Evening Report | August 31, 2023

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Corn, soybean and cotton drought areas expand amid record heat... As of Aug. 29, the U.S. Drought Monitor showed 50% of the U.S. was covered by abnormal dryness/drought, unchanged from the previous week. USDA estimated drought (D1 or higher) covered 45% of corn production areas and 40% of soybeans, both up two percentage points from the previous week. Drought expanded five points to cover 37% of cotton areas. The Drought Monitor noted, “continued intensification of drought across areas of the Midwest, South, Southwest and the Pacific Northwest. In the Midwest, extreme heat impacted areas of the region including Minnesota, Iowa, Missouri, Wisconsin, and Illinois with temperatures soaring 6 to 10+ degrees F above normal. Daily high temperature records were broken across the region during the past week, including in Chicago (98), Milwaukee (101), Minneapolis (101), and Des Moines (100).”

For the Midwest, the Drought Monitor noted: “For the week, light precipitation accumulations (<2 inches) were observed across areas of Missouri, southern Illinois, southern Indiana, Ohio and Michigan. On the map, some degradations were made in areas of Iowa, Minnesota, Wisconsin and Illinois where both short- and long-term precipitation deficits persist. Average temperatures for the week were well above normal (2 to 10+ degrees F) across much of the region with the greatest anomalies observed across areas of southern Minnesota, Iowa, Missouri, southern Illinois, and southwestern Wisconsin.”

For the Plains, the Drought Monitor stated: “On this week’s map, degradations were made in northern portions of North Dakota and in eastern Kansas. Conversely, recent precipitation during the past 30-60-day period led to some minor improvements on the map in drought-affected areas of southeastern Nebraska. Across most of the Plains, hot and dry conditions prevailed this week except for some isolated shower activity along the Kansas-Nebraska border region where 1 to 3 inches were observed. Average temperatures for the week were well above normal (2 to 8 degrees F) with the greatest departures observed in northwestern North Dakota and eastern portions of Nebraska and Kansas.”

Click here for additional information and related maps.

UN sends Russia proposal to restart Black Sea grain deal... United Nations Secretary-General António Guterres said he sent Russian Foreign Minister Sergei Lavrov “a set of concrete proposals” aimed at reviving the Black Sea grain deal. Guterres’ proposals were sent ahead of a meeting between Russian President Vladimir Putin and Turkish President Tayyip Erdogan on Sept. 4 that will focus on the restarting the deal.

“I believe we presented a proposal that could be the basis for a renewal, but a renewal that must be stable,” Guterres said, without elaborating on details of the proposal. “We cannot have a Black Sea initiative that moves from crisis to crisis, from suspension to suspension. We need to have something that works and that works to the benefit of everyone,” he said.

A Russian diplomat told Reuters, speaking on condition of anonymity, told Reuters, “there are no revelations... it just “sums up of previous UN ideas, which didn’t fly.”

China buying Australian barley after tariffs lifted... China has bought around 600,000 MT of Australian barley since Beijing lifted punishing duties on the grain earlier this month, underlining strong pent-up demand from its former top supplier. China ended anti-dumping tariffs on Australian barley on Aug. 5, roughly three years after the 80.5% duties first hit exports. Importers have already snapped up 10 cargoes of old-crop Australian barley for both malting and animal feed since the tariffs were lifted, and more deals are likely. There is not much old-crop barley available in Australia at this time of the season, but China has been buying all it can.

India sees record low August rains... India witnessed the driest August in more than a century as the country received 36% less rainfall than normal in 2023, according to data compiled by the India Meteorological Department (IMD). The country has received 10% less rainfall than normal from June 1 to Aug. 31, IMD data showed. The monsoon, vital for the $3-trillion economy, delivers nearly 70% of the rain India needs to water farms and refill reservoirs and aquifers.

Farm sector profits forecast to fall in 2023... USDA forecasts net farm income will decline $41.7 billion (22.8%) from last year’s record to $141.3 billion in 2023, though that’s up from its February outlook of $136.9 billion. After adjusting for inflation, net farm income is forecast to decrease $48.0 billion (25.4%) relative to 2022.

USDA forecasts net cash farm income, which incorporates cash receipts from farming as well as cash farm-related income (including government payments) minus cash expenses, will decline $53.6 billion (26.5%) to $148.6 billion, down $2.0 billion from its prior outlook. When adjusted for inflation, 2023 net cash farm income is forecast to decrease $60.5 billion (28.9%) from a record high of $209.1 billion in 2022.

Cash receipts from the sale of agricultural commodities are forecast to decrease by $23.0 billion (4.3%) from a record high of $536.6 billion in 2022 to $513.6 billion. Total crop receipts are expected to decrease by $11.2 billion (4.0%) from 2022, led by lower receipts for corn and soybeans. Total animal/animal product receipts are expected to decrease by $11.9 billion (4.6%), following declines in receipts for milk, broilers, eggs and hogs.

Also contributing to lower forecast farm income in 2023 are reduced direct government payments and higher production expenses. Direct government payments are forecast to fall by $2.9 billion (19.0%) from 2022 to $12.6 billion. This decrease is expected largely because of lower supplemental and ad hoc disaster assistance in 2023 relative to last year. Meanwhile, total production expenses, including operator dwelling expenses, are forecast to increase by $29.5 billion (6.9%) to $458.0 billion in 2023. Interest expenses and livestock/poultry purchases are expected to see the largest increases in 2023 relative to 2022.

Farm sector equity is expected to increase 6.8% to $3.57 trillion in nominal terms. Farm sector assets are forecast to increase 6.6% in 2023 to $4.09 trillion following expected rise in the value of farm real estate assets. Farm sector debt is forecast to increase 4.9% to $520.1 billion. Debt-to-asset levels for the sector are projected to improve from 12.93% last year to 12.72% in 2023. Working capital is forecast to fall 5.5%.

China’s arable land supply being stretched thin... China is running out of arable land to produce the high-protein food demanded by its wealthier population, Caixin Global reports, as official statistics show a downward trend in grain consumption and growth in meat, dairy and seafood. Click here to view the full report.

U.S./Canada cattle, hog numbers tighter... The combined U.S. and Canadian cattle and hog herds have gotten smaller. A report from USDA and Statistics Canada says as of July 1 there were 108.055 million cattle and calves in the U.S. and Canada, 3% lower than last year, most of that in the United States. All cows and heifers that have calved were 2% lower, reflecting herd liquidation, while heifer numbers were also below a year ago, which could be a sign of further contraction.

The combined hog inventory was 86.169 million head, slightly less than last year, with declines for both the breeding and market inventories, along with lower farrowings, but a larger pig crop.

Fed’s preferred inflation gauge ticked higher in July... The U.S. personal consumption expenditures (PCE) index rose 3.3% annually in July, up from a 3.0% gain the prior month. Core PCE, which strips out food and energy costs, increased 4.2%, up from the 4.1% rise in June.

Traders kept bets the Federal Reserve will leave its benchmark interest rates in a range of 5.25% to 5.50% next month, following the inflation data. Traders continue to see only about a 10% chance of a rate hike at the Fed’s Sept 19-20 meeting and just under a 50% chance of a rate hike at either the November or December meetings.