Evening Report | August 9, 2022

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China/Taiwan tensions remain elevated... China is conducting military exercises near Taiwan. China’s Eastern Theater Command announced yesterday that it would conduct fresh drills focused on anti-submarine operations and air-to-sea strikes, suggesting that Beijing will keep up the pressure on Taiwanese defenses. Meanwhile, President Xi Jinping has laid out a template for operating ever closer to “space near Taiwan Island” after warning that its military will “never sit idly by” and “whoever plays with fire will get burnt.”

Meanwhile, Taiwan’s military fired dozens of missiles off its southern coast today in a simulation of a defense of the island. Taiwan kicked off its two-day military exercise, known as Tianlei – which can be interpreted as “Thunder from the Sky” – with a one-hour live-fire drill involving more than 700 soldiers, with 38 howitzers firing 114 shells into the waters, according to Taiwan’s Eighth Army Corps. The annual drills, planned months in advance, come amid the highest tensions in decades between Taiwan and China.

“I’m not worried, but I’m concerned they’re moving as much as they are,” President Joe Biden told reporters, referring to China. “But I don’t think they’re going to do anything more.” In the meantime, the U.S. is keeping aircraft carrier USS Ronald Reagan and its strike group “on station in the general area to monitor the situation.”

One China watcher told us: “What began as a fairly restrained response to [House Speaker Nancy] Pelosi’s visit has escalated into a major show of force. How far will Beijing go the next time it feels compelled to up the ante over Taiwan?”

Consumers are choosing to buy chicken and cheaper cuts of beef... Tyson Foods noted the shift in consumer meat buying habits in its earnings report on Monday, a sign shoppers are becoming more cost-conscious as food prices rise. Rather than buying more expensive steaks and loins, consumers are spending more on less expensive chicken and other meats, company officials said. Consumers are becoming more frugal as prices for essentials such as food and gasoline have become more expensive.

Companies are paying close attention to shifts in demand as some retailers and consumer companies have issued profit warnings or projected falling sales in recent weeks as customers start to pull back on spending on certain items.

USDA: Cropland values surge... U.S. cropland values surged 14.3% for the year ending in June, reaching an average of $5,050 an acre, reports USDA’s National Agricultural Statistics Service (NASS). Leading the charge to higher values was Kansas, with a whopping 24.5% surge. It was followed by Nebraska (up 21%), Iowa (up 19.7%), South Dakota (up 18.9%) and Minnesota (up 17.6%). North Dakota reported a 14.1% increase followed closely by Indiana’s 14.0% rise. Wisconsin, Missouri and Illinois followed with gains of 13.6%, 13.4% and 13.3%, respectively. Michigan and Ohio rounded out the 12 Corn Belt states with increases of 12.8% and 11.0%, respectively.

In terms of dollar averages, Iowa topped the list for the 12 Corn Belt states at $9,350 an acre. That was followed by Illinois at $8,950, Indiana at $7,750 and Ohio at $7,550. Minnesota stood at $6,200 while Nebraska and Wisconsin both report an average of $6,000. New Jersey and California posted the highest average cropland values at $15,900 (up $7.4%) and $15,410 (up 11.2%), respectively.

On a regional basis, the Northeast posted an 8.8% increase, followed by gains in the Appalachian region (10.1%), the Southeast (9.3%), the Delta (6%), Southern Plains (12.7%), the Mountain States a (10.5%) and the Pacific (10.9%).  

Besides cropland values, NASS reported the value of U.S. pasture land rose 11.5% to an average of $1,650 an acre and the value of U.S. farm real estate, which includes farm buildings, jumped 12.4% to an average of $3,800 an acre.

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USDA rejects GAO finding on Thrifty Food Plan... USDA insists it followed all the applicable rules and processes in 2021 when it updated its Thrifty Food Plan, boosting costs under the program by an estimated $20 billion. The Government Accountability Office (GAO) said in an opinion released July 28 USDA should have submitted the final plan to lawmakers and the Comptroller General under the Congressional Review Act.

In an emailed statement to Congressional Quarterly, USDA said: “The Department stands behind its process and the resulting decisions which were made in full compliance with USDA’s statutory and regulatory obligations,” a spokesman said. “The Department is reviewing GAO’s decision and, in the meantime continues, to provide benefits that help to feed more than 41 million people — 1 in 8 Americans —each month.”

Soy-based asphalt soon to be commercially available... Soy-based asphalt technology discovered by accident at Iowa State University will be nationally available for commercial use next year. Researchers, who have been testing the product for roughly a decade, recently launched SoyLei Innovations, which is developing the rejuvenator product, which is a compound made of soybean oil that is mixed with recycled asphalt. Rejuvenator can reduce paving costs by as much as 80% compared to projects that use new materials, Eric Cochran, a chemical and biological engineering professor at ISU, said. Each acre of its pavement uses thousands of pounds of soybean oil. A nearly one-acre test site will be on display at the Farm Progress Show in Boone from Aug. 30.-Sept. 1.

Infrastructure and logistics updates... Container imports are projected at 12.8 million, in 20-foot-equivalent units, into major U.S. ports in the second half of 2022, down 1.5% from the same period in 2021 and about 5% below the first half of this year, according to the Global Port Tracker.

Container ship backlogs at the ports of Los Angeles and Long Beach fell to a new low of 10 vessels, according to the Marine Exchange of Southern California.

Meanwhile, more U.S. importers are trying to renegotiate contract shipping rates set at high levels earlier this year.