Evening Report | March 15, 2024

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Your Pro Farmer newsletter is now available... Brazil cut its soybean and corn crop estimates, further widening the already wide gap between its forecasts and those from USDA. Markets are focused on the historically wide production differences, but key for prices will be changes to U.S. exports based on any crop adjustments by Conab or USDA. The International Grains Council projects record global grain and soybean production in 2024, which is expected to sharply increase world ending stocks for both. President Joe Biden proposed a $7.3 trillion budget for fiscal year (FY) 2025. A good portion of Biden’s proposals, especially on tax-increase revenues, will not be approved. But it shows Biden’s priorities ahead if he is re-elected. The USDA budget requests show a continued push for nutrition funding and a concerted effort toward equity (income redistribution) rather than focusing on production agriculture. Our News page 4 feature this week looks at an important issue for farmers in the years ahead – and a potential revenue builder – carbon intensity. We cover all of these items and much more in this week’s newsletter, which you can access here.

NOPA Feb. crush far exceeds expectations... Members of the National Oilseed Processors Association (NOPA) crushed 186.2 million bu. of soybeans during February – by far the most ever for the month, exceeding the previous high of 166.3 million bu. in February 2020. The crush pace increased 0.2% from January and was 12.6% above year-ago.

NOPA data implies the full February crush of about 195.5 million bushels. At that level, crush would be on pace to top USDA’s forecast for a record 2.300 billion bu., though once Argentina begins actively crushing new-crop supplies, export demand for U.S. meal is likely to diminish, which could slow domestic crush.

Soyoil stocks totaled 1.690 billion bu. at the end of February, up 183 million lbs. from January amid the much larger-than-expected crush. Renewable diesel continues to use more soyoil than expected. Soyoil exports have picked up recently, too.

U.S. frosts, freezes in Mid-South, Southeast to impact wheat... Frost and freeze conditions are expected during the early to middle part of next week across the lower Midwest, northern Delta, Tennessee River Basin and interior southeastern states. World Weather Inc. says some damage to wheat is expected, although most of the crop should come through the event with only temporary injury. Damage in the Plains or Midwest is not expected.

World Weather noted, this year’s weather pattern through the first half of March was similar to 2007, which endured the infamous Easter freeze. But the forecaster said, “Early indications suggest cold weather in April 2024 will be of short duration and will not have nearly the impact that the cold had in 2007 even though crops have some potential be a little more advanced this year because of warm weather in February and March. The intensity of cold that occurred in 2007 was substantial and that kind of cold is highly unlikely this year given the very warm atmosphere worldwide. However, the fact that our upper air wind flow pattern is similar to 2007 makes the next favored period for cool weather from this year’s 45-day cycle set to occur April 7-21, well timed to match the period of cold weather that occurred in 2007.”

EPA to unveil final tailpipe emissions rule next week... EPA will unveil the final tailpipe emissions rule for cars and trucks covering model years 2027 through 2032 on March 20. The rule will address both carbon dioxide and conventional pollutants. Last year’s proposal by EPA aimed at tightening pollution requirements, projecting a significant increase in electric vehicle (EV) sales by 2023, although the final rule does not mandate specific EV sales targets. However, the final rule reportedly delays some of the anticipated gains in EV sales to the latter part of the regulation’s period, rather than the early ramp-up as initially envisioned.

The rule has faced pushback from the oil industry and Republicans, who argue it limits consumer choice. Environmentalists have raised concerns about potential foregone emissions reductions due to the delayed increase in EV sales, although the overall rule is still expected to achieve nearly all of the same emissions reductions in the long run.

Stabenow rejects GOP proposal to redirect climate funds, odds of new farm bill declining... Senate Ag Chair Debbie Stabenow (D-Mich.) rejected a Republican proposal to redirect several billion dollars of climate funds into the commodity title of the new farm bill. Stabenow emphasized the importance of retaining climate funds for their intended purpose during an expo on climate-smart agriculture practices. She criticized the idea of splitting the funds, with half going towards commodities, as unacceptable.

Republican staff members from the Senate Agriculture Committee suggested moving $13 billion in climate funds, provided by the 2022 climate law (Inflation Reduction Act/IRA), into the conservation title of the farm bill to bolster conservation spending in the long term. Stabenow expressed support for increasing the conservation baseline but insisted that it must align with the statute's language on climate-smart agriculture.

In negotiations over the farm bill, farm groups and GOP farm-state lawmakers have prioritized higher reference prices and a stronger crop insurance program, both of which require funding. Climate funds have been considered as a potential source to offset these costs. However, Democrats, including Stabenow, have been firm in their stance against cuts to climate funds or the Supplemental Nutrition Assistance Program (SNAP).

Meanwhile, Stabenow highlighted ongoing negotiations on various aspects of the farm bill, expressing optimism about reaching agreements, particularly regarding strengthening the climate funds title. She emphasized the need to ensure that climate funds are used appropriately.

A key farm bill contact told us: Stabenow would need to give ranking member Sen. John Boozman (R-Ark.) “what he needs to support a farm bill” for it to pass both chambers this year.

EU proposes changes to support farmers... The European Commission said it plans new measures to support farmers from the fallout of the war in Ukraine and other geopolitical events. The commission said it would propose replacing a requirement for farmers to leave land fallow with a voluntary acreage scheme. It is also evaluating whether imports of Russian ag products could be restricted.

USDA report calls for expansion of biomass market... USDA released a report urging the expansion of the biomass market, encompassing products like furniture, bioplastics and biofuels. USDA Secretary Tom Vilsack emphasized the potential for increased revenue in the agricultural sector, particularly benefiting rural areas. The report proposes various measures to encourage greater production, including research into biomass crop availability, trials for new crops, improved harvesting methods and the development of bio-manufactured products. Training programs for workers in the biomass industry are also recommended. The report identifies barriers such as the need for established markets to incentivize farmers to plant biomass crops.

U.S. consumer sentiment at 3-month low... The University of Michigan’s consumer sentiment index decreased to 76.5 in March, marking a three-month low. While there were minor improvements in personal finances, they were countered by modest declines in expectations regarding business conditions. Despite this, consumers didn’t perceive clear signs of either economic improvement or deterioration. Many are currently refraining from forming judgments about the economy's trajectory, especially in the long term, awaiting the outcome of the November elections. The expectations gauge dropped to 74.6 from 75.2, while the current conditions subindex remained unchanged at 79.4. Inflation expectations for the next year held steady at 3%, while the five-year outlook stayed at 2.9%.

Clouds gathering over container shipping sector... The container shipping industry is grappling with challenges stemming from various factors, according to the Wall Street Journal:

• A surplus of new ships entering the market coincides with weakening demand, exacerbating the situation.
• Turmoil in the Red Sea is adding to operational costs, further straining shipping lines.

Hapag-Lloyd, ranked as the world's fifth-largest container line, issued a pessimistic forecast for the sector, warning of a potential operating loss this year. It is responding to the pressure on rates by implementing cost-cutting measures and operational adjustments. Hapag-Lloyd's average freight rates experienced a significant decline of 48% last year, highlighting the imbalance between supply and demand in the industry.

Despite a temporary halt in the decline of shipping prices at the beginning of the year, rates have resumed their downward trajectory. According to Drewry Shipping Consultants, average prices for shipments from Shanghai to Rotterdam have plummeted by approximately 30% since January.