Evening Report: March 28, 2022
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Supreme Court to hear California Prop. 12 case... The Supreme Court agreed to hear the case challenging California’s Proposition 12 law. The California law was passed by voters in November 2018 and backed by the Humane Society. The law, called Proposition 12, requires breeding pigs to be able to lie down and turn around in spaces in which they are housed, essentially outlawing pork produced using small gestation stalls in most circumstances. Farm groups, including the National Pork Producers Council (NPPC) and the American Farm Bureau Federation (AFBF), are seeking to overturn the law that also bans the sale of pork from hogs that don’t meet the state’s production standards, even if the pork was raised on farms outside of California. Nearly all pork currently produced in the United States fails to meet California’s standards.
In the coming weeks, NPPC and AFBF will file their initial briefings with the Supreme Court, which could hear oral arguments in the fall and could render a decision by the end of the year. NPPC started the legal battle against the ballot initiative since it was approved, arguing at the U.S. district and appellate court levels that Prop. 12 violates the Constitution’s Commerce Clause, which grants Congress the power to regulate trade among the states and limits the ability of states to regulate commerce outside their borders. The high court is taking up the case on appeal from the U.S. Court of Appeals for the 9th Circuit, which in July 2021 upheld a lower court ruling against the NPPC-AFBF lawsuit.
“We are extremely pleased that the Supreme Court will consider the constitutionality of Proposition 12, in which California seeks to impose regulations targeting farming practices outside its borders that would stifle interstate and international commerce,” said NPPC President Terry Wolters.
Meanwhile, Prop. 12 supporters think the Supreme Court will uphold the law.
"We are confident the Supreme Court will uphold California's landmark farm animal protection law,” said Kitty Block, president and CEO of the Humane Society of the United States. “The Court has repeatedly affirmed the states' rights to enact laws protecting animals, public health and safety, and the pork industry should focus on eliminating cruel caging of animals rather than attacking popular, voter-passed animal cruelty laws."
U.S. diesel exports increase... U.S. waterborne diesel exports from the U.S. Gulf Coast increased to 1.04 million barrels per day so far this month, according to Vortexa, an oil analytics firm. Current diesel exports are on pace for their highest level since August 2019. This has reduced U.S. diesel stocks to their lowest seasonally-adjusted level in eight years. Last week, two diesel cargoes were shipped from New York to Europe, a rare move. Europe has been a big buyer of diesel as they replace Russian diesel. Latin America has also increased its diesel purchases.
Sources: OPEC+ likely to stick to production target plan... When OPEC+ meets this week, the cartel is expected to stay with its plan to increase oil production by 400,000 barrels per day (bpd) each month and raise the target production level to 432,000 bpd after May 1. Several countries have requested OPEC+ countries to increase its oil production. While member countries have increased their production, they have produced less than their target. OPEC+ missed its target by 1.1 million bpd in February, according to the International Energy Agency.
Brazilian soybean crushers drop production, exports... Abiove, Brazil’s soybean crusher group, reduced its estimate of Brazil’s soybean crop to 125.3 MMT, down 10.5 MMT from its previous estimate. Soybean exports were reduced to 77.7 MMT. The group kept its crush projection at a record 48 MMT. Record soymeal exports of 18.3 MMT are expected in 2021-22. Soyoil exports are forecast at 1.7 MMT. The group predicts Brazil’s carryout stocks at 1.9 MMT, the lowest level in more than a decade.
France pledges to help Egypt with wheat supplies... France promised it would assist Egypt to cover its wheat needs over the next few months, French Finance Minister Bruno Le Maire said. France, the EU's biggest wheat exporter, and Egypt, the top global wheat importer, have resolved quality issues and will be holding talks about price, including shipping costs. Egypt traditionally purchases a significant amount of wheat from the Black Sea region and is looking for new suppliers. France, which holds the rotating European Union presidency, has also floated an international food security plan, including measures like allowing grain stocks to be released.
Ukraine might restart wheat exports in April... In April, Ukraine’s government will likely discuss lifting wheat export restrictions, Taras Kachka, deputy economy minister, told Bloomberg News in a video interview Sunday. The decision will be based on how planting goes in the country and if production estimates would provide enough food security. The government has already lifted its export ban on corn and sunflower oil to help farmers get money for spring planting.
Ukraine limits nitrogen fertilizer exports... Ukraine’s government is limiting the amount of nitrogen fertilizer that can be exported to 70,000 MT per month from April to June. The total amount of exports is also limited to 210,000 MT, according to APK-Inform, a Black Sea consultancy. The quotas apply to exports of “mineral or chemical nitrogen fertilizers.”
South Africa increases corn crop, still below last year... South African farmers are expected to harvest 7.115 MMT of yellow corn, primarily used for livestock feed, and 7.570 MMT of white corn, used primarily for human consumption. The forecast for both types of corn by the government’s Crop Estimates Committee (CEC) is up from the previous estimate. However, it would still be a 10% reduction in total corn production compared to last year when the country produced 16.315 MMT.
Higher U.S., Europe sales increase WH Group 2021 profits... The largest pork company in the world, WH Group, increased revenue by 6.7% to $27.29 billion for 2021, according to its company filing. The company that owns Smithfield Foods in the U.S. reported a 1.3% rise in packaged meats sales, its core business, to 3.32 MMT in 2021. China’s sales volume dropped by 1.6% in a consumer market lacking growth momentum. The profit for its Chinese business fell 22.2% to $764.69 million due to lower hog and meat prices. It also said profits from frozen products and pork imports had dropped considerably. Hog prices in China plunged last year as farmers rebuilt herds after an African swine fever epidemic, but Covid-19 outbreaks dampened demand. The company predicts Chinese hog prices will remain low in the first half of 2022 before rising in the second half. Most analysts expect prices to stay low for the entire year.
Biden releases 2023 budget... President Joe Biden unveiled a $5.8 trillion budget. The 2023 budget calls for $1.598 trillion in so-called discretionary spending – areas that aren’t linked with mandatory programs like Social Security – with $813 billion for defense-related programs and $769 billion for domestic spending. It is a 5.7% increase from the omnibus spending bill for the 2022 fiscal year. Biden calls for more than $2.5 trillion in tax hikes on wealthy and large corporations over a decade, on top of the nearly $1.5 trillion of increases included in the House’s version of the Build Back Better plan. It would be the largest tax increase in history in dollar terms.
Japan to look at fuel, food relief package... Japan’s Prime Minister Fumio Kishida will order the government to put together a new relief package by the end of April to cushion the economic blow from rising fuel and food costs. His party’s ruling coalition partner Komeito presented Kishida with a proposal that called for expanding subsidies to industries hit by rising fuel costs, cutting the gasoline tax and steps to mitigate the impact of rising grain prices. Rising fuel and raw material prices have dealt an additional blow to Japan’s economy, which has lagged other countries in making a sustained recovery from the impact of the pandemic.
