Evening Report

Posted on Thu, 03/26/2020 - 14:32

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Record-shattering unemployment claims as Covid-19 restrictions hit home… Shelter-in-place restrictions due to the coronavirus outbreak have had a major toll on the economy, resulting in a wave of layoffs. A record 3.28 million Americans filed claims for unemployment benefits last week, the Labor Department reported, which quadrupled the previous record of 695,000 in 1982 and doubled expectations for weekly claims to come in around 1.6 million. Of note, these figures do not include the self-employed or independent contractors.

The House is expected to clear a third rescue package tomorrow that should help stem the bleeding by providing aid payments to individuals and businesses. But some say more aid may be needed depending on the pandemic timeline. President Donald Trump has signaled he would like to target a staggered resumption of economic activity by Easter (April 12) but outbreak data will drive that decision. 

 

Powell pledges to continue to battle economic slowdown… Federal Reserve Chairman Jerome Powell made a rare televised interview appearance on the NBC Today show as the central bank deploys an unprecedented array of tools to prevent the health crisis from becoming a financial one. Powell pledged that the central bank will keep using the tools it has to fight the economic slowdown brought on by the coronavirus crisis. The central bank chief said the recent initiatives the Fed has taken will help provide capital to businesses that need it and will be especially helpful once the virus is brought under control. “When it comes to this lending, we’re not going to run out of ammunition, that doesn’t happen,” Powell told NBC’s Savannah Guthrie. “We still have policy room in other dimensions to support the economy.”

 

Varying reports about South American transport hiccups… Brazil’s truck shipments of ag goods fell 11.5% March 23-24 compared to volumes shipped before lockdowns associated with coronavirus, according to the data released by the transportation industry association NTC & Logistica. Reports on this front have varied, with groups like Cargonave Group saying things are flowing regularly, while Chinese crushers say shipments have been delayed due to Brazilian trucking disruptions.

Meanwhile, Argentina’s URGARA union that represents grain quality inspectors today asked the government to suspend exports for 15 days. The government has yet to respond, but thus far it has exempted those involved in grain transport/shipment from preventative isolation orders.

More than 3.4-million acres selected in general CRP signup... USDA today announced it accepted more than 3.4 million acres in the recently completed general Conservation Reserve Program signup. This marked the first general signup since 2016.

 

FSA open by phone appointment only; relaxes loan-making process/services… USDA’s Farm Service Agency (FSA) today indicated that its county offices will be open by phone appointment only until further notice. “While our program delivery staff will continue to come into to the office, they will be working with our agricultural producers by phone and using email and online tools whenever possible,” the related press release detailed.

The agency also announced it will relax the loan-making process and add flexibilities for servicing direct and guaranteed loans. This includes:

  • Extending the deadline for farmers to complete farm loan applications;
  • Preparing Direct Loan documents even if FSA is unable to complete lien and record searches because of closed government buildings. Once those searches are complete, FSA would close the loan; and
  • Closing loans if the required lien position on the primary security is perfected, even for loans that require additional security and those lien searches, filings and recordings cannot be obtained because of closed government buildings.

FSA also says it will extend deadlines for producers to respond to loan servicing actions, including loan deferral consideration for financially distressed and delinquent borrowers. “FSA will temporarily suspend loan accelerations, non-judicial foreclosures, and referring foreclosures to the Department of Justice. The U.S. Attorney’s Office will make the determination whether to stop foreclosures and evictions on accounts under its jurisdiction,” it details.

FSA also says that guarantee lenders can now self-certify, providing their borrowers with:

  • Subsequent-year operating loan advances on lines of credit;
  • Emergency advances on lines of credit.

FSA will consider guaranteed lender requests for:

  • Temporary payment deferral consideration when borrowers do not have a feasible plan reflecting that family living expenses, operating expenses and debt can be repaid; and
  • Temporary forbearance consideration for borrowers on loan liquidation and foreclosure actions.

Find more details here.

 

DOE halts solicitation to buy oil for SPR…  “Given the current uncertainty related to adequate Congressional Appropriations for crude oil purchases associated with the March 19, 2020 solicitation, the Department is withdrawing the solicitation,” the Department of Energy said regarding the original solicitation to buy 30 million barrels of crude oil for the Strategic Petroleum Reserve. The department added, “Should funding become secure for the planned purchases, the Department will reissue the solicitation.”

Offers were due today in the solicitation. This indicates the administration was unsuccessful in its efforts to find funds elsewhere to make the purchases since the $3 billion in funding was not included in the Covid-19 aid plan.

 

Senate on recess until April 20… The Senate will be in recess until April 20 but could come back for votes with 24 hours’ notice, according to Senate Majority Leader Mitch McConnell (R-Ky.). The Senate will meet in a pro-forma session in the interim.

 

Hogs & Pigs Report: March 1 hog herd even bigger than expected… USDA’s Quarterly Hogs & Pigs (H&P) Report estimates the U.S. hog herd at 77.6 million head as of March 1, up 3 million head (4.0%) from last year and about 467,000 head more than the average pre-report estimate implied. The market hog inventory at 71.3 million head was up 2.9 million head (4.3%). The breeding herd at 6.4 million head was up 0.4% from last year. U.S. hog numbers were record-large for March.

 

USDA

(% of year-ago)

Average estimate
(% of year-ago)

All hogs March 1

104.0

103.4

Kept for breeding

100.4

101.4

Kept for marketing

104.3

103.5

 

 

 

Market hog inventory

 

 

  under 50 lbs.

104.0

102.9

  50 lbs.-119 lbs.

103.6

102.7

  120 lbs.-179 lbs.

103.9

103.8

  Over 180 lbs.

106.5

105.4

 

 

 

Pig crop (Dec.-Feb.)

104.7

103.5

Pigs per litter (Dec.-Feb.)

102.8

102.5

Farrowings (Dec.-Feb.)

101.9

101.1

Farrowing intentions (March-May)

99.6

100.6

Farrowing intentions (June-Aug.)

95.7

100.4


Producers farrowed 1.9% more hogs in the December through February quarter than the previous year, which was more than the 1.0% increase they indicated in USDA’s December H&P Report. In addition, the number of pigs per litter rose by 2.8% to a record 11.0 pigs saved. That pushed the winter pig crop up 4.7% from last year to a record 34.7 million head.

Based on spring and summer farrowing intentions, hog producers are signaling they will throw the brakes on expansion plans. Spring farrowings are estimated down 0.4% from last year, which matches up with the breeding herd numbers, with summer farrowings projected to fall 4.3%. But producers repeatedly have farrowed more hogs than they indicated to USDA. Plus, we have to anticipate the number of pigs per litter will continue to rise. Therefore, the spring and summer pig crops will be larger than today’s numbers imply – unless there are fundamental changes in the U.S. farrowing business.

Based on the market hog inventories, the heaviest of the slaughter numbers relative to year-ago will soon be past. But the data signals slaughter will run about 4% above year-ago through spring and summer.

With the market hog inventories higher than the average pre-report estimates, the report data is negative for hog futures through summer at least summer. This is going to put even more pressure on increased demand to chew through excess supplies and limit upside price recoveries.

USDA noted these revisions to past data: “All inventory and pig crop estimates for March 2019 through December 2019 were reviewed using final pig crop, official slaughter, death loss, and updated import and export data. The revision made to the December 2019 all hogs and pigs inventory was 1.7%. A revision of 2.6% was made to the September-November 2019 pig crop. The net revision made to the September 2019 all hogs and pigs inventory was 1.2%. A net revision of 3.0% was made to the June-August 2019 pig crop.” Those revisions resulted in increases of 1.245 million head for the Dec. 1 all-hog inventory, 906,000 head for the fall pig crop, 1.02 million head for the Sept. 1 all-hog inventory and 1.055 million head for the summer pig crop.

 

Iowa cropland values show slight annual gain… The average value of an acre of Iowa cropland rose 0.1% for the six-month period ending in March, according to the semi-annual survey conducted by the Iowa Chapter of the Realtors Land Institute (RLI). That increase combined with the 0.8% increase reported in September 2019 indicates a statewide average increase of 0.9% from March 1, 2019 to March 1, 2020, RLI says.

Crop reporting districts were consistent with less than a 1% change in most districts. The southeast district saw the largest increase with 1.8% while the south-central district saw the largest decrease at 1.3%.

Major factors supporting farmland values today cited by survey respondents include a tight supply of quality farms on the market, MFP Payments, low interest rates and above-average yields in many areas. Major negative factors include continued trade uncertainty and low commodity prices that are straining net farm incomes.