Evening Report: April 29, 2022
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Your Pro Farmer newsletter is now available... The U.S. is ramping up food aid to those impacted by Russia's invasion of Ukraine via USDA and the U.S. Agency for International Development initiatives. President Joe Biden also proposed $33 billion in additional aid, including $500 million to encourage U.S. farmers to increase production of crops such as soybeans and wheat to address global food shortages. While food shortage concerns around the world mount, USDA again raised its U.S. food price forecasts. U.S. weather will remain wet into early May, further delaying corn planting, that's already the slowest for the date since 2013. Meanwhile, congestion and service issues have become a “real problem” for industries across the country that need rail to move their goods, including agriculture. We cover these issues and much more in this week’s newsletter, which you can access here.
EPA issues E15 summer emergency waiver... EPA issued an emergency waiver for E15 summer sales on Friday to help lower gas prices. The waiver goes into effect on May 1 and must be reviewed every 20 days. The White House says E15 can save consumers on average 10 cents per gallon at current prices. The waiver comes after President Joe Biden announced he would have EPA issue the waiver during his visit to an Iowa ethanol plant last month. Eight Midwest governors wrote EPA to request allowing year-round E15 sales in their states this week.
Hard freeze threatened Argentina’s crop... Argentina had another round of frost, with some crop areas having a hard freeze Friday morning, according to World Weather Inc. While the country had earlier frosts, today’s cold was more significant, impacting Buenos Aires and La Pampa with some hard freezes. Those hard freezes could end the growing season and threaten more immature late-season corn and soybeans with quality issues. A small part of the corn crop was still in the dough stage. The hard freeze could have helped the early soybeans by assisting them in dropping leaves, leading to faster harvest progress in May. The more immature late-season soybean crop was in varying stages of development. Some of the potential effects on the late-season soybean include reducing bean quality, more blackened beans and decreased oil content.
Weather extremes hampering Canadian planting progress... Farmers in Canada are struggling to plant crops in fields that are either too wet or too dry in the Prairie provinces. One-quarter of the cropland in Alberta, or 44 million acres, is in a significant drought, including major growing areas for spring wheat, barley and durum, according to Agriculture and Agri-Food Canada. In Manitoba, two-thirds of growing regions, another 21 million acres, suffer from excess moisture after back-to-back storms. There has been flooding in Manitoba and more rain is forecast over the weekend. World Weather Inc. predicts a strong ridge of high pressure for the latter part of next week into the following weekend resulting in temperatures well above average and limited rainfall across the Canadian Prairies. Immediately following the mini-heatwave, World Weather forecasts a good chance for rain in the southwestern Prairies to help improve growing conditions.
Ukraine farmers making planting progress... Ukraine farmers have planted 775,000 hectares of corn as of today, according to Ukraine’s agriculture ministry. That compares to the 1.07 million hectares by the same time last year when the country planted 5.4 million hectares of corn. For other crops, 175,800 hectares of spring wheat, 838,000 hectares of barley, 144,000 hectares of oats and 116,300 hectares of peas have been planted. The ministry did not provide total planted area or crop production forecasts. The ministry reported early spring planting was complete in six of the country’s 24 regions. There are no plans to plant crops in the Luhansk region and the total planted area is expected to be down 20% this year from last year due to the war.
Ukraine grain exports picked up in April, but still far below pre-war levels... Ukraine exported 763,000 MT of grain in April, compared to the 300,000 MT it shipped in March and the 6 MMT a month before Russia invaded the country. Ukraine’s April grain exports included 115,000 MT of wheat, 622,000 MT of corn and 25,000 MT of barley. Since July 1, Ukraine has exported 45.709 MMT of grain, including 18.5 MMT of wheat, 21.1 MMT of corn, and 5.7 MMT of barley. Ukraine’s agriculture ministry resumed publishing grain export information today. The ministry did not clarify how grain was delivered. Since the Russian invasion, the country has been working to secure alternative ways to ship grain as seaports are shut down.
India allows remaining GMO soymeal imports... India has allowed an extra 550,000 MT of genetically modified (GM) soymeal imports to help its poultry producers deal with a surge in animal feed prices, Reuters reported. The shipments need to be imported before Sept. 30. In August 2021, the government allowed the import of 1.2 MMT of GM soymeal. Indian importers were able to purchase 650,000 MT before the Oct. 31, 2021, deadline. The Indian poultry association had asked the government to allow the import of the remaining 550,000 MT of soymeal. The Soybean Processors Association of India opposes allowing GM soymeal imports since the country does not allow farmers to grow any GM crops.
Fed likely to slow rate hikes after May and June meetings... The Federal Open Market Committee will likely raise its benchmark rate by 50-basis points after its May 3-4 meeting and do so again in June – the first hikes of that size since 2000 – then downshift to a series of 25-basis-point moves during the second half of the year, according to a Bloomberg survey of 48 economists. The survey forecasts the Fed will lift rates to a target range of 2.25% to 2.5% by December, while markets are pricing in around 2.75% at year’s end. The last published forecasts by the Fed in March showed rates rising to 1.9% this year and 2.8% in 2023. The economists see Fed rates peaking at 2.88% in December 2023. The vast majority of economists surveyed saw little appetite for a 75-basis-point hike, which the Fed last delivered when Alan Greenspan was chair in 1994. The economists also expect The U.S. central bank to start shrinking its $9 trillion balance sheet in May.
Consumer Sentiment Index rises from March... University of Michigan’s Consumer Sentiment Index final survey for April had a reading of 65.2, a tad below the estimate released earlier in the month of 65.7 but well above March’s reading of 59.4, the worst level in over a decade. The Consumer Expectations Index came in at 62.5, a little below the earlier estimate of 64.1 but above last month’s reading of 54.3. The Current Conditions Index came in at 69.4, better than the earlier estimate of 67.8 and higher than the previous month’s 68.1 reading. The gauge of one-year inflation expectations remained unchanged at 5.4%, while the gauge for five-year inflation expectations was also unchanged at 3.0%.
U.S. inflation hits 40-year high...The personal consumption expenditures price index, which the Federal Reserve uses for its inflation target, advanced 0.9% from a month earlier and 6.6% from March 2021, the most since 1982, the Department of Commerce reported. Unadjusted for inflation, spending rose 1.1% from the prior month, while incomes increased more than expected. The median forecasts in a Bloomberg survey of economists called for a 0.1% decrease in inflation-adjusted spending from the prior month and a 6.7% rise in the price index from a year ago. The core PCE (minus food and energy prices) increased 5.2% from last year but declined 0.1% versus February.
Euro zone inflation hits new record high... Euro zone inflation rose to 7.5% in April from 7.4% in March, in line with expectations, driven by an ongoing surge in energy and food prices, data from European Union statistics agency Eurostat showed on Friday. Although volatile energy costs were the most significant contributor, the energy inflation rate declined compared to March. Price growth in food, services and non-energy industrial goods accelerated further, suggesting inflation is increasingly broad-based. Excluding food and fuel prices, core inflation that is closely watched by the European Central Bank (ECB), rose to 3.9% from 3.2%, while a narrower measure that excludes alcohol and tobacco products jumped to 3.5% from 2.9%. Both figures were well above expectations.
Vilsack defends budget request at House hearing... USDA Secretary Tom Vilsack defended USDA’s FY 2023 budget request, saying the topline $23.6 billion budget, $2.2 billion (10%) more than FY 2022 enacted levels, is needed at a House hearing on Thursday. He explained both discretionary and non-discretionary spending at the department has grown slower than the average across all federal agencies. He flagged the need to hire new staff in USDA’s Rural Development office, Natural Resources Conservation Service (NRCS), and other consumer-facing agencies as key — detailing that 5,300 fewer people work at USDA today than at the end of the Obama administration. Vilsack defended USDA’s projection that SNAP participation will increase by 1.2 million people next year. He explained one reason for the increase is USDA’s plan to boost outreach to people who may qualify for SNAP but do not currently collect benefits. He also stressed the need for agricultural research funding as he warned the U.S. is falling behind countries like China.
Sanford Bishop (D-Ga.), House Appropriations Agriculture Subcommittee chair, was pleased with the budget request that “continues to build” on climate, research, equity, and other efforts funded in previous budgets. However, Ranking Member Andy Harris (R-Md.) noted it includes little to address critical issues brought by surging inflation, transportation and export challenges, high fertilizer costs, and a possible global food crisis from Russia’s invasion of Ukraine. Harris also said he wants more oversight of non-discretionary spending at USDA, pointing to changes to the Thrifty Food Plan that “unilaterally increased spending $20 billion a year on SNAP.” He added that he eagerly awaits a GOP-requested Government Accountability Office (GAO) review of those changes.
USDA paid out $146 million in bird flu indemnities... USDA has paid out about $146 million in indemnities to poultry owners, with an additional $263 million available, USDA Secretary Tom Vilsack told the House hearing on Thursday. “That’s about half of where we were in 2014-2015 with the last outbreak,” he said, referring to the highly pathogenic avian influenza (HPAI) epidemic that killed more than 50 million turkeys and egg-laying chickens. Vilsack hopes the warming temps will see an abatement of the virus. So far, this year’s avian influenza outbreak has topped 35 million fowl.
Food aid might cost more to ship than purchase... USDA Secretary Tom Vilsack told a House hearing on Thursday he is concerned the cost to ship food aid will be more than it is for the purchases. He was successful in reducing some shipping food aid shipping costs. The shipping costs are high partly because of cargo preference requirements that the food move on U.S. carriers. “I'm not sure that I have the authority as secretary to waive those provisions,” Vilsack said. Overall, Vilsack thinks the budget “provides the resources to do what we think is necessary” for food aid purchases.
