Evening Report | February 28, 2024

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Cotton producers: Increase old- and new-crop sales... Cotton futures surged to the highest level since mid-September 2022 on the continuation chart during overnight trade. While futures have gone parabolic and there could be more near-term upside potential, prices have only reached these levels three other times previously. We advise cotton hedgers and cash-only marketers to sell another 10% of 2023-crop to get to 90% sold. The remaining 10% of unsold old-crop inventory will be gambling stocks in case prices continue to surge. We also advise selling another 15% of expected 2024-crop production to get to 25% forward sold for harvest delivery.

Livestock producers: Extend feed coverage... Your cash feed coverage expires at the end of February. We advise extending all corn-for-feed and soymeal coverage another month in the cash market through March. We don’t want to get more aggressive in extending coverage until the corn and soymeal markets signal major lows are in place and extended rallies are likely.

Congressional leaders reach funding deal, averting a potential weekend shutdown... The agreement extends two shutdown deadlines into March, aiming to finalize six funding bills next week. Funding for agencies like USDA-FDA and Transportation-HUD is set to last through September, with text expected by the weekend with Congress clearing the bills next week. More contentious bills, including Pentagon and Homeland Security funding, have a new deadline of March 22. The deal, a result of bipartisan negotiations, prevents a shutdown ahead of President Joe Biden’s State of the Union address on March 7. However, passing the stopgap measure will require cooperation from both parties in Congress. If successful, attention will turn to spending bills for fiscal year 2025, which begins Oct. 1.

USDA raises FY 2024 ag exports, imports; trade balance unchanged... USDA now forecasts fiscal year (FY) 2024 ag exports at $170.5 billion, up $1.0 billion from the November forecast. Exports of livestock and dairy, as well as grains and feeds, lead the increase, which more than offset reductions in oilseeds and products. China is forecast to remain the largest market for U.S. agricultural exports at $28.7 billion, an $800-million reduction from the previous projection, largely due to strong South American competition for soybeans and corn. Exports to Mexico are forecast to rise by $500 million to a record $28.4 billion, whereas exports to Canada are increased $300 million to $28.0 billion.

U.S. ag imports in FY 2024 are forecast at $201.0 billion, up $1.0 billion from the November projection, driven by higher beef imports that raised $1.2 billion to $10.1 billion.

That would result in a record ag trade deficit of $30.5 billion in FY 2024, unchanged from the November outlook.

ACE CEO urges proper valuation of climate-smart ag in SAF assessment... American Coalition for Ethanol (ACE) CEO Brian Jennings sent a letter (link) to members of the SAF Interagency Working Group, urging them to properly value climate-smart agriculture (CSA) and consider real-world land use change (LUC) in their assessment of the Greenhouse Gases, Regulated Emissions, and Energy Use in Technologies (GREET) Model for SAF Lifecycle GHG Emissions under Section 40B of the Inflation Reduction Act. Accompanying the letter was an analysis (link) by Ron Alverson comparing modeled LUC estimates to real-world data.

Jennings cautioned that President Joe Biden’s goal of farmers providing 95% of SAF in the next 20 years could be jeopardized if the GREET model artificially inflates LUC and fails to value CSA practices properly. ACE emphasized the importance of GHG credits for CSA practices, which incentivize on-farm practices to reduce or prevent LUC-related emissions. The letter referenced a USDA decision to provide $25 million for a Regional Conservation Partnership Program led by ACE, aimed at implementing CSA practices across 167 counties in a 10-state region. This initiative seeks to provide data on the GHG effects of conservation practices in different soil types and climates.

ACE urged the Interagency Working Group to ensure the GREET model provides carbon credits for CSA practices, not only for Section 40B but also for the 45Z clean fuel production credit.

WIC funding and food stamp changes key topic of ongoing FY 2024 talks... Senate Democrats have requested an additional $1 billion for the federal food assistance program for women, infants and children, known as WIC. The program has seen an enrollment surge since the start of 2023, drawing down federal funds faster than anticipated. President Joe Biden requested the $1 billion to plug that gap. In exchange for that funding, House Republicans — led by the chief agriculture bill negotiator, Rep. Andy Harris (R-Md.) — want changes to the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps. The proposal would launch a pilot program that would restrict participants’ purchases to “nutrient dense” items.

“It’s no secret Dr. Harris would like to see the Supplemental Nutrition Assistance Program returned to what it was originally authorized in Congress to do,” a spokesperson for Harris said in a statement, “which is to ‘safeguard the health and well-being of the Nation’s population by raising levels of nutrition among low-income households.’”

Democrats and anti-hunger activists strongly oppose the GOP effort.

USDA begins trial allowing higher swine line speeds until 2025... USDA’s Food Safety and Inspection Service (FSIS) has initiated a new time-limited trial (TLT) allowing certain slaughter facilities to operate at swine line speeds up to 1,106 head per hour (hph) and higher speeds until Jan. 15, 2025. The trial involves on-site visits, worker interviews and observations of plant operations to assess safety and efficiency. Participating establishments must meet original TLT criteria and provide relevant data. Worker safety agreements with unions or representatives remain mandatory, with documentation required quarterly. Results from the study will inform potential rulemaking on line speeds.

TLT was launched in November 2021 following legal actions regarding the New Swine Slaughter Inspection System (NSIS). However, a third-party evaluation found insufficient data on the impact of faster line speeds on worker safety, leading to a 90-day extension granted in November 2023.

Q4 GDP revised slightly lower... U.S. gross domestic product increased at a 3.2% annualized rate in the fourth quarter of 2023, revised slightly down from the previously reported 3.3% increase and 4.9% in the previous quarter. The modest downward revision reflected a downgrade to private inventory investment.

An alternative mature of growth – gross domestic income (GDI) – has been running well below GDP figures since late 2022 and was just 1.9% in the third quarter of last year, according to updated data. Theoretically, GDP and GDI should be equal. The GDI data would suggest the economy isn’t as strong as GDP suggests.

Disposable personal income increased 4.0% in the fourth quarter, slightly down from the initial reading. Real disposable personal income increased 2.2%, also a slight downward revision. The latest figures suggest personal income and GDP are moving more in line with historical norms.

McConnell to step down as party leader at year-end... Mitch McConnell (R-Ky.), the longtime top Senate Republican, announced he will step down as the party’s leader at the end of the year, citing differences in national security views with the party, now led by former President Donald Trump. McConnell, who recently turned 82, made the announcement in a speech on the Senate floor, acknowledging the political climate within his party. His decision was not unexpected, given health concerns and disagreements within his ranks over foreign policy and leadership style.

McConnell emphasized the importance of America’s global leadership and advocated for a foreign aid bill supporting Ukraine during a recent White House meeting. His departure could potentially facilitate bipartisan efforts on national security issues.

McConnell plans to serve out the rest of his Senate term through 2026.

McConnell’s decision starts a race to be the next Republican leader. Obvious candidates are the “Three Johns” – Senate Minority Whip John Thune (R-S.D.), Senate Republican Conference Chair John Barrasso (R-Wyo.) and Sen. John Cornyn (R-Texas). Thune has served as McConnell’s stand-in during the Kentucky Republican’s absences, and many Republicans seek his guidance on legislation.