2022 and have since decreased by approximately 20% from a year ago, although prices for items like beef and chicken remain elevated.

 

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