Israel Launches Limited Strike Against Iran

House farm bill surprise | GREET rule | Johnson gets Democratic help on foreign aid package

 
Modified report today as I am attending the Virginia Cattlemen’s Assn. meeting where I found details about a new Virginia law that defines Virginia Verified Meat as being bred, born, raised and processed in Virginia... a voluntary label supporting every segment of the industry.  It also creates a public/private partnership (similar to USDA Processed Verified Programs) where approved industry organizations can administer the program with VDACS oversight.  The goal is for Virginia producers to be able to cooperatively market beef and hopefully increase Virginia packing capacity. The bill passed unanimously through the whole state legislature and has been signed into law (going into effect July 1).  The Virginia Cattlemen’s Assn. is starting to work with VDACS (Virginia Dept. of Agriculture and Consumer Services) on developing the regulations needed to start and administer the program.  The bill was led by Delegate Michael Webert, a cattle producer.  Virginia Cattlemen's led the lobby effort.  The program is somewhat modeled after the Oklahoma Certified Beef program.

— Equities: Asian and European stock indexes were mostly firmer overnight. UU.S. Dow opened up 0.1%... S&P & Nasdaq weaker. In Asia, Japan -2.7%. Hong Kong -1%. China -0.3%. India +0.8%. In Europe, at midday, London -0.6%. Paris -0.4%. Frankfurt -0.8%.

— Grains firmer overnight. Corn, soybeans and wheat posted corrective gains during the overnight session. As of 7:30 a.m. ET, corn and soybean futures were trading 2 to 3 cents higher, SRW wheat was 5 to 6 cents higher, HRW wheat was around a penny higher and HRS wheat was 8 to 9 cents higher. Front-month crude oil futures were about 80 cents lower, and the U.S. dollar index was modestly weaker.

— USDA daily export sales: Private exporters reported the following sales activity:

• 216,500 metric tons of corn for delivery to Mexico. Of the total, 23,000 metric tons is for delivery during the 2023-2024 marketing year and 193,500 metric tons is for delivery during the 2024-2025 marketing year;
• 121,500 metric tons of soybeans for delivery to unknown destinations. Of the total, 13,500 metric tons is for delivery during the 2023-2024 marketing year and 108,000 metric tons is for delivery during the 2024-2025 marketing year
   

— Wholesale beef prices continue to slide. Choice wholesale beef prices dropped $1.01 to $295.80 on Thursday, while Select fell $1.61 to $289.27. Falling wholesale beef prices have kept packer margins deep in the red and made them unwilling to raise cash cattle bids. With feedlots in no hurry to move cattle at lower prices again this week, active cash trade doesn’t appear likely until later today. 

— Cash hog index climbs, pork pauses. The CME lean hog index is up another dime to $91.46 as of April 17. After recent declines, the premium in May lean hog futures tightened to $3.265 as of Thursday’s close. The pork cutout value firmed 41 cents on Thursday to $99.96. While it has spent three consecutive days below $100.00, there appears to be solid retailer demand just under that level as movement firmed to 303.7 loads yesterday.

— Israel’s retaliatory strike on Iran rattles markets. In response to Iran's recent aggression, Israel conducted a retaliatory strike, leading to heightened tensions and market reactions. Initially, the strike caused a surge in oil prices and safe-haven assets, reflecting investor concerns about potential escalation. However, subsequent reports indicating no significant damage to Iran's nuclear sites prompted a partial reversal of these gains as fears of prolonged conflict eased. The geopolitical turmoil also had significant implications for financial markets, with stocks declining, Treasury bonds and the dollar strengthening, and oil prices briefly surpassing $90 per barrel — crude is now lower. In Asia, the Nikkei 225 experienced a notable drop of over 3%, reflecting the global impact of the situation.

     Despite the escalation, there were indications that Iran did not intend an immediate retaliatory strike against Israel, as reported by Reuters. This development may have contributed to a sense of temporary relief among investors, prompting a retracement of some of the earlier market movements.

     Iranian media reported that sites associated with Iran's nuclear program were secure, and published footage of calm scenes in the areas where explosions were reported. Israel had for days weighed its response to Iran's unprecedented weekend strikes, most of which were intercepted. Iran launched the attack in retaliation for a suspected Israeli strike on its embassy compound in Syria earlier this month.

     Bottom line: The operation was small and viewed as an effort to de-escalate the situation.  

     Simultaneously, the world's largest democratic exercise in India commenced with voting underway in a major election taking place through June 1 (An estimated 969 million people are eligible to vote). PM Narendra Modi is seeking a third term and aims to win a supermajority of 370 seats, but faces challenges.

— Sales of bags and perfumes by LVMH contribute more to France's exports than agriculture does, according to the Financial Times. The luxury conglomerate accounted for 4% of all French exports in the previous year, totaling €23.5 billion, surpassing the 3.2% contribution from the agricultural sector.

— U.S. mortgage rates have surged past 7% and home sales in March posted their biggest monthly drop in more than a year, renewing pressure on the housing market. Though mortgage applications to purchase a home rose 5% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index, affordability is weakening. Meanwhile, despite a surge in supply, March home sales dropped, largely due to rising mortgage rates.

— EPA chief testifies April 30 amid speculation on green fuel model announcement. EPA Administrator Michael Regan is scheduled to testify on the fiscal year 2025 budget request for the EPA before the House Interior, Environment, and Related Agencies Appropriations Subcommittee on April 30. This has sparked speculation that the session or a day before it may include an announcement regarding the updated Greenhouse gases, Regulated Emissions, and Energy use in Technologies (GREET) model developed by the Department of Energy (DOE). The update pertains to how corn-based ethanol qualifies for sustainable aviation fuel (SAF) credits. The administration had initially aimed to announce the updated model by March 1 but missed the deadline. Both Regan and USDA Secretary Tom Vilsack have indicated that the update will be revealed soon, with Vilsack suggesting it would be weeks, not months, after the missed March 1 date.

— Stop the presses: E15 announcement coming. Widely expected, the Biden administration's Environmental Protection Agency (EPA) is set to announce an emergency waiver allowing sales of E15 fuel beyond June 1, extending into the summer driving season. This waiver involves bypassing Reid vapor pressure regulations to facilitate the sale of E15 during a crucial period for fuel distribution. Regulations mandate the transition from higher volatility winter gasoline to low volatility summer gasoline by May 1, ensuring compliance by June 1.

     Why this coming announcement is expected: EPA has previously implemented similar actions in the past two years, issuing temporary waivers to governors and renewing them throughout the summer driving season. EPA has taken the actions the past two years, formally notifying governors of states of the action under a temporary waiver that was in effect for 20 days, issuing letters to governors on the final business day of April. EPA renewed that action prior to the 20-day period ending during the course of the summer driving season that ends Sept. 15. However, EPA information indicates there is no specified timeline for how long a waiver can last, stating that the Clean Air Act "requires that waivers be limited as much as possible in terms of their geographic scope and duration." In making the decision in 2023, EPA said when notifying governors that the waiver applies "to the smallest geographical area necessary" to address the fuel supply issues that prompted the waiver

     These decisions were prompted by fuel supply concerns, including factors such as Russia's invasion of Ukraine, increased demand for E10 gasoline during supply shortages, and challenges in meeting fuel supply needs due to reduced refining capacity and heightened gasoline demand.

     USDA Secretary Tom Vilsack anticipated this emergency action, with several lawmakers, including Senate Majority Whip Dick Durbin and Republican Whip John Thune, (S.D.)  advocating for it.

— One key person is very upbeat about a new farm bill: House Ag Chair G.T. Thompson (R-Pa.) continues to say he will have a bipartisan approval of the coming text. What’s new? Thompson has worked very closely with Budget Chair Jodey Arrington (R-Texas) in coming up with safety net and crop insurance reform funding designed not to displease Democrats. Key details are awaited on that development.

     Of note: A House Ag panel contact (minority) informs: “All SNAP participants would face a benefit cut under the Republican’s Thrifty Food Plan proposal. An analysis of the proposal (link) shows that freezing the cost of the Thrifty Food Plan outside inflation adjustments would cut SNAP benefits by roughly $30 billion over the next decade.”

— The House Rules Committee approved the rule for a national security package championed by House Speaker Mike Johnson (R-La.), bringing it closer to passage in the House. The package consists of four bills aimed at providing $95 billion in military aid assistance for Ukraine, Taiwan, and Israel, as well as humanitarian aid for Gaza and other regions. Additionally, the package incorporates Republican national security priorities, such as sanctions against Iran, a ban on TikTok, and using seized Russian assets to fund the war in Ukraine.

     In an unusual move, Democrats voted in favor of the majority party's rule to overcome opposition from three Republicans who voted against it. This signals strong Democratic support for the rule on the floor, a decision that leadership had been deliberating on and waited to confirm until seeing the amendments and structure of the rule.

— India's government is facing a wheat stock crisis, with reserves hitting a 16-year low at 7.5 million metric tons as of April 1. This sharp decline, from 8.35 MMT a year ago and far below the average of 16.7 MMT, stems from two years of crop shortages and significant wheat sales from government stocks.

     Officials are reluctant to remove the 40% import tax or directly purchase from exporting countries but pledge to maintain stocks above 10 MMT moving forward. Current regulations mandate buffer reserves to stay at or above 7.46 MMT by April 1. Despite no wheat exports since 2022, there's speculation that import duties could be reconsidered post-elections if government procurement falls short of 30 MMT to 32 MMT.

     Two years of crop shortages and high wheat sales from government inventories have contributed to this decline, according to officials. Import duties could be reconsidered after the ongoing elections.

— Vilsack again taps CCC… this time for food aid. USDA and the U.S. Agency for International Development (USAID) announced release of $1 billion in previously allocated food aid. This funding will be used to purchase U.S.-grown commodities to provide emergency food aid to 18 countries, as previously identified by the two agencies. USDA will utilize Commodity Credit Corporation (CCC) authority to finance the effort. An initial tranche of approximately $950 million will support the purchase, shipment, and distribution of various U.S. agricultural products, including wheat, rice, sorghum, lentils, chickpeas, dry peas, vegetable oil, cornmeal, navy beans, pinto beans, and kidney beans. USAID will determine the most suitable deployment of these commodities to avoid disrupting local markets.

     Additionally, a separate pilot project of up to $50 million will be established to utilize U.S. commodities not traditionally included in international food assistance programs, with USAID collaborating with humanitarian organizations to develop this initiative. The supplies under the larger aid effort will be sent to Bangladesh, Burkina Faso, Burundi, Chad, Democratic Republic of the Congo, Djibouti, Ethiopia, Haiti, Kenya, Madagascar, Mali, Nigeria, Rwanda, South Sudan, Sudan, Tanzania, Uganda, and Yemen.

— USDA is evaluating the possibility of developing a vaccine to protect cattle from the H5N1 bird flu virus, which has recently been found in U.S. dairy herds. While the virus is believed to originate from wild migratory birds, it has been transmitted between cows and may have spread from dairy cattle premises to nearby poultry facilities. Although the risk to human health is considered low, there have been instances of mild symptoms in humans, such as a Texas dairy worker who exhibited mild symptoms of avian influenza. USDA Secretary Tom Vilsack highlighted the challenge of controlling the spread of the virus due to the unpredictable behavior of migrating birds influenced by weather conditions.

    As for a possible vaccine, USDA's Animal and Plant Health Inspection Service (APHIS) and the Agricultural Research Service are involved in assessing the development of a vaccine for H5N1 in cattle. Vaccine manufacturers have shown interest in developing vaccines for both poultry and cattle, but challenges remain in understanding the transmission dynamics and characterizing the infection.

     Transmission of the bird flu virus among cattle is believed to occur through mechanical means, possibly via milking equipment. While the USDA can establish links between affected herds in certain states, it does not currently have evidence to suggest that all affected herds received cows from a specific source.

    HPAI symptoms in dairy cattle are milder compared to poultry, with symptoms such as reduced milk output and lethargy, and little to no mortality reported. However, precautions are advised, including testing dairy stock for the virus before transportation, as well as implementing measures to prevent indirect transmission through contaminated equipment and clothing.

     Of note: The use of a vaccine for HPAI in poultry presents challenges, including the risk of affecting exports due to difficulties in identifying products from infected animals and the logistical complexities of vaccinating large flocks.

— Biden administration solidifies its stance on limiting oil and gas exploration in Alaska, with a plan that entails blocking oil development across a significant portion of the National Petroleum Reserve Alaska. This plan involves prohibiting leasing on approximately 10.6 million acres of the 23-million-acre reserve, effectively curtailing exploration activities. Additionally, the Department of Interior is anticipated to announce regulations today that would advise against permitting a crucial 211-mile roadway necessary to access a copper and zinc deposit in northern Alaska. This move could potentially lead to the rejection of the state-backed road project. Of note: While the new regulations will impact existing leases within the area, they won't alter the terms of the contracts nor hinder activities under the approved Willow project, despite opposition from environmentalists.

— Welspun Tubular, an Arkansas pipe manufacturer, has filed a lawsuit against Summit Carbon Solutions, a company planning to build a carbon dioxide pipeline system in Iowa. The lawsuit seeks more than $15 million in damages due to delays in their agreement.

     Background. Welspun Tubular was commissioned by Summit Carbon Solutions to produce approximately 785 miles of pipe starting in May 2023, with a total cost of about $183 million. However, Summit's project, which involves a 2,500-mile pipeline network across five states, faced delays in receiving approval. Construction, initially expected to start sooner, is now projected to commence early next year.

   According to the lawsuit, a purchase agreement allowed Summit to delay pipe production for up to six months until November 2023. Welspun further delayed production to early 2024 by manufacturing pipe for other clients, with Summit's agreement. However, when Welspun notified Summit of its intention to proceed with production in February, Summit sought another delay.

     Summit eventually canceled the agreement in February, leading Welspun to claim a $15 million cancellation charge and partial reimbursement for materials acquired for pipe manufacturing. Summit disputes owing the money and aims to find a resolution. They emphasize their commitment to collaboration with Welspun despite the dispute.

     Summit's pipeline system is intended to transport captured carbon dioxide from ethanol plants to North Dakota for underground sequestration. The Iowa Utilities Board is set to decide on issuing a hazardous liquid pipeline permit for the project. Meanwhile, state regulators in North and South Dakota rejected Summit's initial pipeline routes, with North Dakota reconsidering a revised plan and Summit intending to file a new permit request in South Dakota.

— NWS weather outlook: Scattered showers and thunderstorms push into the central/southern Appalachians and Southeast today... ...Wet snow and wintry mix over the central High Plains on Saturday as heavy rain threat develops over parts of Texas and the lower Mississippi Valley... ...Unseasonably warm across much of the South and Southwest as below average temperatures expand throughout the Great Plains and Midwest.

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