Evening Report | April 19, 2024

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Your Pro Farmer newsletter is now available... Corn stunt disease continues to spread in Argentina, causing private crop forecasters to slash their Argentine corn production forecasts and warn of additional losses, though corn futures have responded. In Brazil, recent rains have provided a good portion of safrinha corn areas with topsoil moisture as the rainy season comes to an end. Timeliness of rains through harvest could have a huge impact on final crop size. In the U.S., the winter wheat crop ratings slipped a little, though there was a big divergence with the HRW crop declining and SRW improving. There isn’t severe drought in the Plains, but spring weather will be key in how the crop finishes. The National Weather Service’s extended forecast calls for above-normal temps across most of the U.S. through July, while it’s a mixed picture for the precip outlook, with much of the central U.S. expected to see “equal chances.” On the economic front, the Fed is indicating higher rates for longer to combat sticky inflation, which pushed the U.S. dollar index to five and a half year high. The global economy remains resilient, though concerns about fiscal sustainability, inflation and trade restrictions could impact the trajectory of growth. We cover all of these items and much more in this week’s newsletter, which you can access here.

Cattle on Feed Report: Mildly friendly... USDA estimated there were 11.821 million head of cattle in large feedlots (1,000-plus head) as of April 1, up 174,000 head (1.5%) from year-ago but 35,000 head less than the average pre-report estimate implied. This marked the seventh consecutive month with a year-over-year increase in feedlot inventories. March placements of cattle into feedlots fell 12.3%, while marketings dropped 13.7%.  

Placement of 9-weight and heavyweight (1,000-plus lbs.) cattle was unchanged from year-ago, though those two categories accounted for only 13.2% of the total number of cattle moved into feedlots during March. There was a sharp decline in placements in all other categories with lightweights (under 600 lbs.) down 15.4%, 6-weights down 17.5%, 7-weights down 14.8% and 8-weights down 9.9%. Placements were down 20,000 head in Colorado, 60,000 head in Kansas, 30,000 head in Nebraska, 90,000 head in Texas and 46,000 head in “other states.”

The April 1 feedlot inventory consisted of 7.266 million steers and 4.555 million heifers, up 1.7% and 1.1% from year-ago, respectively.

The report data is mildly friendly but likely won’t have much market impact. If anything, it could encourage some bull spread unwinding, with pressure on nearby futures and support for deferred contracts.

EPA grants summer E15 sales waiver... As we reported in “First Thing Today,” EPA announced it will allow summer sales of E15 for a third year in a row. The waiver is effective on May 1 and will continue for 20 days. The administration intends to renew the waiver through the end of the summer driving season in mid-September.

USDA evaluating possibility of developing vaccine to protect cattle from the H5N1 virus... While the virus is believed to originate from wild migratory birds, it has been transmitted between cows and may have spread from dairy cattle premises to nearby poultry facilities. Although the risk to human health is considered low, there have been instances of mild symptoms in humans, such as a Texas dairy worker who exhibited mild symptoms of avian influenza. USDA Secretary Tom Vilsack highlighted the challenge of controlling the spread of the virus due to the unpredictable behavior of migrating birds influenced by weather conditions.

As for a possible vaccine, USDA’s Animal and Plant Health Inspection Service (APHIS) and the Agricultural Research Service are involved in assessing the development of a vaccine for H5N1 in cattle. Vaccine manufacturers have shown interest in developing vaccines for both poultry and cattle, but challenges remain in understanding the transmission dynamics and characterizing the infection.

Transmission of H5N1 among dairy cattle is believed to occur through mechanical means, possibly via milking equipment. While USDA can establish links between affected herds in certain states, it does not currently have evidence to suggest that all affected herds received cows from a specific source.

H5N1 symptoms in dairy cattle are milder compared to poultry, with symptoms such as reduced milk output and lethargy, and little to no mortality reported. However, precautions are advised, including testing dairy stock for the virus before transportation, as well as implementing measures to prevent indirect transmission through contaminated equipment and clothing.

Of note: The use of a vaccine for HPAI in poultry presents challenges, including the risk of affecting exports due to difficulties in identifying products from infected animals and the logistical complexities of vaccinating large flocks.

Vilsack again taps CCC, this time for food aid... USDA and the U.S. Agency for International Development (USAID) announced the release of $1 billion in previously allocated food aid. This funding will be used to purchase U.S.-grown commodities to provide emergency food aid to 18 countries, as previously identified by the two agencies. USDA will utilize Commodity Credit Corporation (CCC) authority to finance the effort. An initial tranche of approximately $950 million will support the purchase, shipment and distribution of various U.S. agricultural products, including wheat, rice, sorghum, lentils, chickpeas, dry peas, vegetable oil, cornmeal, navy beans, pinto beans and kidney beans. USAID will determine the most suitable deployment of these commodities to avoid disrupting local markets.

A separate pilot project of up to $50 million will be established to utilize U.S. commodities not traditionally included in international food assistance programs, with USAID collaborating with humanitarian organizations to develop this initiative. The supplies under the larger aid effort will be sent to Bangladesh, Burkina Faso, Burundi, Chad, Democratic Republic of the Congo, Djibouti, Ethiopia, Haiti, Kenya, Madagascar, Mali, Nigeria, Rwanda, South Sudan, Sudan, Tanzania, Uganda and Yemen.

EPA chief testifies April 30 amid speculation on green fuel model announcement... EPA Administrator Michael Regan is scheduled to testify on the fiscal year 2025 budget request for the EPA before the House Interior, Environment, and Related Agencies Appropriations Subcommittee on April 30. This has sparked speculation that the session or a day before it may include an announcement regarding the updated Greenhouse gases, Regulated Emissions, and Energy use in Technologies (GREET) model developed by the Department of Energy. The update pertains to how corn-based ethanol qualifies for sustainable aviation fuel (SAF) credits. The administration had initially aimed to announce the updated model by March 1 but missed the deadline. Both Regan and USDA Secretary Tom Vilsack have indicated that the update will be revealed soon, with Vilsack suggesting it would be weeks, not months, after the missed March 1 date.

Welspun Tubular files lawsuit against Summit Carbon Solutions... The lawsuit seeks more than $15 million in damages due to delays in their agreement. Welspun Tubular was commissioned by Summit Carbon Solutions to produce approximately 785 miles of pipe starting in May 2023, with a total cost of about $183 million. However, Summit’s project, which involves a 2,500-mile pipeline network across five states, faced delays in receiving approval. Construction, initially expected to start sooner, is now projected to commence early next year.

According to the lawsuit, a purchase agreement allowed Summit to delay pipe production for up to six months until November 2023. Welspun further delayed production to early 2024 by manufacturing pipe for other clients. However, when Welspun notified Summit of its intention to proceed with production in February, Summit sought another delay.

Summit eventually canceled the agreement in February, leading Welspun to claim a $15 million cancellation charge and partial reimbursement for materials acquired for pipe manufacturing. Summit disputes owing the money and aims to find a resolution. They emphasize their commitment to collaboration with Welspun despite the dispute.

Summit’s pipeline system is intended to transport captured carbon dioxide from ethanol plants to North Dakota for underground sequestration. The Iowa Utilities Board is set to decide on issuing a hazardous liquid pipeline permit for the project. Meanwhile, state regulators in North Dakota and South Dakota rejected Summit’s initial pipeline routes, with North Dakota reconsidering a revised plan and Summit intending to file a new permit request in South Dakota.