Evening Report | October 13, 2022

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Reuters: Russia prepared to end Black Sea grain export deal... Moscow has submitted concerns to the United Nations about an agreement on Black Sea grain exports, and is prepared to reject renewing the deal next month unless its demands are addressed, Russia’s UN ambassador told Reuters. Gennady Gatilov, Russia’s UN ambassador in Geneva, said Moscow had delivered a letter to UN Secretary-General Antonio Guterres on Wednesday setting out a list of complaints. UN officials are due in Moscow on Sunday to discuss the renewal of the agreement. “If we see nothing is happening on the Russian side of the deal – export of Russian grains and fertilizers – then excuse us, we will have to look at it in a different way,” he said.

Asked if Russia might withhold support for the grains deal’s renewal over the concerns, he said: “There is a possibility... We are not against deliveries of grains but this deal should be equal, it should be fair and fairly implemented by all sides.”

UN speokesperson Stephane Dujarric said: “We remain in constant touch with Russian officials, as well as with officials from the European Union, the United Kingdom and the United States in order to remove the last obstacles to facilitate the export of Russian grain and fertilizer.” He said Guterres was committed to those efforts and to having an extended and expanded Black Sea export deal.

 

Drought continues to expand eastward... As of Oct. 11, 82% of the U.S. was experiencing abnormal dryness/drought, according to the U.S. Drought Monitor, up five percentage points from the previous week. Drought coverage increased and intensified throughout the Pacific Northwest, Plains, Ohio River Valley and Southeast over the past week.

USDA estimates the drought footprint covers 66% of winter wheat acres (up 3 points from last week).

In HRW areas, dryness/drought covers 77% of Colorado (up 2 points), 99% of Kansas (unchanged), 90% of Montana (unchanged), 100% of Nebraska (unchanged), 100% of Oklahoma (unchanged), 95% of South Dakota (up 2 points) and 94% of Texas (up 5 points).

In SRW areas, dryness/drought covers 100% of Missouri (up 6 points), 64% of Illinois (up 17 points), 80% of Indiana (up 28 points), 46% of Ohio (up 26 points), 51% of Michigan (unchanged), 85% of Kentucky (up 19 points) and 74% of Tennessee (up 11 points).

Click here for more details and to view related map.

 

Consumer inflation slows but tops expectations... Consumer prices in the U.S. rose 0.4% on a monthly basis in September, the highest reading in three months, and twice the market expectation of a 0.2% gain. The consumer price index slowed to an annual rate of 8.2%, the lowest in seven months, but also above expectations. Increases in prices of shelter (0.7%), food (0.4%) and medical care services (1%) were the largest of many contributors to the increase. The food index continued to rise, jumping 0.8%. These increases were partly offset by a 4.9% decline in gasoline costs, but prices of natural gas (2.9%) and electricity (0.4%) increased.

     As for food inflation:

  • Fruit and vegetable index jumped 1.6% — 6.8% increase in the price of lettuce and 5% rise in apple prices. Potato prices rose 3.5%.
  • Meat index rose 0.7% — 1.8% hike in pork prices and a 0.6% rise in poultry prices. Beef prices declined 0.1% in September.
  • Dairy prices were 0.3% higher in September.
  • Sugar and sweets were up 1.8%.
  • Fats and oils rose 1.2%.
  • Egg prices, which have surged 30.5% over the past 12 months due to an outbreak of avian influenza, fell 3.5% last month.
  • Cereal and bakery products rose 0.9%.

Core inflation, excluding food and energy costs, rose 0.6% from August and 6.6% annually, the highest since 1982.

Following the hotter-than-expected consumer inflation data on the heels of Wednesday’s higher-than-anticipated producer prices, traders raised their bets on another big interest rate hike in November. Traders priced in more than 90% odds of another 75-basis-point rate hike by the Fed next month.

 

IMF urges governments restrain spending to fight inflation... Governments fighting inflation should limit spending increases to programs focused on helping the poor, the International Monetary Fund (IMF) said Wednesday, as surging food and energy prices create hardships worldwide. Such measures could include discounts on utility bills and allowances for school meals and public transportation, limited to low-income households, said IMF economists in their latest report on global fiscal conditions. IMF said policy makers should refrain from adopting price controls, subsidies or tax cuts for all households to cushion the effects of rising prices because such measures are costly and don’t work in the long run.

 

Exchanges cut Argentine wheat crop forecasts... Argentina’s wheat crop is now expected to total 16 MMT, according to the Rosario Grain Exchange, down 500,000 MT from its prior forecast. It said last weekend’s freezing temps in some areas further damaged a crop already hurt by drought. The Buenos Aires Grain Exchange lowered its 2022-23 Argentine wheat crop estimate by 1 MMT to 16.5 MMT.

Yesterday, USDA cut its 2022-23 Argentine wheat crop forecast by 1.5 MMT to 17.5 MMT.

 

New farm bill, but same debate on food stamps... Watching a farm bill debate is getting boring, especially after you’ve reported on ten previous ones. This time, it is the same divisive argument as recent bills: funding for SNAP benefits (food stamps). And it always ends up with lawmakers plowing more money for the program, and that will likely be the case this time. Although lawmakers may try to cut SNAP benefits as part of the farm bill due in 2023, “we’re not going backwards,” said Senate Ag Committee chair Debbie Stabenow (D-Mich.) at a food conference on Thursday. Deadline for portions of the bill is Sept. 30, although “oftentimes there has to be an extension. So that may happen,” she said.

Recall that House Republicans proposed large cuts in SNAP in the 2014 and 2018 farm bills, without success. Stabenow correctly noted the Nov. 8 general election would determine the dynamics for the new farm bill. “It depends on who is in the majority in the House and the Senate… whether we’re going to have fights around going forwards or backwards,” said Stabenow at the Consumer Federation of America conference. “So, we’re not going to go backwards. But we’re going to need your help to make sure we don’t.”

Nutrition funding, heavily skewed by SNAP, accounts 84% of farm bill spending.

In an interesting exchange, Stabenow rejected a suggestion by an audience member to ban the purchase of sugary beverages with SNAP benefits as a pilot project against obesity. “I don’t think low-income people should be told they can’t do something that everybody else can do.” More than four of every 10 Americans is obese, according to CDC data.

 

Minority farmers sue over repeal of debt relief program... Four minority farmers filed suit in the U.S. Court of Federal Claims over repeal via the Inflation Reduction Act (IRA) of the minority debt relief effort for USDA borrowers previously held up in court by suits filed by white farmers who alleged discrimination since the effort was based on race, not need. The Virginia farmers filing the suit allege repeal of the debt relief effort is a breach of contract by the government, arguing some farmers made financial plans based on the expectation of getting debt relief. Reuters reported that around 14,000 farmers of color received letters from USDA in 2021 that promised debt relief of around $2.4 billion. The initial race-based debt relief effort was contained in the American Rescue Plan but did not proceed due to court challenges. IRA repealed that debt forgiveness effort and replaced it with one based on need.

 

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