Evening Report | January 25, 2024

Evening Report
Evening Report
(Pro Farmer)

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

 

Exchange raises Argentine crop forecasts... The Buenos Aires Grain Exchange increased its Argentine soybean crop forecast 500,000 MT to 52.5 MMT. It raised the corn crop peg 1.5 MMT to 56.5 MMT. However, the exchange noted in the case of soybeans, if timely rains do not materialize during the remainder of the growing season it “could have an impact on our current projection.”

 

USDA inches up 2024 food price forecast... USDA forecasts food prices will rise 1.3% this year, with food away from home (restaurant) prices expected to increase 4.7% and food at home (grocery store) prices projected to decline 0.4%. In December, USDA forecast all food prices would increase 1.2%, with restaurant prices projected to rise 4.9% while grocery store costs were seen declining 0.6%. That would still be the smallest annual increase in overall food prices since they rose 0.9% in 2017 and the steepest decline in grocery prices when they fell 1.3% in 2016.

In 2023, food prices increased by 5.8%. Food-at-home prices rose by 5.0%, while food-away-from-home prices jumped by 7.1%.

Beef and veal prices are predicted to increase 5.8% in 2024, the highest growth of any category as prices remain elevated following consistent growth in 2023. USDA expects pork to decrease 1.4% this year. Egg prices are projected to decrease 4.6% in 2024, though USDA noted impacts from outbreaks of highly pathogenic avian influenza will be monitored closely and could affect prices.

 

Recent developments concerning trade issues between the U.S., Mexico, and Canada... Meetings have taken place in preparation for the Mid-Year Check-In meetings related to the U.S.-Mexico-Canada Agreement (USMCA).

Cara Morrow, Senior Advisor to the U.S. Trade Representative (USTR), met with Mexico’s Under Secretary of Economy for Foreign Trade, Alejandro Encinas, in Toronto. Discussions in the meeting included topics such as steel and aluminum exports to the U.S. and the Rapid Response Labor Mechanism. There was also a call for progress on Mexico’s energy policies and environmental laws related to fisheries. Notably, the USTR statement did not mention the dispute over GMO corn.

Morrow met with Canada’s Deputy Minister for International Trade, Rob Stewart, expressing dissatisfaction with Canada’s dairy tariff rate quota allocation measures, among other issues.

Canadian Ag Minister Lawrence MacAulay had discussions with USDA Secretary Tom Vilsack regarding proposed changes in voluntary “Product of USA” labeling regulations for meat and livestock, as well as California’s Proposition 12. Canada raised concerns that these rules could potentially restrict trade and disrupt supply chains. USDA's final rule on voluntary Product of USA labeling is currently under review at the Office of Management and Budget.

Recall that the U.S. recently lost a dispute with Canada on dairy issues and is currently pursuing a case under USMCA related to Mexico’s ban on imports of GMO corn.

 

Winter wheat drought footprint shrinking... As of Jan. 23, the U.S. Drought Monitor showed 50% of the U.S. was covered by abnormal dryness/drought, down one percentage point from the previous week. USDA estimated 22% of U.S. winter wheat areas were covered by drought, down five points from the previous week.

In HRW areas, dryness/drought covered 67% of Kansas (virtually no D3 or D4), 61% of Colorado (2% D3, no D4), 33% of Oklahoma (no D3 or D4), 52% of Texas (3% D3, no D4), 39% of Nebraska (no D3 or D4), 29% of South Dakota (no D3 or D4) and 80% of Montana (no D3 or D4).

In SRW areas, dryness/drought covered 82% of Missouri (no D3 or D4), 38% of Illinois (no D3 or D4), 81% of Indiana (no D3 or D4), 33% of Ohio (no D3 or D4), 52% of Michigan (no D3 or D4), 84% of Kentucky (no D3 or D4) and 79% of Tennessee (20% D3 or D4).

The Seasonal Drought Outlook calls for drought improvement or removal across the Central and Southern Plains through April, especially in the northern two-thirds of Kansas. But drought is expected to persist in SRW areas of the Midwest.

Click here to view related maps.

 

Biden postpones approval of natural gas export terminal... President Joe Biden postponed the approval of the country’s largest natural gas export terminal due to increasing pressure from climate activists, the New York Times reported. The White House has now mandated the Department of Energy to carry out an environmental review of Calcasieu Pass 2, a $10 billion project developed by Venture Global, before granting approval. Calcasieu Pass 2 is among 17 proposed natural gas export terminals in the U.S., and any delay in its approval could potentially affect other projects in the pipeline.  

Venture Global criticized the Biden administration following the report, accusing the White House of attempting to shape policy through leaks to the media. Shaylyn Hynes, a spokeswoman for Venture Global, expressed concerns about the uncertainty this creates regarding whether U.S. liquefied natural gas (LNG) can be relied upon by allies for their energy security. She also suggested that if the leaked report from anonymous White House sources is accurate, it could imply a moratorium on the entire U.S. LNG industry.

 

USDA sends animal ID plan to OMB... USDA has sent a final rule to the Office of Management and Budget (OMB) on updating animal disease traceability regulations to require the Animal and Plant Health Inspection Service (APHIS) to only recognize identification devices as official identification for cattle and bison if they have both visual and electronic readability (EID). USDA has targeted finalizing the rule in April.

 

U.S. economy grows more than expected... In the final quarter of 2023, the U.S. economy expanded at an annualized rate of 3.3%, surpassing market expectations of a 2% increase. This growth followed a 4.9% rise during the previous quarter. The expansion was driven by various factors, including increased consumer spending, exports, state and local government spending, nonresidential fixed investment, federal government spending, private inventory investment and residential fixed investment. Imports also saw an uptick during this period.

For all of 2023, the U.S. economy registered a growth rate of 2.5%, a notable improvement compared to the 1.9% growth observed in 2022. These figures closely align with the Federal Reserve’s GDP estimate of 2.6% for 2023.

 

ECB keeps rates unchanged... The European Central Bank (ECB) kept interest rates unchanged at historic levels during its first meeting of 2024 and reaffirmed its commitment to fighting inflation, without giving a hint that its leaders are beginning to contemplate a more flexible policy. The main refinancing operations rate remained at a 22-year high of 4.5% for a third consecutive meeting, while the deposit facility rate held steady at a record 4%.

ECB said it would continue with a macroeconomic data-dependent approach, meaning it was not committing to any particular policy path and reserved the right to adjust interest rates as necessary.

ECB President Christine Lagarde said, “We are determined to ensure that inflation returns to our 2% medium-term target in a timely manner. Based on our current assessment, we consider that the key ECB interest rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to this goal. Our future decisions will ensure that our policy rates will be set at sufficiently restrictive levels for as long as necessary... Inflation is expected to ease further over the course of this year as the effects of past energy shocks, supply bottlenecks and the post-pandemic reopening of the economy fade, and tighter monetary policy continues to weigh on demand... The risks to economic growth remain tilted to the downside. Growth could be lower if the effects of monetary policy turn out stronger than expected. A weaker world economy or a further slowdown in global trade would also weigh on euro area growth... Upside risks to inflation include the heightened geopolitical tensions, especially in the Middle East, which could push energy prices and freight costs higher in the near term and hamper global trade. Inflation could also turn out higher than anticipated if wages increase by more than expected or profit margins prove more resilient.”

 

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