Evening Report | June 16, 2022

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Hot summer, featuring western Corn Belt dryness... The National Weather Service 90-day forecast calls for elevated odds of above-normal temps across virtually the entire country for July through September. However, the lowest odds of above-normal temps are in the major corn producing areas of the central Corn Belt. And the heat is not expected to build from Iowa and central Illinois northward until after the corn crop has pollinated, as the July outlook gives “equal chances” for above-, below- and normal temps in those areas.

The central and western Corn Belt are expected to see below-normal precip during the 90-day period. The eastern half of Illinois eastward and southward is expected to see “equal chances” for rainfall during the period.

If the forecast verifies, hotter-than-normal temps will necessitate timely summer rainfall, especially in those areas that are expected to favor a drier bias.

Click here to view the related maps.

Drought footprint gradually shrinking... Drought continues to cover much of the western half of the country, though the footprint has gradually shrunk. As of June 14, the U.S. Drought Monitor shows 57% of the country covered by some form of dryness/drought, down a point over the past week and 17 percentage points lower than mid-March.

USDA estimates the drought footprint at 17% for corn (down two points from last week), 9% for soybeans (down a point), 22% for spring wheat (down three points) and 52% for cotton (up a point). At this stage, only cotton has a major concern with drought, especially in top producer Texas. But given the extended forecast for a hot and generally dry summer, especially in the central and western Corn Belt, there is risk the drought footprint will build for corn, soybeans and potentially spring wheat.

Vilsack: Temporary storage would work but reopening Ukrainian ports better... Temporary grain storage on Ukraine’s border would help prevent Russia from stealing Ukrainian grain and make sure the country’s harvest is not lost, USDA Secretary Tom Vilsack said on Thursday. But he stressed that reviving shipments from Ukraine’s Black Sea ports was the most effective and efficient way to export grain and urged Russia to take U.N.-led talks on the issue “seriously.”

“We know of circumstances and situations where that has occurred -- Russians having taken grain from Ukrainian farmers. So to the extent that we can get it out of the country, that is a plus that reduces the risk of loss,” Vilsack told reporters.

President Joe Biden said earlier this week temporary silos would be built along the border with Ukraine in an effort to help export more grain and address a growing global food crisis. Vilsack did not give any further details on U.S. involvement.

EU asks Russia to agree to UN plan to free up Ukrainian grain exports... The EU called on Russia to accept the UN initiative for unblocking Ukrainian ports for the export of grain, French President Emmanuel Macron told a news conference in Kiev on Thursday. He stressed “the participants in the talks in Kiev discussed the problem of food security.”

“The global food crisis that we are experiencing is a direct consequence of military operations,” Macron said, stressing that the sanctions adopted by the EU did not affect Russian agriculture.

Ships loaded with grain and metals will leave the Azov Sea port of Mariupol soon, with shipments potentially headed to the Middle East, a pro-Russian separatist leader told Interfax news agency. Denis Pushilin, leader of the self-proclaimed Donetsk People’s Republic, said plans were for the port to handle around 1 MMT of freight by the end of the year. “Concerning exports, it will be metals, and a little later grain,” Interfax quoted Pushilin as saying.

Meanwhile, the European Commission, jointly with V_labs and Rail Cargo Group, launched the Grainlane trading platform to help optimize grain exports from Ukraine to European Union countries, Ukrainian media reported with reference to the Ukrainian Agrarian Policy and Food Ministry’s website on Thursday. The platform was set up for selling and buying agricultural products and consolidating and strengthening ties between European logistics companies and Ukrainian farmers and grain traders.

Russian official: No plans to change grain export tax plan... Russian Deputy Prime Minister Viktoria Abramchenko told Reuters the government has no plans to change grain export duty or alter the tax formula as the 2022-23 marketing year approaches. Russian President Vladimir Putin earlier this month said the country could export 50 MMT of grain in 2022-23, up from around 37 MMT this year, with most of that being wheat. USDA forecasts 2022-23 Russian wheat exports at 40 MMT, up from 33 MMT in 2021-22. USDA forecasts Russian coarse grain (corn, sorghum, barley, oats, rye, millet and mixed grains) exports at 10.45 MMT in 2022-23, up 8.26 MMT in the current marketing year.

House passes Lower Food and Fuel Costs Act... The bill — an expanded version of HR 7606 — would provide a total of $700 million in emergency funding to help reduce the costs of using crop nutrients or precision agriculture practices, and for grants to expand biofuel infrastructure. The bill would also establish a USDA office to investigate competition matters in meat and poultry markets. As we noted in “First Thing Today,” the measure will face hurdles in the Senate.

Meat tariffs reduced to fight inflation... Many countries are lowering tariffs on food imports, including red meats, according to the U.S. Meat Export Federation (USMEF). That is providing global access to some markets for U.S. meat exporters.

USMEF Vice President of Economic Analysis Erin Borror said, “Mexico eliminating tariffs on imports of beef, pork and poultry, that’s a bigger step than we’ve seen from them in the past,” Borror says. “The Philippines also reducing tariffs on imported pork, but that was an extension of what was in place starting last year to help deal with their African swine fever related shortage. And the announcement for Vietnam actually came last year where they’re planning to reduce the tariff rate on pork imports in July of this year. One of the newest developments would be Korea announcing a duty-free quota for imports of pork.” Taiwan also slashed the import duty on beef in half and Brazil eliminated its beef tariff.

But Borror says many countries where consumers are most vulnerable to high food prices continue to hold onto high tariffs, including “most of the African markets.”

USMEF President and CEO Dan Halstrom said, “I’m convinced that with our industry, with our reputation, with our differentiated high value product, if we’re on a level playing field, we can compete with anybody in the world and so that’s why getting this tariff normalization is so important to all concerned.”

Why isn’t USDA buying up rice for food aid donations?... That is what some veteran policy sources are asking. U.S. rice prices have lagged most other U.S. farm products, but producers are paying the same sky-high input prices. Some sources note the food aid announced so far has more transportation costs than the underlying commodity even at current prices. But USDA could ask for an emergency waiver from Jones Act requirements specifying U.S.-flag vessels.

As for funding, USDA has several programs it could tap, and there is always the Commodity Credit Corporation funding “pool,” but most sources say that would not likely be used for this.

Those electrifying Democrats... Several Democrats, including Sen. Debbie Stabenow (D-Mich.), have made the case for switching to electric vehicles as a means of avoiding high gas costs. Republicans labeled that as “out of touch” with average consumers. Reason: The disparity between the average electric vehicle costs and the median household income. In Michigan that stands at $59,234, according to data from the U.S. Census Bureau. According to Kelley Blue Book, the average cost of an electric vehicle is $56,437, or roughly $10,000 more than the industry average. According to data from the U.S. Census Bureau, the median household income is $67,521.

In an interview Tuesday, Energy Secretary Jennifer Granholm noted high gas prices make a “very compelling case” for drivers to buy electric vehicles. “If you filled up your EV, and you filled up your gas tank with gasoline, you would save $60 per fill-up [by going electric],” said Granholm, the former governor of Michigan whose net worth is estimated to be about $8 million.

Stabenow recently said it “doesn’t matter” how high gas prices go because she drives an electric vehicle. Speaking during a Senate Finance Committee meeting, Stabenow said of the record-high prices: “I just have to say, on the issue of gas prices, after waiting for a long time to have enough chips in this country to get my electric vehicle, I drove it from Michigan to [Washington, D.C.] this last weekend and went by every single gas station, and it didn’t matter how high it was." Speaking at a press conference, she said she is “proud” of her new Chevy Bolt, which she touted as “terrific.” Stabenow added: “As somebody who just bought my first electric vehicle, I’m driving by the pump. And I won’t tell you the motion I’m making when I drive by.”

Perspective: Ford F-150 gas pickup starts at $30,000. Cheapest F-150 EV: $39,000, $9,000 buys you a lot of gas, even at these prices. That $9,000 would buy 1,800 gallons of gasoline at $5 per gallon. Plus, you would have to spend another $2,500 to $6,000 for a charging station.

Infrastructure czar: F-150 EV poised to sweep rural America... The electric version of Ford Motor Co.’s best-selling F-150 truck is poised to sweep rural America and tip the U.S. market for EVs, President Joe Biden’s infrastructure czar predicted. “You all are gonna be driving Ford F-150s with electric batteries in them. That’s how that’s gonna work,” Mitch Landrieu, the former New Orleans mayor, said in an interview with Bloomberg News on Wednesday. “And rural America’s going to beat everybody to the punch — my prediction,” he said.