Evening Report | April 28, 2023

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You Pro Farmer newsletter is now available... The grain and soy markets faced heavy selling pressure amid eroding technicals and active fund selling. Fundamental pressure for corn came from Chinese old-crop cancellations, while wheat plunged as HRW areas of the Southern Plains received the best rains since last summer and news Canadian farmers intend to plant the most wheat acres in 22 years. Soybeans faced pressure from seasonally slowing export demand as Brazil actively exports its record crop onto the global market. On the economic front, initial data showed U.S. economic growth slowed more than anticipated during the first quarter. Still, the Fed is expected to raise interest rates another 25 basis points after the May 2-3 monetary policy meeting amid sticky inflation. With debt-limit legislation seemingly getting closer, a major focus in Washington is debate over a new farm bill. We look at the wide-ranging wants of commodity groups and the major issues that need to be addressed. We cover all of these items and much more in this week’s newsletter, which you can access here.

EPA issues emergency waiver for summertime E15 sales... EPA issued an emergency waiver to allow E15 gasoline to be sold during the summer driving season, as we alerted you would happen in “First Thing Today.” EPA Administrator Michael S. Regan said, “Allowing E15 sales during the summer driving season will not only help increase fuel supply, but support American farmers, strengthen U.S. energy security, and provide relief to drivers across the country.”

EPA’s emergency fuel waiver will go into effect on May 1 when terminal operators would otherwise no longer be able to sell E15 in the affected regions of the country and will last through May 20, which is the statutory maximum of 20 days. EPA will continue to monitor the supply with industry and federal partners and “expects to issue new waivers effectively extending the emergency fuel waiver until such time as the extreme and unusual fuel supply circumstances due to the war in Ukraine are no longer present.”

Perspective: The waiver for summertime E15 sales will boost demand, though not as much as some believe. It also won’t ease pump prices much. Just over 2,500 stations offer E15 sales. As we’ve repeatedly stated, what’s needed is a permanent waiver for year-round sales to spur investment in E15 pumps.

Tentative deal reached to resume Ukraine grain transit through five EU countries... The European Commission said on Friday it had reached a deal in principle to allow the transit of Ukrainian grain to resume through five European Union countries that had imposed restrictions. European Commission Vice President Valdis Dombrovskis tweeted “an agreement in principle” was reached with Bulgaria, Hungary, Poland, Romania and Slovakia “to address concerns of both farmers in neighbouring EU countries and Ukraine.” He said the deal included “safeguard measures” for four products – wheat, corn, rapeseed and sunflower seed, though did not provide any further details. The deal also includes a support package worth 100 million euros ($110.25 million) for local farmers, Dombrovskis said.

Fed’s preferred inflation gauge eases in March but remains persistently high... The Personal Consumption Expenditures (PCE) price index rose 0.1% in March, easing from a 0.3% advance in February. The core PCE price index, minus volatile food and energy prices, increased 0.3%, the same as in the previous month. On an annual basis, the PCE inflation slowed to 4.2%, the lowest since May 2021, while the core index eased to 4.6%, matching December’s 13-month low but slightly above market expectations of 4.5%.

Fed fund futures reflect roughly 90% odds the Fed will raise interest rates another 25 basis points following next week’s monetary policy meeting. Expectations are the Fed will pause after that.

Russia lowers wheat export tax... Russia’s wheat export tax for May 4-11 will be 5,573.2 rubles ($70.17) per metric ton based on an indicative price of $281.70. That’s down from a rate of 5,678.9 rubles per metric ton the previous week.

USDA begins implementing climate-smart program... Some $3.1 billion — three times more than originally planned — will be spent on 141 pilot projects to offer incentives that encourage producers to adopt climate-mitigating practices on working lands. “The game’s changing. Farming is no longer about what food is produced; it’s also about how food is produced,” said USDA Secretary Tom Vilsack said. “The world is demanding more sustainable products across the board.”

USDA said 29 projects involving 45 major commodities in the Partnerships for Climate-Smart Commodities program were already active. Vilsack said negotiations were complete with the majority of 70 projects selected last fall for $2.8 billion in support. “We’re looking forward to seeing these projects hit the ground running now to enroll farmers and landowners in these exciting efforts.”

USDA announced a “learning network” that will share information about which project practices and approaches are successful. “We plan to make available our findings from this effort so that we can all work together to make the most climate-smart commodity markets move forward,” said Vilsack.

When in full operation, the projects will involve more than 60,000 farms and 25 million acres of working lands, including woodlands, using such practices as nutrient management and cover crops to sequester a combined 60 MMT of carbon in the soil and in trees, said USDA. The projects will run from one to five years.

NGFA supports targeted approach to rail safety... The National Grain and Feed Association (NGFA) urged leaders of the Senate Committee on Commerce, Science and Transportation to pass bipartisan, targeted rail safety legislation. In a letter sent today to Chairwoman Maria Cantwell (D-Wash.) and Ranking Member Ted Cruz (R-Texas), NGFA and 47 other members of the Agricultural Transportation Working Group said legislation should reduce the risk of future derailments while also ensuring a “reliable, economically sustainable” railroad freight transportation system. “We support Congressional efforts to improve rail safety and believe there are targeted, common-sense provisions that can address this important issue to prevent future incidents,” the groups stated. 

Provisions supported by the working group include:

• Standardization and expanded use of defect detectors, which help carriers prevent accidents.
• Increased funding for first responder training to meet new authorized levels set by the Infrastructure Investment and Jobs Act.
• Recommended improvements for track maintenance programs.
• Full funding of the Department of Transportation’s Pipeline and Hazardous Materials Grant Program, which is funded by hazardous materials registration fees paid by both the shippers and transportation carriers to support emergency response planning and training.

The letter also outlined several areas of concern that could create new supply chain disruptions.

Peak-season pressure is starting to reach pricing in container shipping’s spot market... Costs to ship boxes from Asia to the U.S. West Coast have surged this month, the Wall Street Journal reports, as container lines try to reverse a monthslong slide in rates that has hit carrier earnings and raised alarms about a bigger financial hit later this year. Xeneta says rates have jumped 34%, or $425, over the past two weeks. That suggests the market has accepted a big part of the $600 general rate increases that shipping lines rolled out at the start of the month. Experts say the carriers are trying to get U.S. importers to sign peak-season contracts rather than sitting back to see if spot rates will keep dropping. Their bigger hope is probably that importers follow through by boosting their shipping volumes in the coming months.