Evening Report | July 16, 2021
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Your Pro Farmer newsletter is now available!... USDA slashed its spring wheat crop estimate from the implied level last month amid severe drought in the Northern Plains, but it only tweaked its Canadian wheat crop forecast, leaving many scratching their heads. Meanwhile, scorching temperatures are expected for these already stressed areas over the next week. You’ll find plenty more report and weather coverage as well as policy updates and market analysis in this week’s newsletter, which you can access here.
USDA’s U.S. and global forecasts have faced increased scrutiny, including from us... Lawmakers have reached out to us (and others) for our ideas on what is needed to improve NASS estimates and World Board forecasts ahead of a meeting with USDA officials. We’ve provided some thoughts, but we would like Member feedback. Email your ideas to editors@profarmer.com and we’ll pass them along.
USDA raises its 2021 beef export forecast, trims total supply for 2022… USDA on Monday made some changes of note to its 2021 balance sheet for beef. In particular, it raised its beef export forecast by 80 million lbs., pushing it to 3.422 billion lbs., up 16% from last year’s strong showing. But the department also pared its total use forecast by 65 million bu., with ending stocks now projected at 650 million lbs., down 15 million lbs. from the June projection and 9.2% under year-ago.
Its beef balance sheet adjustments for 2022 were more modest but also friendly. USDA trimmed production while leaving imports unchanged. It aIso added 20 million lbs. to its export forecast that now stands at 3.320 billion lbs., which would be a 3.0% retreat from its forecast for this year. Beef ending stocks are expected to align with this year’s 650 million lbs. at the close of 2022.
USDA cited “continued firm demand in Asia for its higher beef export forecasts.
USDA left its pork exports unchanged for both this year and next at 7.552 billion lbs. and 7.550 billion lbs., respectively.
July rural mainstreet index shows strong rural economies… For the eighth straight month, the Creighton University rural mainstreet index (RMI) remained above growth-neutral. The monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy yielded a healthy overall index reading of 65.6, though down from June’s strong 70.0. The index ranges between 0 and 100 with a reading of 50.0 representing growth-neutral. Approximately 31% of bank CEOs reported that their local economy expanded between June and July.
“Solid, but somewhat weaker, grain prices, along with the Federal Reserve’s record-low interest rates, and growing exports have underpinned the Rural Mainstreet Economy. Even so, current rural employment remains below pre-pandemic levels,” says Creighton’s Dr. Ernie Goss, who conducts the survey.
At 71.0, the farmland price index remains well above growth-neutral — as has been the case for 10 straight months. This is first time since 2012-13 that Creighton’s survey has recorded 10 straight months of farmland prices above growth-neutral. The June reading was down 4.9 points from June.
Approximately 46.9% of bankers reported damaging drought conditions for farmers in their area. However, there was significant variation among reports. Find more details here.
FT: High level U.S. official cancels planned trip to China on diplomacy snub… The U.S. has canceled plans to send U.S. Deputy Secretary of State Wendy Sherman to the Chinese city of Tianjin after the Chinese government rejected a request to meet with her counterpart, Le Yucheng, the Financial Times (FT) reported July 15, citing unnamed sources “familiar with the decision.” Instead, China offered a sitdown with the fifth-highest Ministry of Foreign Affairs official who handles U.S. relations. The U.S. Department of State had not formally announced Sherman’s China trip, but it was reportedly slated to be part of her trip next week to Japan, South Korea and Mongolia.
Pork processors lose line speeds appeal… Pork processors lost their appeal to stay a lower court’s June 30 decision that nixed a USDA rule that let plants operate without line-speed limits. The U.S. pork industry says it lost 2.5% of its packing capacity due to the slower line speeds.
How serious is U.S. about a carbon border adjustment/carbon tariff?... Very serious. Democrats need a pay-for for all their spending. And it will be a way to get China, Russia and other countries more serious on climate-change goals. The implications of this for agriculture could be huge. The U.S. imports a lot of fertilizer as well as steel and aluminum for farm equipment, all of which would be subject to duties barring any carveouts for ag. If Democrats are able to get this through, farmer input costs will rise significantly and cross-retaliation will come back in vogue.
Will Powell get a Fed chair extension?... Treasury Secretary Janet Yellen said the question of whether to nominate Fed Chair Jerome Powell for a second term is a conversation for her and President Joe Biden, declining to give her opinion in a televised interview. Some are signaling that the attacks on Powell during the Thursday hearing on monetary policy by Senators Elizabeth Warren (D-Mass.) and Sherrod Brown (D-Ohio) could be a sign his reappointment to lead the Fed could be in jeopardy. However, others believe that it might be unwise for Biden to shift Fed leadership as the U.S. economy is still recovering from the pandemic. A majority of economists polled by Reuters said Biden should reappoint Powell to another four-year term to lead the U.S. central bank. Powell has mostly been in sync with Biden administration economic goals.
California lawmakers approve first state-funded guaranteed income plan... California lawmakers approved a state-funded guaranteed income plan, the first in the U.S., committing $35 million for monthly cash payments to qualifying pregnant people and young adults who recently left foster care, with no restrictions on how they spend it. The plan, contained in a bill related to the state budget, now goes to Democratic Governor Gavin Newsom's desk.
Market Watch… Our Market Watch table features monthly and quarterly price outlooks along with weekly prices for a variety of ag markets. Check it out.
