Evening Report | May 31, 2023
Check our advice monitor on ProFarmer.com for updates to our marketing plan.
Cotton producers: Finish old-crop sales, increase new-crop sales... West Texas continues to receive rains, which increases odds USDA will raise its harvested acreage and production forecasts. As a result, we advise cotton hedgers and cash-only marketers to make the final 10% 2022-crop sale to get to 100% priced in the cash market. We also advise all cotton producers to sell another 10% of expected 2023-crop to get to 50% forward-priced for harvest delivery.
Livestock producers: Extend corn-for-feed coverage by two weeks... Corn futures have pulled back sharply the past two days. With corn-for-feed coverage running out today, we advise covering another two weeks in the cash market through mid-June. Given bearish seasonal tendencies during June, we don’t want to extend coverage beyond that at this time.
UN tries to save Black Sea grain deal with ‘mutually beneficial’ proposal... The United Nations proposed Ukraine, Russia and Turkey start preparatory work for the transit of Russian ammonia through Ukraine as it tries to salvage the Black Sea grain deal, a source close to the talks told Reuters. As the preparatory work starts, the UN reportedly wants parallel talks to be held on widening the Black Sea deal to include more Ukrainian ports and other cargoes. Ukraine and Turkey have agreed to the new proposal, intended to improve operations in the Black Sea grain export corridor, but Russia has not yet responded, the source said.
Brazilian soybeans headed to United States... Brazil is exporting a combined 120,000 MT of soybeans to buyers in the U.S., shipping data seen by Reuters showed. According to data from shipping agency Williams dated May 26, three vessels loaded with soybeans will leave ports in northern Brazil between June 4 and June 11. The data identifies the buyers as chicken producer Perdue Farms and global grains merchant ADM.
The 120,000 MT of Brazilian soybeans would be the largest imports from the country since 2021, when nearly 178,000 MT arrived in May and June, according to U.S. Census Bureau trade data. The record for Brazilian soybean imports into the U.S. was 1.048 MMT in 2014.
Firm raises Brazilian soybean, corn crop estimates... AgResource Brasil raised its Brazilian soybean crop estimate by 1.2 MMT to a record 155.15 MMT after yields came in better than expected. The firm increased its 2022-23 Brazilian soybean export forecast by 500,000 MT to a record 97 MMT.
AgResource Brasil increased its Brazilian corn crop estimate by 1.37 MMT to a record 127.45 MMT, noting favorable weather for the safrinha crop. That prompted a 3-MMT increase to its 2022-23 Brazilian corn crop forecast, which is now 50 MMT – and “could be even higher, given the price discounts” for Brazilian corn.
USDA cuts ag export forecast more than imports... USDA now forecasts fiscal year (FY) 2023 ag exports at $181.0 billion, down $3.5 billion from the February forecast. This revision was driven by decreases in corn, wheat, beef and poultry exports. U.S. ag imports in FY 2023 are now projected at $198.0 billion, down $1.0 billion from the February forecast. This decrease was primarily driven by horticultural, livestock, dairy and poultry product imports. That would leave the U.S. with an ag trade deficit of $17.0 billion for FY 2023 versus the $14.5 billion deficit implied by the February trade forecasts and the $2.4 billion surplus in FY 2022.
CBO: Changes to food aid in debt limit bill would cost money, not save... A Republican attempt to expand work requirements for federal food aid in debt legislation moving through Congress would increase federal spending by $2.1 billion over 10 years — far from the cuts GOP lawmakers had promised. An estimate from the nonpartisan Congressional Budget Office (CBO) released late Tuesday said that while the new work requirements in SNAP would save money, the added benefits pushed by Democrats would cost more — and add almost 80,000 people to the rolls in an average month.
CBO said the new work rules on their own would reduce SNAP spending by $6.5 billion over 10 years. But the exemptions added by Democrats for veterans, homeless people and others would cost $6.8 billion over the same period. The agency said the bill would cost another $1.2 billion because the changes would overlap somewhat as they were phased in.
House Speaker Kevin McCarthy (R-Calif.) dismissed the estimates. “Come see me in a year, and I’ll show you how much we actually saved,” McCarthy said as he left a late-night meeting Tuesday with his members. “You watch — a lot of people are going to get jobs now.” McCarthy and House Agriculture Committee Chairman Glenn “GT” Thompson (R-Pa.) said they believe the CBO estimate is incorrect and that some recipients who are already exempted from the work requirements may have been double counted.
The overall bill negotiated by McCarthy and Biden would still cut spending over the next two years. CBO said: “In CBO’s estimation, if HT 3746 was enacted and appropriations that are subject to caps on discretionary funding for 2024 and 2025 were constrained by the limits specified in section 101(a) of the bill, the agency’s projections of budget deficits would be reduced by about $1.5 trillion over the 2023–2033 period relative to its May 2023 baseline projections. Reductions in projected discretionary outlays would amount to $1.3 trillion over the 2024–2033 period. Mandatory spending would, on net, decrease by $10 billion, and revenues would, on net, decrease by $2 billion over the 2023–2033 period (see Table 4). As a consequence, interest on the public debt would decline by $188 billion.”
Peterson discusses key farm bill issues... Former House Agriculture Committee Chairman Collin Peterson, now a private agriculture industry consultant, discussed key issues concerning the upcoming farm bill in an interview with us on AgriTalk.
Work Requirements for SNAP: Peterson indicated that with the debt-limit establishing some work requirements for the Supplemental Nutrition Assistance Program (SNAP), this will facilitate the passage of a new farm bill, as disagreements over SNAP have disrupted past farm bill negotiations.
Funding for New and Existing Programs: Peterson expressed concern about the challenge of securing additional funding for new and existing programs, given the ongoing impasse over the debt ceiling and political resistance to both spending increases and cuts.
CBO Scoring of the farm bill: The Congressional Budget Office’s recent scoring of the farm bill has not aided the negotiations, according to Peterson. The scoring methodology has been contentious, and new groups are lobbying for their interests to be incorporated into the mandatory spending bill.
Reference Prices and farmer safety net: Peterson highlighted the demand for higher reference prices (the price at which crops are guaranteed to be purchased) for some crops, but especially the need for higher rice reference prices. However, he noted that increasing reference prices by just 10% would cost $20 billion and wouldn't necessarily benefit producers, especially those growing corn and soybeans.
Funding from the Commodity Credit Corporation (CCC): There is disagreement over using the CCC to fund new initiatives, a practice that started during the Trump administration, he said. Peterson argued that this funding strategy is not what the CCC was intended for.
Passage of a new farm bill: Peterson believes the likelihood of passing the farm bill has increased but isn't guaranteed. Some farmers could accept an extension of the current bill, but others, especially in the South, are seeking changes.
Overriding California’s Proposition 12: Peterson supports legislation to override California’s Proposition 12, which establishes minimum space requirements for farm animals. He argued against allowing one state to dictate nationwide agricultural practices using its economic influence.
RFS update... There are now 32 meetings that have either occurred or are planned at the Office of Management and Budget (OMB) regarding the final rule from EPA for levels under the Renewable Fuel Standard (RFS) for 2023 and beyond. The newly added meetings involve firms such as Mead & Hunt, which specializes in developing waste-to-energy solutions (June 12), Coalition of Massachusetts Anaerobic Digestion Facilities and CommonWealth New Bedford Energy LLC (June 13); and EVgo (June 13).
Many of the scheduled meetings are with groups that concentrate on renewable energy for electricity generation. There are reports suggesting EPA will delay the part of its proposed RFS plan for 2023, 2024, and 2025 that deals with renewable electricity generation. The concern is that potential court action might slow this component of the plan down. However, expectations suggest that even if the renewable electricity section is not part of the final rule due by June 14, it is likely to be released within this year.
