Evening Report | April 12, 2024

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Your Pro Farmer newsletter is now available... USDA’s April crop reports failed to provide any bullish spark for grain markets. USDA cut corn ending stocks 50 million bu., though that was less than traders expected. Soybean and wheat carryover were raised 25 million bu. each. On the global side, USDA made modest changes to the 2023-24 ending stocks forecasts. The lack of a bullish surprise failed to trigger buyer interest. In fact, futures faced pressure immediately after the report data. We have full report details on News page 4. Not surprisingly, USDA remained well above Conab with its Brazilian crop forecasts. Private crop forecasters cut Argentina’s production, especially for corn, given spreading disease pressure. Cases of Bovine Influenza A Virus continue to spread among the U.S. dairy herd, with eight states reporting cases – and that number is likely to climb. On the economic front, March inflation data came in hotter than expected, pushing back odds of the Fed starting rate cuts by midyear. The highest odds are now for the first rate cut in September, with two reductions now expected this year instead of three. We cover all of these items and much more in this week’s newsletter, which you can access here.

Michigan finds three more cases of BIAV in dairy herds... Michigan’s Department of Agriculture announced the detection of Bovine Influenza A Virus (BIAV) in three additional dairy herds. That increases the total cases to date in the state to four. Not counting these cases, USDA’s Animal and Plant Health Inspection Service has confirmed 26 cases of BIAV in eight states.

Firm raises Brazil soybean, corn crop forecasts... Safras & Mercado raised its Brazilian soybean crop forecast by 2.65 MMT to 151.25 MMT. The Brazil-based consulting firm increased its outlook for the country’s corn crop by 270,000 MT to 126.13 MMT, despite a 370,000-MT reduction in expected safrinha production.

USTR confident in victory on Mexico GMO corn dispute, focuses on Indo-Pacific trade expansion... In an interview with Politico, Doug McKalip, Chief Agricultural Negotiator in the Office of the United States Trade Representative (USTR), defends U.S. trade policy and predicts success in the GMO corn challenge with Mexico under the U.S.-Mexico-Canada Agreement (USMCA). McKalip emphasizes the importance of science-based decision-making and vows to see the case through.

While avoiding speculation on potential tariff actions against China, he stresses the Biden administration’s commitment to diversifying trade partnerships in the Indo-Pacific region.

Despite not pursuing new free trade agreements, efforts are directed toward facilitating agricultural exports by addressing market entry barriers.

Bottom line: McKalip echoes concerns raised by USDA Secretary Tom Vilsack about the trade deficit in the agriculture sector, highlighting challenges posed by a strong U.S.  economy and dollar. The administration seeks to reassure the agriculture community amid growing concerns over trade deals and widening trade deficits.

China may cancel European corn cargoes, too... China may cancel corn shipments from Europe following cancellations of Ukrainian cargoes to ease supply pressure on the domestic market, China Grain Net, an information provider affiliated with state stockpiler Sinograin, said. “China’s domestic corn prices have hovered near more than three-year lows as imports have surged and demand from the domestic feed industry have weakened. Some importers have already booked too much corn, leading to the recent cancellation of import orders,” China Grain Net said in a note.

As of April 4, there were only 157,000 MT of outstanding U.S. old-crop corn sales on the books, so there is limited risk of cancellations.

Biggest farm bill hurdles: Cost and funding moves... For months, House farm-state lawmakers and Ag Committee staff have been searching for ways to add billions in funding for a new farm bill above the CBO-estimated $1.51 trillion farm bill price tag over 10 years. When House Ag Chair Glenn “GT” Thompson (R-Pa.) finally releases details of the omnibus package sometime in May, initial focus will be on the “creative” ways he and staff have found to boost the farm bill baseline by a likely $40 billion to $50 billion. But that’s when additional hurdles will surface.

• Farm-state Dems are already upset about some of the ways Republicans have reportedly found additional funding.
• With the U.S. debt adding $1 trillion every 100 days, and the cost to service the debt exceeding $800 billion, more than defense spending, some opposition could surface among true GOP conservatives… who could join disgruntled Democrats if and when the House measure gets a floor vote.

House GOP farm-state lawmakers, staff try to woo Democrats with farm bill gimmes... House Ag Democrats are facing internal tension and uncertainty as they struggle to formulate a response to the GOP’s farm bill proposal. In a closed-door meeting, Democrats expressed frustration over the lack of progress in negotiations and pressed Ranking Member David Scott (D-Ga.) for more information on discussions with House Agriculture Republicans. The meeting also involved deliberations on a one-page document outlining the GOP’s proposal.

Democrats reportedly remain divided on how to proceed, with no consensus reached on a counteroffer. The meeting did not result in any concrete decisions or votes on specific policies. Despite this, Scott indicated Democrats will be prepared to respond when necessary, although they have not finalized a counteroffer.

One contentious aspect of Republican’s proposal involves reallocating future nutrition funding, particularly regarding updates to the Thrifty Food Plan, which has sparked controversy among Democrats.

White House monitors agriculture supply chains post-Baltimore bridge collapse... Following the bridge collapse in Baltimore, White House officials remain cautiously optimistic about the immediate economic impact on the agriculture sector. However, they are closely monitoring key supply chains such as soybeans, fertilizer and sugar for any signs of strain. Any disruptions in these supply chains could exacerbate the already volatile food costs, especially considering recent inflation reports that have put pressure on grocery prices. To address potential challenges, officials from President Joe Biden’s economic team and USDA have been engaging with food and agriculture stakeholders since the incident. One of the primary concerns for shippers is navigating the logistics and permitting necessary to redirect their shipments for distribution. Reports note the White House is aware of the potential for detention fees to become a significant issue among agriculture stakeholders if firms fail to move their products out of alternative ports quickly enough.

Dollar surges amid inflation data, impacting global markets... The surge in the U.S. dollar index to the highest level since November marked its most robust weekly performance since 2022, fueled by stronger inflation data this week and caused reverberations across global markets. Against a basket of six currencies, the dollar has appreciated 1.5% this week, the most substantial gain since September 2022, as traders adjusted their expectations regarding early interest rate cuts by the Federal Reserve. The euro and sterling have weakened to their lowest levels against the dollar since November, while the yen plummeted to a 34-year low. This shift in market sentiment has widened the spread between benchmark 10-year U.S. and German government bond yields to its highest level since 2019.

Impacts: The sustained strength of the dollar could pose challenges for countries aiming to implement rate cuts without depreciating their currencies and fueling inflationary pressures. Consequently, central banks are cautious about significant currency depreciation, as it could lead to increased inflation through higher import costs.

EPA report: U.S. ag accounted for 10% of emissions in 2022... The Environmental Protection Agency’s annual report on U.S. greenhouse gas emissions said agriculture accounted for 10% of emissions in 2022, a level consistent with estimates in recent years. Click here to view the full report.

USDA report: Military food insecurity double civilian rate... A USDA report sheds light on a troubling issue within the U.S. military: food insecurity. The findings indicate that a significant proportion of military personnel, around 25.3%, have experienced food insecurity, a rate more than double that of the civilian population, which stands at 10.1%.

The data highlights specific demographics within the military that are particularly vulnerable to food insecurity. This includes active-duty personnel under the age of 25 who identify as belonging to minority groups and whose spouses are unemployed. Despite typically earning higher incomes and having more stable employment compared to civilians with similar education levels, military families encounter unique challenges that contribute to food insecurity. Factors such as long working hours, frequent deployments and relocations present obstacles for military spouses in securing employment, thereby affecting household income levels.

Addressing food insecurity within the military necessitates a multifaceted approach that acknowledges the complexities of the issue. It is not solely an economic concern but also one influenced by the unique circumstances and challenges faced by military families. Comprehensive efforts are required to support military households in accessing sufficient nutrition, which may involve targeted interventions aimed at improving employment opportunities for spouses and addressing structural barriers within the military community.