Evening Report | November 9, 2023
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USDA’s crop estimates, ending stocks higher than expected... USDA raised its corn crop estimate more than anticipated to a record 15.234 billion bushels. Its bigger soybean and cotton production forecasts were counter to market expectations. The bigger crop forecasts pushed projected 2023-24 ending stocks higher for all three commodities. Wheat ending stocks also increased as USDA cut use. While markets were down ahead of the reports, the data added to the price pressure, with soybeans leading losses on the day. Click here to view the full report details.
Winter wheat drought footprint unchanged... As of Nov. 7, the U.S. Drought Monitor showed 55% of the U.S. was covered by abnormal dryness/drought, up one percentage point from the previous week. USDA estimated 42% of U.S. winter wheat areas were covered by drought, unchanged from the previous week.
In HRW areas, dryness/drought covered 85% of Kansas (8% D3 or D4), 46% of Colorado (virtually none of the wheat-heavy eastern part of the state and none D3 or D4), 50% of Oklahoma (1% D3, no D4), 86% of Texas (11% D3 or D4), 40% of Nebraska (11% D3 or D4), 12% of South Dakota (no D3 or D4) and 33% of Montana (1% D3, no D4).
In SRW areas, dryness/drought covered 75% of Missouri (1% D3, no D4), 40% of Illinois (no D3 or D4), 63% of Indiana (no D3 or D4), 37% of Ohio (no D3 or D4), 26% of Michigan (no D3 or D4), 68% of Kentucky (no D3 or D4) and 97% of Tennessee (43% D3 or D4).
Click here to view related maps.
Odds favor El Niño lasting through spring... Current conditions are indicative of a strong El Niño, with anomalies increasing in the central and east-central Pacific over the past month, according to the U.S. Climate Prediction Center (CPC). The government forecast agency says there is a greater than 55% chance of at least a “strong” El Niño persisting through January-March 2024. There is a 35% chance of this event becoming “historically strong.” CPC says El Niño is anticipated to continue through the Northern Hemisphere spring, with a 62% chance of it lasting into the April to June period.
New farm bill, same issues... While it is now well-known farm-state lawmakers have no solutions yet on funding and policy issues relative to getting a new farm bill, now there is disagreement over what language should be in a likely one-year extension of the 2018 Farm Bill. House Ag Chair Glenn “GT” Thompson (R-Pa.) may want to withhold providing funding for 21 so-called “orphan” programs to put leverage on lawmakers to get a new bill completed in 2024.
As for funding issues, USDA Secretary Tom Vilsack has now been added to the list of officials who say they should or are looking at “creative” ways to find additional funding, saying “we would encourage Congress to consider them as quickly as possible.”
Meanwhile, Thompson said a new farm bill will not come before the full House until January “at the earliest,” citing issues he has previously noted — delays in getting scoring on proposals and technical responses from USDA and a lack of agreement on key issues.
“Quite frankly, we’re still being held back by USDA technical assistance, CBO scores and we’re working on the funding part of it,” he remarked. “It’s just challenging as we’re in two weeks in December, and that’s the limitation we have.”
Electric grid concerns... EPA officials are facing criticism and concerns about their plans to address greenhouse gas emissions from power plants, with some suggesting it could negatively impact grid reliability. At the annual reliability technical conference hosted by the Federal Energy Regulatory Commission (FERC), EPA representatives provided an overview of their regulatory agenda, and a stakeholder panel will offer reactions. This issue has created division within the industry. Prior to the conference, the chairs of the House Energy and Commerce committee expressed concerns in a letter dated Nov. 7. They questioned EPA’s analysis of the potential impact on electric reliability in developing its proposed rules for the power sector. They urged FERC commissioners to evaluate the consequences of the EPA's proposals.
Besides these concerns, the North American Electric Reliability Corporation (NERC) has issued a warning that nearly half of the U.S. is at risk of experiencing power outages this winter. According to NERC’s winter reliability assessment, power grids spanning from Texas to New England may face electricity shortages during an extended cold spell or severe storms this winter. John Moura, NERC’s director of reliability assessment, emphasized that certain areas lack sufficient natural gas pipeline and infrastructure to support gas-based power generation, leading to potential reliability challenges.
Powell’s IMF stick to recent script... Fed Chair Jerome Powell told an International Monetary Fund (IMF) gathering U.S. monetary policymakers are “not confident” interest rates are “sufficiently restrictive.” In prepared comments, Powell said the Fed “is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2% over time; We are not confident that we have achieved such a stance.”
Powell reiterated his stance the Fed will proceed cautiously, using data on a meeting-by-meeting basis to determine future monetary policy, noting the U.S. central bank “will not hesitate” if further rate hikes are needed in its fight against inflation.
Goolsbee: Fed will need to monitor risks of overshooting on rates... Austan Goolsbee, who serves as the president of the Federal Reserve Bank of Chicago, emphasized the need for monetary policymakers to closely monitor the impact of rising longer-term bond yields. He expressed concern that these elevated yields could potentially have a more significant effect on the economy than anticipated in the coming year. Goolsbee highlighted this concern becomes increasingly important as the central bank shifts its focus from determining how high to raise interest rates to considering how long to maintain them at a 22-year high.
Manchin won’t seek re-election... Senator Joe Manchin (D-W.V.), who has often bucked party leadership in recent years, said on Thursday he will not seek re-election in 2024, greatly hurting his party’s chances of holding the West Virginia seat. Manchin has been a key vote on every major piece of legislation of President Biden's tenure, as a moderate representing an increasingly conservative state. His support was critical to passage of President Joe Biden’s sweeping $1 trillion infrastructure law, one of the president’s key domestic accomplishments.
