Evening Report | February 8, 2024

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USDA’s February crop reports feature mostly negative changes... USDA raised its domestic ending stocks forecasts for corn, soybeans and wheat. Global carryover was increased for soybeans, while the others were lowered. The soybean market had an initial negative reaction to the news, but rebounded to post mild gains, while wheat finished with sharp losses and corn was slightly lower. Click here to see the full report details.

Brazil grain exporters group ‘greatly concerned’ by farmer bankruptcies... Brazilian grain exporters group Anec is concerned about a rise in farmer bankruptcy filings in the country, warning a recent increase in cases potentially compromises the execution of grain contracts. The rise in farmer bankruptcy cases, which may affect delivery of committed grains, may also hamper exporters’ ability to complete their exports, Anec said. Anec represents global grain merchants, including ADM, Bunge, Cargill, Louis Dreyfus Commodities and China’s Cofco, among others.

A statement from the group stated, “Anec views with great concern the growth in the number of requests of judicial recovery. Farmers have been offered – indiscriminately and often maliciously – the  judicial recovery procedure as a means of renegotiation of debts and contracts,” referring to loans and also soy and corn contracts.

China’s deflation signals global economic concern... China’s slowing economy and excess capacity are leading to falling prices of its exports, causing concerns about deflation spreading to other economies, the Financial Times (FT) reports. Chinese export prices are declining at their fastest rate since the 2008 financial crisis, indicating a potential global impact. Investors predict this deflationary pressure from China could prompt central banks, particularly in emerging markets, to cut interest rates. However, some economists argue the influence of Chinese export prices on consumer prices in advanced economies might be limited, citing factors like the relatively small share of Chinese imports in total consumption. Nevertheless, there are concerns about the underestimation of U.S. imports from China and the potential for increased trade protectionism in response to cheaper Chinese exports.

FT also highlights the impact on manufacturing sectors globally, with Chinese suppliers playing a critical role. It concludes by suggesting that while the U.S. and EU may face dilemmas regarding import reliance on China, other regions might simply opt for purchasing cheaper Chinese products if they meet quality standards.

Winter wheat drought footprint continues to shrink... As of Feb. 6, the U.S. Drought Monitor showed 42% of the U.S. was covered by abnormal dryness/drought, down two percentage points from the previous week. USDA estimated 14% of U.S. winter wheat areas were covered by drought, down three points from the previous week.

In HRW areas, dryness/drought covered 64% of Kansas (virtually no D3 and no D4), 40% of Colorado (virtually none in wheat-heavy eastern areas of the state), 21% of Oklahoma (no D3 or D4), 40% of Texas (2% D3, no D4), 36% of Nebraska (no D3 or D4; mostly in southeast and east-central areas), 24% of South Dakota (no D3 or D4) and 88% of Montana (no D3 or D4).

In SRW areas, dryness/drought covered 59% of Missouri (no D3 or D4), 17% of Illinois (no D3 or D4), 24% of Indiana (no D3 or D4), 11% of Ohio (no D3 or D4), 55% of Michigan (no D3 or D4), 22% of Kentucky (no D3 or D4) and 68% of Tennessee (1% D3, no D4).

Click here to view related maps.

U.S. pork exports surge in December... The U.S. exported 643.8 million lbs. of pork during December, the highest monthly total since May 2021. Pork shipments increased 36.3 million lbs. from November and 81.6 million lbs. from December 2022. In 2023, the U.S. exported 6.818 billion lbs. of pork, up 473.3 million lbs. (7.5%) from the previous year. USDA forecasts pork exports will rise another 3.8% this year to 7.080 billion lbs., which would be the second most ever behind 7.280 billion lbs. in 2020.

December beef exports totaled 252.4 million lbs., the most since August 2023. Beef shipments increased 23.1 million lbs. from November but were 14.1 million lbs. less than December 2022. In 2023, the U.S. shipped 3.038 billion lbs. of beef, down 506.6 million lbs. (14.3%) from the previous year. USDA forecasts beef exports will decline another 8.3% this year to 2.785 billion lbs., which would be the smallest tally since 2016.

Mexico passes China as leading exporter to America... In 2023, Mexico surpassed China as the top source of goods imported by the U.S. for the first time in over two decades. Imports from Mexico rose by $20.8 billion annually to $475.6 billion, while Chinese imports declined by $109.1 billion to $427.2 billion, as reported by the U.S. Census Bureau. Economists attribute this shift to escalating trade tensions between Washington and Beijing, noting it as a clear indication of decoupling affecting trade flows.

NALC updates key legal and regulatory issues for agriculture... The National Agricultural Law Center (NALC) provided updates to members of the National Association of State Departments of Agriculture (NASDA) regarding significant legal and regulatory issues affecting the agricultural sector in 2024 and beyond.

• Foreign Farmland Ownership: States have been proposing laws to restrict foreign ownership of US farmland, particularly targeting countries like China, Iran, North Korea and Russia. Legal challenges have arisen, with litigation in progress and rulings pending in federal district courts. The Eleventh Circuit Court of Appeals recently granted an injunction blocking implementation of Florida’s restrictions, citing potential conflicts with federal law and constitutional grounds.
• Proposition 12 and Corporate Transparency: The future of California’s Proposition 12, concerning animal welfare, faces potential challenges through legislative avenues like the Ending Agricultural Trade Suppression (EATS) Act. Additionally, the implementation of the Corporate Transparency Act (CTA) requires increased transparency in corporate ownership, impacting agriculture businesses and necessitating specific reporting.
• Glyphosate Litigation and Pesticide Rules: Legal battles surrounding glyphosate continue, with recent rulings suggesting ongoing challenges for pesticide companies. Lawsuits also target EPA’s 2020 registration updates for dicamba herbicide, potentially affecting its availability for the upcoming growing season. Issues regarding chlorpyrifos pesticide tolerances have seen conflicting rulings, impacting its availability for agricultural use.
• Waters of the U.S. (WOTUS): The Supreme Court’s ruling in Sackett v EPA has implications for the Biden administration’s WOTUS rule, with ongoing legal challenges and uncertainty surrounding its interpretation. Some states are operating under an injunction, applying an older WOTUS definition, while others adhere to EPA’s revised rule aimed at complying with the Supreme Court decision. Questions remain regarding the scope and interpretation of WOTUS regulations.

Bottom line: These legal and regulatory issues present significant uncertainties and potential impacts on the agricultural sector, requiring careful monitoring and legal counsel for affected stakeholders.

Court rules EPA unlawfully approved dicamba use... A federal court earlier this week ruled EPA unlawfully approved dicamba for use on soybeans and cotton crops. The decision vacates 2020 registrations for Monsanto (now Bayer) XtendiMax, BASF Engenia, and Syngenta Tavium, preventing farmers from using dicamba for weed control this season. BASF expressed concern about the impact on farmers and acreage. The court cited dicamba’s broader toxicity and volatility, siding with four organizations challenging EPA’s decision. Bayer disagreed with the ruling and awaits EPA guidance.

The Agricultural Retailers Association criticized the decision’s timing and called for science-based regulation. It urged an appeal and flexibility to minimize disruptions.

Senate advances foreign aid bill... The Democrat-led Senate advanced a $95 billion foreign aid bill on a 67-32 vote, with 17 Republicans voting to advance the measure. U.S. border security provisions were removed from the bill on Wednesday after a failed vote. The foreign aid package deals with Ukraine, Israel and Taiwan as well as humanitarian efforts in Gaza. House action on the matter is murky as Speaker Mike Johnson (R-La.) has not indicated whether he will bring it to the floor for a vote.