Evening Report | June 8, 2022

Check our advice monitor on ProFarmer.com for updates to our marketing plan.

Minor changes expected to U.S., global ending stocks... USDA is expected to fine tune its U.S. and global old- and new-crop balance sheets in Friday’s Supply & Demand Report. USDA continues to assess the global supply situation given the war in Ukraine, but based on the average pre-report estimates, traders believe the bulk of that is already factored into the U.S. and global balance sheets. USDA will also update its U.S. winter wheat production estimates, though it typically makes minor adjustments in June. A potential wild card is the U.S. corn yield projection. In May, USDA cut its corn yield projection by 4 bu. per acre from trendline due to planting delays. As of June 5, the planting pace had surpassed the five-year average. That could prompt USDA to raise its yield some, though there’s no precedent of that happening in June, and we doubt there will be an upward revision.

Beef exports stay strong, pork exports remain weak... The U.S. exported 304.0 million lbs. of beef during April, which was a record for the month and the second highest tally ever behind May 2021. This marked the first time U.S. beef shipments have topped 300 million lbs. in consecutive months. Through the first four months of this year, beef exports at 1.150 billion lbs. increased 66.2 million lbs. (6.1%) from the same period last year, driven by a 42.5% increase in shipments to China.

Pork exports totaled 528.7 million lbs. during April, down 15.5 million lbs. (2.8%) from March and 111.8 million lbs. (17.4%) below year-ago. Through the first four months of the year, pork exports at 2.069 billion lbs. fell 512.4 million lbs. (19.8%) versus the same period last year amid a 72.2% plunge in shipments to China.

U.S. had small ag trade deficit in April... The U.S. exported $17.61 billion of ag goods against imports of $17.63 billion in April for a deficit of $19.3 million. Through the first seven months of fiscal year (FY) 2022, ag exports reached $119.4 billion against imports of $110.5 billion for a surplus of nearly $9 billion. USDA forecasts FY 2022 ag exports at $191 billion and imports at $180.5 billion, which would leave a surplus of $10.5 billion. To get to those levels, exports would have to average $14.3 billion and imports would have to average $14.0 billion over the final five months of FY 2022.

Record exports sharply narrows U.S. trade deficit... The U.S. trade deficit narrowed by the most in nearly 9-1/2 years in April as exports jumped to a record. The Commerce Department said on Tuesday that the trade deficit dropped 19.1%, the largest monthly decline since December 2012, to $87.1 billion. Imports of goods and services fell 3.4% to $339.7 billion, while exports increased 3.5% to $252.6 billion.

Economists expect first-quarter GDP will be revised to show it contracting at a rate of about 1.3% when the government publishes its third estimate later this month. Trade has subtracted from GDP for seven straight quarters. Growth estimates for the second quarter are as high as a 4.8% rate.

 

Egypt extends ban on exports of food staples... Egypt has extended the ban on the export of wheat, flour, corn, lentils, pasta, fava beans and all kinds of vegetable oil for three more months, its trade ministry said in a document seen by Reuters on Wednesday. In mid-March, Egypt suspended exports of these staples for three months.

The ministry said it would allow exports of any excess of the local market’s needs of these goods but only after approval from the ministry. This excess amount would be estimated by the ministry of supply.

Payment limit issues relative to the Emergency Relief Program (ERP)... For equipment gains to be considered part of a farm AGI, other net farm AGI must be greater than 66.66% of overall AGI. However, the Tax Cuts and Jobs Act of 2017 (TCIA) made all trades of farm equipment a taxable event, which causes the gain to be recognized as taxable income, and the equipment purchased is allowed to be fully deducted using 100% bonus deprecation. This causes many farmers’ tax returns to show negative Schedule F income while having overall net farm income if equipment gains were included. But it appears the FSA handbook has not been updated to address this issue. Many farmers have 100% of their income from farming, but they show an overall AGI loss. In this case, the farmer can never qualify for the increased payment limit.

Meanwhile, most married farmers file joint income tax returns. Under the rules for determining AGI for the more than $900,000 AGI limits for most farm programs, CPAs and attorneys are allowed to determine what the farmer’s AGI would be if they filed a married filing separate tax return. Clarity is needed if CPAs and attorneys can do the same for the more than 75% of farm AGI calculation. Without this ability, many farmers will not be able to receive an increased payment due to their spouse’s income exceeding 25% of AGI.

One suggestion being offered: Farmers with negative farm AGI should be allowed to receive the increased payment limit as long as their gross receipts from farming exceeds some percentage of overall gross receipts. Says one CPA: “They may want to bump this number to greater than 75% such as 85% or more, but these farmers should not be penalized due solely to overall losses during these years. These farmers are likely the ones that need the relief the most.”

Seed availability issues surface... On a recent Signal to Noise podcast, a viewer/listener asked about the availability of some seed due to drought and other conditions. We received mixed information when checking out the topic. A seed company contact said: “Seed companies are in the business to sell seed. They are not going to run short and will produce to compensate for the risk around weather etc.  Some varieties could be short in a given year if or when it hurts that particular production geography.”

Meanwhile, Michelle Jones, a producer, emailed: “Our local Nutrien dealer has told us if we want 2023 Clearfield winter wheat seed that we need to buy it now — and they’re not sure they can find it. It’s apparently very short. That’s not wildly surprising given the WW production challenges —and wheat doesn’t import as much seed from other locations (that I know of) like corn and soybeans. But I’ve never had that happen — especially on established varieties; sometimes new releases can be short this far in advance.”