Evening Report | January 24, 2024

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

LanzaJet opens world’s first ethanol-to-SAF facility... LanzaJet inaugurated the world’s first ethanol-to-sustainable aviation fuel (SAF) production facility, Freedom Pines Fuels, in Soperton, Georgia. However, U.S. corn farmers face challenges entering the SAF market due to the carbon intensity of American ethanol.

USDA Secretary Tom Vilsack gave remarks at the LanzaJet grand opening, stressing the opportunity ethanol-to-SAF production can create for American farmers. “This is a new industry that will use what you grow and convert it into something far more valuable,” he said. Other government officials attending the event included U.S. Deputy Secretary of Energy David Turk, Georgia Public Service Commissioner Tim Echols, Treulin County Commissioner Phil Jennings and Soperton Mayor John Koon.

The opening of Freedom Pines Fuels also featured the participation of LanzaJet shareholders and investors, including International Airlines Group (IAG), LanzaTech, Mitsui & Co, Shell, Suncor Energy, Microsoft Climate Innovation Fund, Breakthrough Energy, British Airways, and All Nippon Airways (ANA).

The company’s ethanol-to-SAF technology was originally developed in collaboration with the Pacific Northwest National Lab in 2010, and its first commercial flights were completed in 2018 and 2019 with Virgin Atlantic and All Nippon Airways (ANA), respectively.

Only one U.S. plant with carbon capture and sequestration (CCS) produces SAF-friendly ethanol, while Brazil leads in SAF-compatible ethanol production.

A recent study (link) suggests Midwest corn farmers could benefit significantly from a 35-billion-gallon SAF market, but access remains a key issue. The Iowa Renewable Fuels Association released a study it commissioned from Decision Innovation Solutions (DIS), an economic research and development firm, to discover how a 35-billion-gallon SAF market would impact the Midwest economy. The study concluded Midwest corn farmers stand to gain $441 million in additional income from such a market, if given the opportunity to access it. “For a 1,000-acre farm with 50/50 corn and soybeans and trendline national yields, this would mean $11,760 more income in 2050," according to the study.

Cold Storage Report: Beef, pork stocks climb more than average in December... USDA’s Cold Storage Report showed frozen beef and pork stocks both increased more than their average rate during December, suggesting demand didn’t keep pace with supplies.

Beef stocks totaled 485.1 million lbs., up 27.7 million lbs. from November, more than tripling the five-year average increase of 8.9 million lbs. during the month. Still, beef stocks declined 58.8 million lbs. (10.8%) from December 2022 and were 27.4 million lbs. (5.4%) below the five-year average.

Pork inventories reached 427.3 million lbs., up 11.6 million lbs. from November versus the fraction increase for the five-year average. Still, pork stocks declined 29.1 million lbs. (6.4%) from December 2022 and 44.0 million lbs. (9.3%) from the five-year average.

El Niño ocean warmth past its peak as positive IOD nears its end... The Australian Bureau of Meteorology says El Niño continues in the tropical Pacific Ocean. Model forecasts and observations indicate sea surface temperatures in the central tropical Pacific have peaked and are now declining. Sea surface temperatures in the tropical Pacific are expected to return to neutral levels by April-June.

The bureau notes: “The typical drying influence of El Niño on Australia’s climate usually reduces during summer, especially in the east; however, below median rainfall is still often observed in north-east Australia. As we have seen this year and through historical data, high-impact rainfall events can occur during El Niño years, particularly during October to April when severe storm frequency peaks... The positive Indian Ocean Dipole (IOD) event has weakened from the strong values seen in late 2023. IOD events typically breakdown as the monsoon trough shifts south into the southern hemisphere. Due to the strength of the positive IOD in 2023, the event decay has been later than usual.”

As we noted in “First Thing Today” on Tuesday, Australia is poised to produce much more wheat and other crops this year than previously thought after rainfall confounded expectations that the El Niño weather pattern would maintain dry and hot conditions across the country.

China to encourage hog farmers to reduce capacity... China will guide farmers to reduce hog production capacity as it steps up regulation of the industry, the ag ministry said, after an aggressive expansion drive led to an oversupply and heavy losses. Big agribusinesses in the world’s top pork producer have modernized farms and expanded hog herds so rapidly in recent years that a downturn in demand led to plummeting prices, mounting losses and rising debt last year.

As a result, struggling producers sped up slaughter late last year to cut their losses, raising the country’s pork production to a nine-year high of 57.94 MMT. The sow herd at the end of December was down 2.5 million head from a year ago to 41.42 million head. But herd numbers are still high and thus destocking will continue in the next one to two months, continuing to depress prices. But the fall in the number of breeding sows is expected to help the market recover in the second quarter of the year.

Chen Bangxun, the ag ministry’s director of the development planning department, said there is room for China to continue reducing the amount of high-protein soybeans used in livestock feed. The current proportion of soymeal in feed formulas fell to 13% last year, down 1.5 percentage points from 2022, which is equivalent to a reduction of about 9 MMT of soybean consumption.

Armstrong announces run for North Dakota governor, forgoing re-election bid... Rep. Kelly Armstrong (R-N.D.) has decided to run for governor of his state instead of seeking re-election to the House. This decision follows Republican Governor Doug Bergum’s announcement that he will not run for a third term. The future candidate for Armstrong’s House seat remains uncertain, but North Dakota is traditionally considered a Republican stronghold.

The ag sector is nervous about this House opening. They are nervous that Rick Becker, a former North Dakota lawmaker, is running for the state’s only seat in the U.S. House of Representatives. Becker, a plastic surgeon in Bismarck, received over 18% of the statewide vote in his unsuccessful U.S. Senate bid in 2022, when he ran as an independent against Republican Sen. John Hoeven, who won, and Democrat Katrina Christiansen, who is running for Senate again this year.

Of note: Becker is against sugar, crop insurance, the farm bill, etc.. Says one congressional contact: “Imagine ND sending someone like that to the House and what it would mean for ag.”

If Trump becomes president, a major change will occur relative to Thrifty Food Plan... One contact said, “If [Donald] Trump becomes president, I think one of the things USDA does is reverse [Secretary Tom] Vilsack’s $250 billion TFP decision.” Vilsack’s interpretation of 2018 Farm Bill language on this topic allowed him to raise SNAP spending by a quarter trillion dollars.

Of note: The Congressional Budget Office (CBO)charged nothing for the provision in 2018 because nobody thought it would allow such a move. Now, CBO would give just $30 billion to remove the authority. One veteran Washington analyst says, “CBO like the GAO has policy prejudices that spill over into its judgements on costs. It also relies a lot on USDA for guidance on costs and that gets political. The system needs to be revamped to get honest score keeping.”

FMC to hold public hearing on impact of Red Sea situation on shipping and supply chains... The Federal Maritime Commission (FMC) has scheduled a public hearing on Feb. 7, with a potential extension to Feb. 8, to address the impact of conditions in the Red Sea and Gulf of Aden regions on commercial shipping and global supply chains. FMC’s primary goal is to gather input from stakeholders in the supply chain regarding how attacks on commercial shipping have disrupted operations, the measures taken in response to these incidents and their resulting consequences.

Additionally, FMC intends to use this session to collect information and identify any new issues.

Bullard expects rate cuts before inflation reaches 2% target... Former St. Louis Fed President James Bullard anticipates the Federal Reserve will initiate interest rate reductions before inflation reaches the 2% threshold. He suggests these rate cuts could potentially be implemented as early as March. Bullard’s projection is based on the expectation the core inflation rate, which excludes food and energy prices, will gradually decrease to approximately 2% before October. Headline personal-consumption expenditures price index fell to 2.6% in November 2023 compared to the previous year. The next report on this index is scheduled to be published on Friday.