Evening Report | April 9, 2024

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Modest changes expected in April WASDE Report... USDA is expected to make relatively modest changes to its domestic usage forecasts in Thursday’s Supply & Demand Report. On average, analysts expect ending stocks to decline 70 million bu. for corn, rise 2 million bu. for soybeans and increase 17 million bu. for wheat. Globally, focus will remain on South American production, though USDA will likely remain above many private crop forecasts and Conab with its Brazilian crop estimates. The following estimates are from Reuters; Bloomberg for cotton.

NASS discontinues July Cattle Inventory Report, some data collection... USDA’s National Agricultural Statistics Service (NASS) will stop publishing the July Cattle Inventory Report. NASS will also discontinue the cotton objective yield survey, as well as all county estimates for crops and livestock beginning with this year. The decision to discontinue these surveys and reports was due to budgetary reasons.

Key Senate GOP Ag Committee members introduce bill to improve crop insurance affordability... This move directly challenges the proposal put forth by Senate Ag Chair Debbie Stabenow (D-Mich.) earlier in the year, which focused on offering lower-cost crop insurance options but required producers to opt out of certain risk management programs (ARC/PLC) to maintain funding for farm bill nutrition and climate initiatives.

The Republican bill, called the FARMER Act and led by Sens. John Hoeven (R-N.D.) and John Boozman (R-Ark.), aims to make crop insurance more accessible without mandating producers to opt out of other risk management programs. It includes provisions to increase premium support for certain coverage levels and enhance the Supplemental Coverage Option. Details on how the bill will be funded remain unclear.

States, organizations sue Biden administration over EV fuel economy rule... Several states and organizations filed lawsuits against the Biden administration’s recent revision of the calculation method for determining the fuel economy of electric vehicles (EVs). The Department of Energy (DOE) published a final rule on March 29, which sparked controversy. Critics argue DOE overstepped its authority in making these changes and failed to conduct an environmental impact assessment as required by the National Environmental Policy Act.

In their filings with the U.S. Court of Appeals for the Eighth Circuit, the plaintiffs contend DOE lacked the statutory power to implement a factor that adjusts the fuel efficiency of electric cars. They also claim DOE did not fulfill its obligation to assess the environmental impact of the revised standards.

DOE’s action was prompted by a 2021 petition for rulemaking submitted by the Natural Resources Defense Council and Sierra Club. The American Free Enterprise Chamber of Commerce and attorneys general from several states, including Iowa, Arkansas, Florida and others, have joined the legal battle against DOE’s decision.

Of note: Legal challenges to regulatory changes typically result in delays to their implementation as the cases proceed through the courts.

NPPC lobbying Congress to address state animal welfare laws in farm bill... The National Pork Producers Council (NPPC) emphasized the negative impacts of California’s Prop 12 law, including higher prices and reduced availability of pork. NPPC is seeking bipartisan support for federal legislation to preempt state laws and ensure consistency across states. While standalone legislation like the EATS Act hasn’t passed, NPPC remains hopeful for a solution in the next farm bill.

“We are looking forward to the farm bill as finding a federal solution for Prop 12,” said NPPC President Lori Stevermer, regarding a legislative fix. “That’s what the Supreme Court said — it’s an issue and it said that Congress needs to fix it — so we’re looking to Congress to fix it. Stevermer said some of the negative impacts of the law warned about by NPPC and other opponents have come to pass. “We’re seeing prices of select pork products [that are] 20% higher in California now that Prop 12 is in effect, versus before Prop 12. We’re also seeing consumption of fresh pork declining 8% to 10%,” she noted, citing reduced availability and higher prices for the decline.

NPPC CEO Bryan Humphreys added that those impacts are “exactly what [USDA Secretary Tom Vilsack] was referring to when he testified before Congress about the chaos that would ensue, partially in California for consumers, but also with a patchwork across the country, making it almost impossible for producers to comply.”

Vilsack calls for agricultural market competition boost... During an antitrust conference hosted by the Federal Trade Commission and Justice Department, USDA Secretary Tom Vilsack highlighted the need for more efforts to promote competitive markets in the agricultural sector. He specifically mentioned plans to revitalize the Packers and Stockyards Act, a competition law dating back to 1921. USDA has already finalized two rules aimed at clarifying this law and bringing transparency to contracts between poultry farmers and companies. Vilsack indicated that additional rules would be advanced this year to further reform the system for poultry producers, aiming for better balance.

Vilsack underscored the importance of educating both the public and lawmakers about the administration's anti-monopoly efforts to prevent a repeat of past congressional resistance, which hindered reform during the Obama administration. Vilsack emphasized the need for effective messaging to garner support and avoid opposition, particularly from industries such as the meat sector, which has threatened legal action against USDA’s competition regulations. Vilsack views this as a continuation and expansion of efforts over the past three years, aiming to secure broader understanding and backing to avoid obstacles like riders in appropriations bills.

Raw material prices surge on economic expansion optimism... Rising prices for raw materials used in manufacturing and transportation indicate investor confidence in an extended economic expansion. The S&P GSCI, a global commodities price index, has surged 12% this year, with copper and oil gaining approximately 10% and 17%, respectively. Optimism stems from expectations of increased demand from the U.S. and China, along with sustained momentum in industrial supply chains. A report from Macquarie Group suggests real income growth has stimulated global goods demand, likely pushing commodity prices even higher. This rally contrasts with an 18-month decline following Russia’s invasion of Ukraine, which caused prices of oil, natural gas, grains and industrial metals to soar. However, the surge in industrial material prices also poses a risk of triggering new inflation.

Global backlash against China’s exports intensifying... Countries such as the U.S., Europe, Brazil, India, Mexico, and Indonesia are imposing trade barriers and import-related measures against China, the Wall Street Journal reports. The resistance is fueled by concerns over the influx of cheap Chinese goods, which threaten local suppliers by undercutting prices. Efforts by China to boost economic growth through exports are met with growing opposition, highlighting tensions in global trade and the potential for a split in the global economy between those seeking to reduce dependence on China and those aligned with its supply chains.