Evening Report | April 4, 2024

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Ag trade deficit widens in February... The U.S. exported $15.72 billion of agricultural goods in February against imports of $16.93 billion, resulting in a deficit of $1.21 billion. During the first five months of fiscal year (FY) 2024, U.S. ag exports stood at $78.86 billion against imports of $82.93 billion for a deficit of $4.07 billion. USDA forecasts ag exports at $170.5 billion and imports at $201.0 billion for FY 2024, which would imply a deficit of $30.5 billion. The first four or five months of the fiscal year are typically the strongest for ag exports, while imports are strongest during spring.

U.S. trade deficit largest shortfall in nearly a year... The U.S. trade deficit expanded in February for the third consecutive month, reaching $68.9 billion, marking the largest shortfall in nearly a year, according to data from the Commerce Department. Imports surged to nearly $332 billion, while exports climbed to $263 billion.

These figures, which are not adjusted for inflation, reflect a 1.9% increase in the trade gap compared to the prior month, exceeding expectations of a $67.6 billion deficit.

Brazil’s soybean exports surge in March... Brazil exported 12.63 MMT of soybeans during March, according to official government data, up 6.02 MMT (91.1%) from the previous month but 610,000 MT (4.6%) less than last year.

Brazil exported 431,307 MT of corn last month, down 1.28 MMT (74.8%) from February and 909,000 MT (67.8%) less than last year.

Russia holds up two Egyptian wheat ships due to trader dispute... Russian authorities are holding up two Egyptian ships loaded with wheat for export, according to Bloomberg. The ships are carrying cargoes from Grainflower DMCC, which people familiar with the matter say is an export partner of Russian trader TD Rif. Rif has been targeted by Russia’s ag watchdog Rosselkhoznadzor recently amid complaints about shipment quality. Egypt’s Supply Minister Ali El-Mosilhy told Bloomberg the ships were denied permission to sail because they did not have the right documents and are being held up in Russian ports.

Risk of HPAI pandemic ‘100 times worse’ than Covid?... The New York Times reported a highly pathogenic avian influenza (HPAI) pandemic with the potential to be “100 times worse than Covid” may be on the horizon after a human case was discovered in Texas, experts have warned. Dr. Suresh Kuchipudi, a bird flu researcher from Pittsburgh, told the Daily Mail, “This virus [has been] on the top of the pandemic list for many, many years and probably decades. And now we’re getting dangerously close to this virus potentially causing a pandemic.”

John Fulton, a pharmaceutical industry consultant for vaccines and the founder of Canada-based BioNiagara, said: “This appears to be 100 times worse than Covid — or it could be if it mutates and maintains its high case fatality rate. Once it’s mutated to infect humans, we can only hope that the [fatality rate] drops.”

Perspective: This is likely more hype than reality for now. But if some scientists are talking about HPAI becoming the next pandemic, it’s likely an issue that isn’t going away anytime soon.
 

Drought footprint mildly expands in HRW wheat areas... As of April 2, the U.S. Drought Monitor showed 41% of the U.S. was covered by abnormal dryness/drought, down one percentage point from the previous week. USDA estimated 18% of U.S. winter wheat areas were covered by drought, up one point from the previous week but well below 48% on this date last year. There was general improvement in SRW areas, while dryness/drought mildly expanded in Kansas and Texas.  

In HRW areas, dryness/drought covered 78% of Kansas, 30% of Colorado (virtually none in wheat-heavy eastern areas of the state), 38% of Oklahoma, 45% of Texas, 28% of Nebraska (all in the eastern half of the state), 49% of South Dakota and 94% of Montana.

In SRW areas, dryness/drought covered 67% of Missouri, 33% of Illinois, 11% of Indiana, 0% of Ohio, 73% of Michigan, 40% of Kentucky and 23% of Tennessee.

Click here to view related maps.

Farm bill update...  The following updates come from Dr. Joe Outlaw of Texas A&M Agricultural and Food Policy Center (AFPC):

• The House Ag Committee is expected to unveil its version of the farm bill in mid-April. Sources have said the Ag panel would consider the chairman’s mark two weeks after being released.
• Outlaw says if you look back at history, the quickest a farm bill has ever been released from committee and then signed by the president, is nine months. That means even if we see a farm bill by mid-April, it’s unlikely it would be passed in 2024.
• The House GOP farm bill version is expected to include an increase in reference prices, as well as other key changes (crop insurance program improvements, back-end loading of trade promotion funding for MPP and FMD, and biosecurity funding). We have previously cited sources as saying the reference price increases would be variable, higher for some crops, lower for others.
• Where’s additional farm bill funding coming from? While Outlaw wouldn’t give a clear answer, it appears the House Ag Committee staff was very creative in finding these funds. Outlaw mentioned the Commodity Credit Corporation (CCC), but didn’t go into detail. We have recently reported that it appears $40 billion to $50 billion in additional funding beyond the farm bill baseline has been found via SNAP changes (a complete no-no for Democrats), some tweaks to conservation funding (a no-no for Senate Ag Chair Debbie Stabenow if it moves away from climate-smart practices funding), and some tapping of USDA’s CCC (with some “guard-rail” language limiting USDA’s authority in tapping such funding).

Comments: The system of getting a new farm bill written and released needs to be reformed. And that includes all the time panel members going out to farm country and hearing what farmers want, despite not knowing the costs of all those wish lists or total funding available and if additional funding can be found. Even after we get a House farm bill, and a different Senate farm bill “soon” after, the question will eventually turn to can any House farm bill garner enough votes. And that includes more than a few nay votes from House GOP conservatives who have suddenly started to worry about deficits and debt. If the House GOP farm bill touches SNAP in any way (funding or policy nuances), that’s a red line for Democrats. If so, the fate of the farm bill will be like immigration reform: later, not sooner.

NASS announces program changes following five-year review... Every five years, USDA’s National Agricultural Statistics Service (NASS) conducts a program review following the completion of the Census of Agriculture. NASS made no changes of significance for field crops. For livestock, NASS will make changes to its survey work for the January Cattle Inventory Report, December Hogs & Pigs Report, Cattle on Feed Report and Milk Production Report, along with some others.

NASS will reduce the number of published states for the January Cattle Inventory Report from 50 states to 31 states, though it will publish all cattle and calves inventory, all cows inventory and calf crop for those 19 states. The 19 states will be Alaska, Connecticut, Delaware, Hawaii, Indiana, Louisiana, Maine, Maryland, Massachusetts, Mississippi, Nevada, New Hampshire, New Jersey, North Carolina, Rhode Island, South Carolina, Utah, Vermont and West Virginia.

NASS will reduce the number of published states for December Hogs and Pigs Report from 50 states to 16 states. The 16 published states will be Colorado, Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Carolina, Ohio, Oklahoma, Pennsylvania, South Dakota and Texas. The 34 non-published states will be accounted for as “other states.”

NASS will remove Minnesota as a published state in the Cattle on Feed Report. It will be accounted for in “other states.”

For the quarterly Milk Production Report, NASS will reduce the number of published states from 50 to 33. The 17 non-published states will be Alabama, Alaska, Arkansas, Connecticut, Delaware, Hawaii, Louisiana, Massachusetts, Mississippi, Montana, New Hampshire, New Jersey, North Dakota, Rhode Island, South Carolina, West Virginia and Wyoming, which will be accounted for as “other states.”

Key takeaways from the Resources for the Future’s Global Energy Outlook... As identified by the Financial Times (edited):

• Fossil fuels are projected to remain significant until at least the middle of the century, even in scenarios aligned with climate goals of limiting global warming to 1.5°C or 2°C. Complete phaseout of fossil fuels may not be necessary to achieve these goals.
• Carbon capture technologies will play a crucial role in mitigating emissions from fossil fuels. However, there is a significant need for scaling up these technologies, raising concerns about cost and incentivizing continued reliance on oil and gas.
• Meeting renewable energy targets set at COP28 will require substantial annual capacity additions, far exceeding current levels, with only a few scenarios achieving this goal.
• The goal of tripling nuclear capacity by 2050, as set at COP28, is highly ambitious and would require a significant reversal of current trends in nuclear power deployment.
• The future of natural gas remains uncertain, with divergent projections ranging from continued growth to a significant drop-off in demand by 2050. This reflects the ongoing debate over the role of gas in the energy transition.