Evening Report | September 9, 2022

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Your Pro Farmer newsletter is now available... Corn and soybean crop condition ratings as measured by the weighted Pro Farmer Crop Condition Index continue to fall. CCI ratings have declined for eight consecutive weeks for corn and five straight for soybeans. The decline in crop ratings has traders expecting USDA to cut its corn and soybean production estimates on Sept. 12. While much of the focus is on new-crop supplies, Brazil raised its soybean export forecast (it lowered corn exports) and Argentina is giving a foreign exchange boost to its farmers through September to encourage more shipments. Meanwhile, Russian President Vladimir Putin is questioning the Ukraine grain export deal. On the economic front, a potential world energy crisis is a threat to global growth, while central banks continue to aggressively raise interest rates to combat surging inflation. We cover all of these items and much more in this week’s newsletter, which you can access here.

Smaller corn, soybean crop estimates expected Sept. 12... Analysts fully expect USDA to cut its corn crop estimate in the Sept. 12 Crop Production Report, with the average forecast down 271 million bu. for production and 2.9 bu. per acre for yield from last month. Analysts are split on soybeans, though the average estimate is down 35 million bu. on crop size and 0.4 bu. per acre for yield. USDA is expected to mildly increase U.S. old-crop ending stocks for corn and soybeans. For 2022-23 ending stocks, the average trade estimate is down 171 million bu. for corn, up 2 million bu. for soybeans and up 8 million bu. for wheat from last month’s projections. The following estimates are from a Reuters survey (cotton from Bloomberg):

USDA to restart weekly export sales data next week... USDA said Friday it would release four weeks of export sales data on Sept. 15. “The Aug. 18 and Aug. 25 data will be combined in a single report,” USDA said in a statement. “Separate reports will be issued for the reporting periods ending Sept. 1 and Sept. 8.”

RFA quickly responds to ‘dirty’ ethanol story... A Reuters report on Friday said, “The nation’s ethanol plants produce more than double the climate-damaging pollution, per gallon of fuel production capacity, than the nation’s oil refineries,” citing its analysis of federal data. The Reuters story continued, “The average ethanol plant chuffed out 1,187 metric tons of carbon emissions per million gallons of fuel capacity in 2020, the latest year data is available. The average oil refinery, by contrast, produced 533 metric tons of carbon. The ethanol plants’ high emissions result in part from a history of industry-friendly federal regulation that has allowed almost all processors to sidestep the key environmental requirement of the 2007 law, the Renewable Fuel Standard (RFS), according to academics who have studied ethanol pollution and regulatory documents examined by Reuters. The rule requires individual ethanol processors to demonstrate that their fuels result in lower carbon emissions than gasoline.”

The Renewable Fuels Association (RFA) quickly responded: “To truly understand the climate impacts of transportation fuels, you have to look at the emissions associated with every step in the production process. Narrowly focusing on just one piece of the carbon lifecycle is inappropriate, misleading, and misses the forest for the trees. When all of the energy inputs and emissions related to producing corn ethanol are properly considered from beginning to end, it is clear that the fuel has a lifecycle carbon intensity that is 40-50% lower than gasoline. The science is clear that ethanol offers a significant and immediate carbon savings compared to petroleum.”

RFA also pointed out that:

• Just because an ethanol plant was “grandfathered” does not mean it isn’t meeting or surpassing the 20% GHG requirement. The plants were grandfathered based on the date they commenced construction, not based on their actual GHG performance. In fact, dozens of ethanol plants have clearly demonstrated to EPA (via the efficient producer pathway process) that they are surpassing the 20% threshold. We do not see how one can argue that “grandfathered plants contribute 40% more emissions than non-grandfathered plants.” There is no way of knowing that, as grandfathered plants that did not pursue an efficient producer pathway do not submit their full lifecycle carbon intensity scores to EPA.

• RFA had suggested that EPA use the GTAP as another model to cross-check their modeling results from the FASOM and FAPRI models. EPA agreed that using the GTAP model as another source to compare to FASOM and FAPRI made sense. There was also a major concern about the lack of transparency with FASOM and FAPRI—the models were unavailable to the public and stakeholders were unable to replicate or validate EPA’s work with those models. This violated EPA’s own guidance about transparency in decision-making and modeling. In the end, their final rule continued to rely primarily on FASOM and FAPRI model results, but also did include some scenarios from GTAP.

RFA continued: “At a few points in the exchange, we offered an interview to answer questions directly and clarify matters, but the reporter did not respond.

In continued follow-up, we provided an example of why examining stationary-source emissions in isolation of the rest of a fuel’s lifecycle is misleading and problematic. If one took the same analytical approach to electricity that the reporter is taking with ethanol and petroleum refining, the emissions related to electricity generation across most of the United States would be 14 to 35 times worse than the estimate for ethanol (per gasoline-gallon equivalent) and 27 to 66 times worse than the estimate for refined petroleum products (the low end is natural gas; high end is coal).

Does that mean electric vehicles running on natural-gas fired electricity are 27 times worse for the climate than gasoline, or an EV running on coal-fired electricity is 66 times worse? Of course not, because there are GHG benefits upstream and downstream of the electric power plant. But if you are looking only at the emissions coming from the facility where the fuel is produced, then non-renewable electricity (which is 80% of our supply today) would be viewed as a disastrous vehicle fuel choice for the environment and the climate.

Because we knew the reporter was going to cite the Tyler Lark et al. study from February, we shared with her the two rebuttals provided by researchers at Argonne and Purdue.”

They noted: “Our detailed review of the original paper and the responses by those authors reveals various major deficiencies, problematic assessments, and misinterpretation of the existing literature.” Even further, they wrote, after additional review, the paper “is more problematic than what we initially evaluated to be the case.”

RFA concluded: “The fact is, ethanol and other biofuels offer significant carbon emissions reductions today, and there is a clear and workable pathway toward net-zero carbon emissions by 2050 or sooner. And this is on top of their other benefits, such as lower gas prices at the pump and bolstering the rural economy and energy security. As always, we invite truly inquisitive reporters to learn more, so they can present information that is balanced, accurate and updated with the latest research in an evolving industry.”

Russia’s war with Ukraine hurting its own ag sector... Signs have surface that Russia’s invasion of Ukraine, which has been devastating to global food security, is hurting its own farm sector. Some of Russia’s top grain exporters are losing their market share and shipments have been down this season. Sanctions haven’t targeted trade in food and fertilizers, but some buyers, insurers and shippers are wary of doing business with Russian firms. Bloomberg notes there are questions over Russia’s ability to sustain agricultural production amid sanctions on critical imports of farm inputs. According to a confidential internal report obtained by Bloomberg News, fully 99% of poultry production and 30% of Holstein dairy cattle output depends on imports, while seeds for staples like sugarbeets and potatoes are mostly brought in from outside the country, as are fish feeds and amino acids.

Ag groups plea for Congress to prevent ‘devastating’ rail strike... More than 30 leading agricultural groups on Thursday urged lawmakers to avert a rail strike that would halt the transport of food and potentially cripple the U.S. economy. Around 115,000 rail workers could strike as soon as Sept. 16 if they cannot reach a contract agreement with railroads. In a letter to the top lawmakers on transportation committees, agricultural groups warned farmers rely on freight rail to transport their goods and that any kind of stoppage would likely lead to the loss of food supplies, driving up prices and exacerbating the risk of famine around the globe. “A complete stoppage of the rail system would lead to shutdowns or slowdowns of rail-dependent facilities resulting in devastating consequences to our national and global food security,” the groups, including the American Farm Bureau Federation and National Grain and Feed Association, told lawmakers. “A freight rail stoppage would drastically make inflation worse, especially for those who can least afford it,” they added.

In the event of a lockout, lawmakers could vote to enact the White House-appointed panel’s recommendations, something railroads are pushing for, or appoint arbitrators to fast-track a new deal, among a range of other options.

USDA reopens comment period on poultry growing tournament systems... USDA’s Agricultural Marketing Service (AMS) has briefly reopened the public comment period on its advanced notice of proposed rulemaking (ANPR) covering poultry growing tournament systems that was published June 8. The proposed rule had a comment deadline of Sept. 6, but AMS is reopening the comment period through Sept. 26, according to a notice in the Federal Register. The revision came after AMS received requests from industry organizations for additional time to comment on the plan “citing the breadth and complexity of the questions and concepts presented for comment.”

Salt in oceans may be the next big predictor of rains for crops... Brinier water on the surface of the ocean can predict heavier rainfall that will fall far from the coasts, according to Boston-based Salient Predictions, The company, whose clients include seed and crop chemical giant BASF SE, is using the technique to forecast precipitation totals and help farmers at a time when drought is hurting food supplies.

“Evaporation from the ocean is the main source of all rainfall, and if some patch of ocean gets saltier than normal, it’s because more water has evaporated,” Ray Schmitt, an oceanographer and co-founder of Salient Predictions, said in an interview with Bloomberg News. “It’s bound to rain more somewhere else.” Salient is marketing a new suite of weather metrics including ocean salinity to larger agricultural businesses.