Evening Report | December 22, 2022

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Senate clears omnibus spending measure for FY 2023... The Senate Thursday afternoon cleared the nearly $1.7 trillion omnibus spending package by a 68-29 vote. Click here for some key ag-sector funding from the omnibus.

The bill now moves to the House. Speaker Nancy Pelosi (D-Calif.) said she hoped the House could pass the measure on Thursday night, though that depended on how long it took the Senate to send the amended version across the Capitol. Even after the House clears the bill, it will take time for the measure to be enrolled for Pelosi’s signature, the last step before it’s ready to go to the White House.

Bottom line: It’s just a matter of time before the spending bill becomes law.

Update on U.S./Mexico GMO corn trade clash... Mexico’s Agriculture Minister Victor Villalobos said U.S. officials were satisfied with a proposal to delay a ban on the import of GMO corn until 2025, according to a published report. President Andrés Manuel López Obrador signed a decree in late 2020 to end imports of GMO corn by 2024. Ahead of a U.S./Mexico meeting last week, López Obrador reportedly offered to wait until 2025 to ban imports of yellow corn, used in livestock feed. “Our U.S. counterparts considered this response satisfactory,” said Villalobos at an event on Wednesday, Reuters reported. “We submitted a document for discussion, possible in the second half of January, where this issue will be definitively resolved.” The timeline for restrictions on corn imports could be adjusted again in the future depending on domestic production levels, he said.

As for USDA, it referred questioners to “the public statement following last week’s meeting with Mexican officials.” In a joint statement, U.S. Trade Representative Katherine Tai and USDA Secretary Tom Vilsack said the Mexican delegation had presented “some potential amendments” to the GMO corn decree on Friday. “We agreed to review their proposal closely and follow up with questions or concerns in short order. There is a joint recognition that time is of the essence, and we must determine a path forward soon,” said Tai and Vilsack.

USDA raises food price outlook for 2023... USDA held its 2022 food price inflation outlook steady this month, keeping the increases at 9.5% to 10.5% for all foods, 11% to 12% for food-at-home (grocery store) prices and 7% to 8% for food-away-from-home (restaurant) prices. But USDA made revisions within the food categories used for grocery prices, including lowering the outlook for poultry to an increase of 14% to 15% (14.5% to 15.5% prior) and for vegoils to 18% to 19% (18.5% to 19.5% prior), cereal and bakery products to an increase of 12.5% to 13.5% (13% to 14% prior) and for other food to a rise of 12% to 13% (12.5% to 13.5% prior). USDA raised its egg price outlook due to the ongoing highly pathogenic avian influenza (HPAI) situation, with prices now forecast to climb 30.5% to 31.5%.

For 2023, all food prices are predicted to increase between 3.5% and 4.5% (up from 3.0% to 4.0% in November), food-at-home prices are expected to rise between 3.0% and 4.0% (up from 2.5% to 3.5% previously) and food-away-from-home prices are forecast to climb between 4.0% and 5.0% (unchanged). USDA made several increases in 2023 food categories. The ongoing HPAI situation has USDA also raising its forecast for 2023 egg prices, now putting the expected rise at 4% to 5% versus an outlook for 2% to 3% in November. That marks a sizable rise from USDA’s initial outlook for 2023, which was for egg prices to be unchanged — down 0.5% to up 0.5%. Fruits and vegetable prices are expected up 1% to 2% (unchanged to up 1% prior), with USDA noting “elevated prices for wholesale fresh vegetables are expected to place upward pressure on retail prices in the coming months.” USDA sees vegoil prices rising in 2023 by 5% to 6% even though it lowered the level of increase for 2022.

EU cuts 2022 wheat, corn crop estimates... The European Commission cut its forecasts for this year’s wheat and corn crops in the European Union. The commission now forecasts EU 2022 wheat production at 126.4 MMT, down 600,000 MT from its prior figure. It cut the EU corn crop 1.2 MMT to 52.1 MMT.

Cold Storage Report: Beef, pork stocks follow seasonal patterns in November... USDA’s Cold Storage Report showed beef stocks climbed in November, which is normal during the month, though they rose more than the five-year average. Pork stocks declined last month, which is the normal pattern, though they dropped slightly more than average.

Beef stocks at the end of November totaled 521.9 million lbs., up 11.6 million lbs. from October. The five-year average during the month was a 3.5-million-lb. increase. Beef stocks rose 31.5 million lbs. (6.4%) from November 2021 and were 25.9 million lbs. (5.2%) above the five-year average.

Pork stocks totaled 454.2 million lbs., down 55.5 million lbs. from October, which was slightly greater than the five-year average decline of 52.7 million lbs. during the month. Pork stocks increased 52.0 million lbs. (12.9%) from November 2021 but were 27.2 million lbs. (5.6%) below the five-year average. Bone-in ham inventories were record-low.

Total poultry stocks dropped 127.6 million lbs. from October to 1.049 billion lbs., though that was 161.3 million lbs. (18.2%) above November 2021. USDA reported record-low inventories for whole turkeys, turkey legs and mechanically deboned turkey meat.

Q3 GDP stronger than previously estimated... The U.S. economy grew an annualized 3.2% in the third quarter, better than 2.9% previously estimated, following two straight quarters of contraction in the first half of the year. The stronger growth reflects an upward revision to consumer spending and nonresidential fixed investment that were partly offset by a downward revision to private inventory investment. Thursday’s GDP report was the Commerce Department’s third and final look at the July-September quarter. The first estimate for the fourth quarter will be released Jan. 26.

Feedlot numbers expected to shrink vs. year-ago... USDA’s Cattle on Feed Report Friday afternoon is expected to show the Dec. 1 feedlot inventory down 2.8% from last year, with all estimates below year-ago levels. This would mark the third month in a row with a year-over-year decline in feedlot inventories. Analysts expect USDA to show placements dropped 4.2% last month, while marketings are anticipated to have increased 0.9% from November 2021.

H&P Report expected to show more hog herd contraction...  Analysts expect USDA’s Hogs & Pigs Report to show the U.S. hog herd contracted 1.5% from year-ago as of Dec. 1. The breeding herd is expected to be 0.2% smaller than last year, while the market hog inventory is anticipated to be down 1.6%. Based on expectations for fall farrowings, along with winter and spring farrowing intentions, the data is not anticipated to show any end to the extended contraction phase.  

WTO rules for Hong Kong in its trade dispute with United States... A World Trade Organization (WTO) panel found the U.S. broke trade rules in forcing Hong Kong goods to be relabeled ‘Made in China.’

Environmental groups sue to stop sale of oil, gas drilling rights off coast of Alaska... Environmental groups filed suit in federal court in Alaska seeking to halt the planned sale of oil and gas drilling rights on nearly 1 million acres in the Cook Inlet Dec. 30. The Department of Interior (DOI) had scrapped the sale earlier this year, but provisions in the Inflation Reduction Act (IRA) ordered the Biden administration to hold the oil and gas lease sales if there were sales of rights for wind energy in the Gulf of Mexico.

The groups want the court to vacate the environment review as they maintain it violates federal environmental law as it does not consider impacts to threatened species including the Cook Inlet beluga whale and humpback whales.

There are currently 14 active federal leases in the Cook Inlet, but no production is taking place. The only operating oil and gas platforms in the area are all in state waters.