Evening Report | March 12, 2024

Check our advice monitor on ProFarmer.com for updates to our marketing plan.

Last chance: Please fill out our acreage survey... You should have received our annual spring acreage survey via e-mail last week. Please fill out the survey with your current planting intentions for this year. We’ll cover results and our acreage forecasts ahead of USDA’s March 28 Prospective Plantings Report. Click here to fill out the survey if you haven’t already responded. Please complete the survey only once.

Russian wheat prices fall to lowest level since August 2020... Russian 12.5% wheat export prices last week dropped $9.50 to a range of $199.00 to $202.00 per metric ton FOB, SovEcon reported. This marked the lowest level since August 2020, as the market remained under pressure from high supplies and weak demand. SovEcon said domestic prices are tumbling, allowing exporters to offer lower rates. The current spread between French and Russian wheat is around $8 per metric ton compared to steady rates in late January. As a result, Russian wheat is gaining demand. SovEcon said outstanding Russian wheat sales as of March 12 reached 2.8 MMT, up from 1.9 MMT a month earlier.

U.S. consumer inflation edges up in February, core prices ease... The annual consumer inflation rate increased to 3.2% in February from 3.1% the previous month. The inflation rate rose from 0.3% to 0.4% on a monthly basis. This increase was mainly driven by higher prices for shelter and gasoline, which accounted for more than 60% of the overall monthly rise in prices.

However, core inflation, which excludes food and energy costs, eased to 3.8% from 3.9%.

The food index was unchanged in February, as was the food at home (grocery store) index. Both of these indexes rose 0.4% in January. The food away from home (restaurant) index rose 0.1% in February after increasing 0.5% in January. On an annualized basis, food inflation increased 2.2%, with grocery store prices up 1.0% and restaurant prices up 4.5%.

Highlights of Biden’s FY 2025 budget proposals... President Joe Biden proposed a $7.3 trillion budget for fiscal year (FY) 2025. The plan proposes lower costs for childcare and housing, among other things, funded by higher taxes on corporations and the rich. Highlights:

• The budget proposal is $300 billion higher than the current budget’s roughly $6.9 trillion.
• $895.2 billion in discretionary funds directed towards national defense. Of that, the Pentagon’s portion comes out to $849.8 billion — while up 2%, it’s a number that defense leaders say amounts to an effective cut from its FY24 request due to inflation. While high in dollar terms, at 3%, current U.S. defense spending as a share of GDP remains relatively low, especially compared to the 1950s and 60s, when it was closer to 9-10% of GDP, or during the Reagan era (6%), the Ford and Carter presidencies (~4.5%) and the Iraq and Afghanistan wars (~4%).
• Raises taxes by a net $4.9 trillion over a decade, or more than 7% above what the U.S. would collect without any policy changes.
• Aims at increasing taxes on wealthy individuals and corporations.
• Includes new tax measures, such as raising the corporate alternative minimum tax rate to 21% and rolling back tax breaks for private jet travel. Additionally, it resurrects Biden's earlier suggestions to increase the corporate tax rate to 28% (from 21%) and introduce a 25% minimum tax for the wealthiest households.
• Households worth at least $100 million would pay at least a 25% income tax rate.
• The top personal-income tax rate goes to 39.6%, from 37%, for those making more than $400,000.
• Capital gains for those earning at least $1 million would be taxed at a base rate of 39.6%, up from 20%.
• Imposes a capital gains tax on transfers, either during life or at death. There would be a $5 million exemption ($10 million for couples with portability). Also, farmers could elect to defer the tax until it is no longer farmed in the family, etc. but interest would be due, but payable over 15 years.
• Includes housing-related tax credits and an expansion of the child tax credit to assist low- and middle-income families.
• Section 2032A would be bumped up to $14 million and indexed to inflation. Tax expert Paul Neiffer says this would allow farmers to value their land at its rental value instead of current fair market value. Current law allows for about a maximum $1.3 million deduction. This would increase it to $14 million.
• All farm income over would be subject to either the Net Investment Income Tax or SE taxation if adjusted gross income exceeds $400/500,000. There is a phase-in of the tax.
• International tax proposals: Floats several new international tax proposals, including an expansion of the stock-buyback tax and tweaks to foreign tax credit reporting.
• USDA: Requests $29.2 billion, a $2 billion (8%) increase, that includes $6 billion in climate related funding, a $733 million increase from last year, and $7.7 billion for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), around a $700 million increase. USDA’s budget request included a $733 million increase in climate-related funding over fiscal 2023 spending and $387 million more to the USDA Forest Service to help address recruitment and retention challenges — including for the wildland firefighting workforce — critical risk mitigation work and other priorities. Biden proposed $112 million for USDA’s ReConnect program to expand rural access to high-speed internet service. Some $15 billion was proposed over the next decade so that participation in the Community Eligibility Provision, which allows schools in low-income areas to serve lunch for free to all pupils, could grow to reach 9 million students. Also proposed were $1 billion in loan guarantees to install renewable energy equipment on farms and small businesses; $6.5 billion for rural electric loans for clean energy, energy storage, and transmission projects; and $6 billion for climate resilience and other conservation practices. Of note: The White House supports permanent authorization of a cover crop incentive that is offered through federal crop insurance program. It provides a premium support of $5 an acre to farmers who plant cover crops.
• EPA’s FY 2025 budget calls for hiring 2,023 additional full-time employees to help rebuild the agency to carry out its mission. That would boost the EPA workforce to 17,145 full-time employees, according to the proposal.
• Biden is asking Congress for $8 billion toward the climate corps — the funding would be provided over a decade, to be put toward hiring 50,000 new workers annually by 2031 hire and train young workers to prevent wildfires, defend communities from floods, and install solar systems.
• Calls for a 2% civilian pay boost, along with a 4.5% military pay raise. The difference between the figures quickly drew a rebuke from Hoyer (D-Md.), the ranking member of the House Appropriations Financial Services Subcommittee, who said he’d push for an even raise across the board.

Bottom line: While a GOP-controlled House and a close Senate virtually assure a good portion of Biden’s proposals, especially on tax-increase revenues, will not be approved, it shows his priorities ahead if he is re-elected president. As for USDA, the funding requests show a continued push for nutrition funding and a concerted effort toward equity (income redistribution) rather than focusing on production agriculture.

Biden budget proposals include comments about a new farm bill... The administration says it wants to work on issues surrounding new and beginning farmers; shoring up agricultural research; enhancing investments in climate-smart agriculture and forestry; and supporting competition by increasing transparency and support for independent meat processors, among other priorities. It also says the administration “supports improvements to crop insurance, proactively managing risk from natural hazards, including the permanent authorization of the cover crop incentive program.”

USDA Secretary Tom Vilsack said too much of the farm bill discussion is about how much one commodity or another is getting. “The future of the farm bill can be broad, looking for ways in which every farming operation has a shot,” Vilsack said.

Tenth Circuit upholds GMO corn lawsuit settlement, rejects fee dispute appeals... The U.S. Court of Appeals for the Tenth Circuit upheld a settlement agreement related to attorneys’ fees in a lawsuit concerning genetically modified (GMO) corn. The lawsuit, involving Syngenta AG, centered on the release of GMO seeds in China before regulatory approval, which led to U.S. corn producers being excluded from the Chinese market. Numerous lawsuits were consolidated in multidistrict litigation before the U.S. District Court for the District of Kansas, resulting in a $1.51 billion settlement.

Following the settlement, $503 million in attorneys’ fees were allocated, with four pools established. Three pools corresponded to common benefit work for each state involved, while the fourth was for attorneys representing individual clients. The allocation plan faced challenges from several firms, leading to a series of appeals.

In one of these appeals, Watts Guerra LLP reached an agreement to end litigation over their fees. Under this agreement, Watts Guerra would receive $7 million from the common benefit pools, funded by a reduction in other firms’ awards. However, firms with pending appeals and those challenging the settlement agreement were not required to contribute to this fund.

The Tenth Circuit determined that objecting firms lacked standing to challenge the settlement agreement because their fees would not be affected by the agreement with Watts Guerra. Judge Jerome A. Holmes emphasized that rescinding Watts Guerra’s fees wouldn’t impact the objecting firms’ fees, thus they hadn’t suffered an injury granting them standing.

The court also rejected the argument that objecting firms suffered a procedural injury, stating that without a concrete prejudice, procedural injury alone was insufficient for standing. Moreover, since the Tenth Circuit had affirmed the allocation orders, many arguments against them were deemed “stale.”

The ruling deferred decisions on appeals related to the portion of funds for attorneys representing individual clients. Judges Robert E. Bacharach and Carolyn B. McHugh joined in the opinion. Watts Guerra was represented by MoloLamken LLP. The case is Shields Law Group LLC v. Stueve Siegel Hanson LLP, 10th Cir., No. 21-03021, decided on March 11, 2024.