Evening Report | December 15, 2022

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Extended forecast offers little moisture relief for HRW areas... The National Weather Service (NWS) 90-day forecast continues to call for increased chances of below-normal precip across most of HRW wheat areas during the January through March period. But the area expected to see above-normal temps across the Southern Plains continues to shrink, with the major HRW production areas now expected to see “equal chances” for above-, below- and normal temperatures during the three-month period. The majority of SRW production areas are expected to see above-normal precip, with mostly “equal chances” on temps.

Above-normal precip and below-normal temps are expected from the Pacific Northwest through the Northern Plains during the period.

The seasonal drought outlook through March shows drought persisting across most HRW production areas. Drought is expected to improve or be removed across most of SRW wheat areas.

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Drought recedes a little more, but footprint still wide... As of Dec. 13, 78% of the U.S. was experiencing abnormal dryness/drought, according to the U.S. Drought Monitor, down one percentage point from the previous week and seven points below the peak at the beginning of November.

USDA estimated 71% of the winter wheat crop was experiencing drought, down two percentage points from the previous week but 18 points greater than last year at this time.

In HRW areas, dryness/drought covers 84% of Colorado (unchanged), 100% of Kansas (unchanged), 88% of Montana (unchanged), 100% of Nebraska (unchanged), 98% of Oklahoma (down 2 points), 100% of South Dakota (unchanged) and 75% of Texas (up 1 point).

In SRW areas, dryness/drought covers 75% of Missouri (down 6 points), 86% of Illinois (unchanged), 93% of Indiana (unchanged), 52% of Ohio (down 5 points), 49% of Michigan (up 8 points), 79% of Kentucky (down 19 points) and 51% of Tennessee (down 46 points).

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NOPA crush lower than expected in November... Members of the National Oilseed Processors Association (NOPA) crushed 179.2 million bu. of soybeans during November. That was down 5.3 million bu. from October and lower than the 181.5 million bu. traders expected. The NOPA data implies a full November crush of 191 million bu., which would be slightly above year-ago.

Despite the slower-than-expected crush, soyoil stocks climbed 102 million lbs. during the month to a four-month high of 1.630 billion pounds. Implied use during November was down 6.9% from October.

Bunge plans new soy processing plant... Bunge announced it would invest about $550 million to build a soy protein concentrate facility in Morristown, Indiana. The new facility, which is adjacent to the company’s soybean processing plant at that location, is expected to process an additional 4.5 million bu. of soybeans. Construction is likely to start in the first quarter of 2023 with the plant expected to be fully operational by mid-2025.

The investment is part of a broader U.S. expansion of oilseed-processing capacity as demand rises for food, animal feed and vegetable oils used in producing renewable fuels. Soy protein concentrate is used to make meat alternatives, but also helps to increase nutritional value in existing meat and poultry products.

ECB, BOE follow Fed with slower pace of interest rate increase... The European Central Bank (ECB) raised interest rates 50 basis points, marking a slowdown in the pace of tightening from 75-basis-point hikes its two previous meetings. ECB flagged even higher interest rates, signaling it remains committed to its fight against inflation, which it says could stay above the 2% target through 2025. ECB also laid out plans to stop replacing maturing bonds from its 5 trillion-euro ($5.31 trillion) portfolio. Under the plan, ECB will reduce monthly reinvestments from its Asset Purchase Program by 15 billion euros starting in March and revise the pace of balance-sheet reduction from July.

ECB now sees inflation in the 19-country bloc that shares the euro at 6.3% next year, compared with expectations for 5.5% made in September. Its 2024 forecast was raised to 3.4% from 2.3%. In its first estimate for 2025, ECB sees inflation at 2.3%. ECB now sees GDP growth at 0.5% next year compared with 0.9% forecast in September, while in 2024, it is projected at an unchanged 1.9%. In 2025, ECB sees growth at 1.8%.

The Bank of England (BOE) raised interest rates 50 basis points to 3.5%, the highest level in 14 years. This marked the ninth straight increase in rates by BOE, the most aggressive run of hikes since 1989. BOE members indicated more rate increases were likely without providing signals on how high they may push rates. “Further increases in the Bank Rate may be required for a sustainable return of inflation to target,” BOE said.

USDA announces funding for rural clean energy projects... USDA said on Thursday it will invest nearly $600 million in clean energy projects for farms and rural communities in its effort to cut the nation's emissions while increasing energy security. USDA will distribute $285 million in grants and loans through its Rural Energy for America Program (REAP) for 844 projects in 46 states that will aid farmers with projects like the purchase and installation of solar arrays and implementing more energy-efficient farm equipment.

USDA is also opening applications for an additional $300 million in REAP funding, $250 million of which comes from the Inflation Reduction Act (IRA) that was passed by Congress in August and appropriated nearly $2 billion to REAP. USDA will receive the full amount of appropriated funds over a period of years and intends to distribute it as quickly as possible, Secretary Tom Vilsack said.

GAO finds USDA did not follow rules in updating its Thrifty Food Plan... While USDA was within its power to revise the Thrifty Food Plan under the Supplemental Nutrition Assistance Program (SNAP), the Government Accountability Office (GAO) said in a report the agency did not follow procedural steps in making the changes. USDA boosted maximum benefits by 21% or more compared with the rate of inflation, the first time that had happened in 45 years. GAO faulted USDA’s review process on the effort, saying that they did not follow “key project management practices, peer review guidelines, and quality standards.” The report also said USDA “missed an opportunity to identify ways to measure project success and to set clear expectations for stakeholders” with the update.

The report was requested by Senate Agriculture Committee Ranking Member John Boozman (R-Ark.) and House Agriculture Committee Ranking Member Glenn “GT” Thompson (R-Pa.), with the two blasting USDA’s actions in the wake of the report. “This report shows the problems with this process are far greater than USDA merely cutting corners,” Boozman said. “It is evident that the department’s political leadership set out to achieve a predetermined outcome and purposefully ignored important steps in the process that would get in their way.” Thompson also criticized USDA’s actions, saying it was a “particularly egregious effort to pull the wool over the eyes of the public as it relates to the Thrifty Food Plan Update.”

The GAO assessment will be used by Republicans in the coming debate on a new farm bill as SNAP and other nutrition programs comprise almost 85% of farm bill spending.

Russia warns U.S. on Ukraine military aid... Russia isn’t happy about the United States’ plan to send a Patriot missile defense system to Ukraine, which has been under near-constant bombardment from Russian attacks. Russia’s embassy in Washington issued a dire warning to the U.S. against giving the system to Ukraine.

“If this is confirmed, we will witness yet another provocative step by the administration, which can lead to unpredictable consequences,” the Russian embassy said in a statement.

Regulators set to propose biggest changes to U.S. stock market rules since mid-2000s... The proposed rule changes are aimed at giving small investors better prices on their trades. The SEC proposed rules would squeeze stock-market middlemen and reduce some advantages enjoyed by high-speed trading firms. It would amount to the biggest changes to stock-market rules since the mid-2000s. Brokerages and so-called wholesalers have said individual investors get a good deal under the current system and warned the SEC overhaul could end up hurting investors.