Evening Report | February 7, 2024

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Trade official: U.S./Mexico GM corn dispute to be resolved this year... The U.S. trade dispute with Mexico over GM corn is expected to be resolved by the end of this year, U.S. Chief Agricultural Negotiator Doug McKalip said. “This (case) is about a lot more than biotech corn. It’s about making sure that nations adhere to the provisions of the trade agreements they’ve already signed and making sure we stick to science as the underpinning of trade,” McKalip said at the conference of the National Association of State Departments of Agriculture.

In August, the U.S. requested a dispute panel under the U.S.-Mexico-Canada Agreement, arguing the Mexican decree banning GM corn from human diets is not based on science and violates its trade commitments.

The dispute panel’s members and chair have been selected and arguments before the panel have been scheduled for later this year, McKalip said.

Some positive news for corn export demand... Official Census Bureau corn exports totaled 190 million bu. in December, up from 141 million bu. in November and most for that month since 2007. Previously reported inspections for December totaled 156.8 million bushels. Census data usually exceeds inspections by a few million bu. due to cross-border shipments mainly with Canada and Mexico. However, sometimes they are exceedingly large, like this year.

Census data for December showed corn exports up 12.3 million bu. for Canada and 13.2 million bu. for Mexico compared to inspections. At nearly 33 million bu. added to exports via Census data, that was almost like an extra week of inspections.

Brazil soybean, corn exports slow in January but remain strong... Brazil exported 2.855 MMT of soybeans in January, according to official government data. That was down from 3.829 MMT in December but well above the 839,588 MT shipped in January last year.

Brazil shipped 4.876 MMT of corn last month, down from 6.064 MMT in December and 6.140 MMT during January 2023.

Ag runs trade deficit in December... The U.S. exported $15.50 billion of agricultural goods in December against imports of $15.66 billion, resulting in a deficit of $160.55 million following a surplus of $98.97 million the previous month. During the first three months of fiscal year (FY) 2024, U.S. ag exports stood at $48.24 billion against imports of $48.56 billion for a deficit of $323 million. Given the first quarter of the fiscal year is the strongest period for ag exports, this is a poor start.

USDA forecasts ag exports at $169.5 billion and imports at $200.0 billion for FY 2024, which would imply a deficit of $30.5 billion.

The overall U.S. trade deficit increased 0.5% to $62.2 billion in December, as exports rose 1.5% to $258.2 billion and imports firmed 1.3% to $320.4 billion. The trade gap narrowed 18.7% in 2023, the largest annual drop since 2009, to $773.4 billion. It represented 2.8% of GDP, down from 3.7% in 2022. Trade added more than half a percentage point to the economy’s 2.5% growth last year.

Farm income forecast to plunge further in 2024... USDA’s initial forecast calls for net farm income to plunge $39.8 million (25.5%) to $116.1 billion in 2024. This follows a decrease of $29.7 billion (16.0%) from to $155.9 billion in 2023. After adjusting for inflation, net farm income is forecast to drop $43.1 billion (27.1%) in 2024. With this expected decline, net farm income would be 1.7% below its 20-year average (2003–22) and 40.9% below the record high in 2022 in inflation-adjusted dollars.

Net cash farm income is forecast at $121.7 billion in 2024, a decline of $38.7 billion (24.1%). This follows a decrease of $41.8 billion (20.7%) last year. When adjusted for inflation, 2024 net cash farm income is forecast to fall $42.2 billion (25.8%) from 2023, and expected to be 13.7% below its 2003–22 average and 43.2% below the record high in 2022.

Cash receipts from the sale of agricultural commodities are forecast to decrease $21.2 billion (4.2%) to $485.5 billion in 2024. Total crop receipts are expected to decline $16.7 billion (6.3%), led by lower receipts for corn and soybeans. Total animal/animal product receipts are expected to drop $4.6 billion (1.9%), following declines in receipts for eggs, turkeys, cattle/calves and milk.

Direct government payments are forecast to fall $1.9 billion (15.9%) to $10.2 billion in 2024, largely because of lower supplemental and ad hoc disaster assistance relative to 2023.

Farm sector equity is expected to increase by 4.7% to $3.74 trillion in nominal terms. Farm sector debt is expected to increase 5.2% to $547.6 billion. Debt-to-asset levels for the sector are forecast to worsen slightly from 12.73% in 2023 to 12.78% this year.

E15 update... EPA’s final rule to remove the one PSI waiver for nine states, allowing for year-round sale of E15, remains pending at the Office of Management and Budget (OMB). Despite five meetings, including one scheduled with the American Petroleum Institute (API) on Feb. 12, the timing of the rule’s issuance remains uncertain. Opposition to the waiver centers on concerns about creating a patchwork of E15 availability and increasing costs for refiners. Meanwhile, API and the National Corn Growers Association support bipartisan legislation for nationwide E15 sales, seeing it as a more reliable approach than the regulatory route, which has faced legal challenges in the past.

NALC lawyers discuss uncertainty over Prop 12 and WOTUS with state ag officials... The National Agricultural Law Center (NALC) addressed state agriculture officials regarding California’s Proposition 12 and Waters of the U.S. (WOTUS) rules. NALC lawyers informed the National Association of State Departments of Agriculture (NASDA) that the path to reversing Proposition 12 remains uncertain, with legislative changes and inclusion in the farm bill facing opposition.

Regarding WOTUS, NALC attorney Brigit Rollins highlighted ongoing lawsuits challenging the current definition, with injunctions in some states. There is discussion about defining waters as continuously flowing standing waters, extending only to wetlands with a continuous unbroken connection. The unresolved nature of these issues suggests continued challenges for agriculture in the coming months.

Chinese gold prices soar... Gold prices in China have reached unprecedented levels as the Lunar New Year approaches. Consumer demand remains strong despite concurrent stock market volatility. Traditionally, the holiday season prompts heightened purchases of luxury items like jewelry, and this year’s robust demand for gold stands out amidst a backdrop of market turmoil. The surge in gold purchases underscores its reputation as a reliable store of value during times of economic uncertainty, attracting a growing number of adherents, according to Bloomberg.

Senate GOP abandons bipartisan deal, raising doubts on negotiation skills... Senate GOP leaders have scrapped a bipartisan agreement that linked foreign aid with border security, a compromise they had previously insisted upon. This move, seen as rejecting their own desired trade-off, has left Democrats questioning their ability to negotiate. Despite endorsements from conservative groups like the border patrol union, the Wall Street Journal and the Chamber of Commerce, the GOP’s shift towards cultural battles over economic issues has led to internal discord and failed House votes, including attempts to impeach Homeland Security Secretary Alejandro Mayorkas and provide aid solely to Israel.

The GOP’s strategy, characterized by Sen. Mitt Romney (R-Utah) as prioritizing unpassable proposals for political gain, reflects a party driven by former President Donald Trump’s combative approach. While House Republicans plan to retry the impeachment of Mayorkas, it’s unlikely to succeed in the Senate. Some Republicans suggest separating foreign aid from border security, a move that could garner bipartisan support and pave the way for a comprehensive aid package.