Evening Report | March 17, 2023

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Your Pro Farmer newsletter is now available... Fear of financial contagion flared as the recent failure of Silicon Valley Bank and the shutdown of Signature Bank of New York spread to Europe, touching off a series of emergency preventative actions by U.S. and Swiss officials. The new banking sector uncertainty puts even more spotlight on the upcoming Fed decision on interest rates. Markets are now pricing in greater odds the Fed will pause its monetary tightening. History shows a misstep by the Fed could have long-term economic implications. Meanwhile, Argentina’s crops continue to suffer from drought, while Brazil’s crops remain stable. China is facing a new outbreak of African swine fever, which could impact the feed and hog markets. This issue marks the 50^th anniversary of Pro Farmer. In a special page 4 feature, co-founders Merrill Oster and Jerry Carlson took a look back over the past 50 years and gazed into their “crystal ball” for what lies ahead for agriculture. We cover all of these items and much more in this week’s newsletter, which you can access here. Link

Cattle on Feed Report: The USDA stated the March 1, 2023 population of cattle in large (1,000-plus head) U.S. feedlots at 11.645 million head, down 4.5% from the comparable year-ago level. That essentially matched industry forecasts, which gave the report an overall neutral tone. However, futures seem likely to open more firmly Monday morning since the key number of monthly feedlot placements fell short of expectations for a 6.0% annual reduction, whereas the actual result at 1.734 million head fell 7.2% below its February 2022 counterpart. Cattle slaughter fell about 5% short of year-ago levels during February, so industry expectation of a 4.4% year-to-year reduction in feedlot seemed well justified. The report stated the official result 4.9% below last year, which also looks supportive of the fed cattle outlook.

Contentious topics addressed during Senate Ag Committee hearing... Food stamps, use of CCC funding, the new farm bill and big vs small farms were the primary and sometimes contentious topics during a Senate Ag Committee hearing Thursday.

USDA Secretary Tom Vilsack returned to a favorite talking point when he said the next farm bill should create more markets for small- and medium-sized farmers. Vilsack said if lawmakers want to discourage population losses in rural America, they should help the smaller producers.

Vilsack said that even though the last two years have resulted in record farm net cash income, nearly 50% of farmers did not make money, while 40% made most of their income from off-farm jobs, leaving 10% to make most of the money. “This is not a small versus large situation but 90% of our farmers need help,” Vilsack said.

Sen. John Boozman (R-Ark.) said, “While 89% of the farms in the U.S. are classified as small by USDA and contribute nearly 18% of farm production, there are 3.2% of farms, classified as large, that contribute 46.5% of our nation’s farm production… All farms are valuable,” Boozman said. “This farm bill will not neglect the small nor punish the large.”

Vilsack acknowledged the importance of large, commercially successful farms, but recalled noted that Boozman had said “Based on the last Census, 53 of the 75 counties in Arkansas have lost population. That is 71% of Arkansas counties. Across the United States, 53% of our counties, or 1660 out of 3140, lost population.”

Vilsack also sparred over criticism over his use of tapping the Commodity Credit Corporation (CCC), sometimes called USDAs ATM machine. “It’s my belief that the USDA’s discretionary use of CCC undercuts this committee’s farm bill process,” Sen. Chuck Grassley (R-Iowa) said. “This farm bill will not be a success unless Congress takes back our responsibility of setting the nation’s farm programs.” Vilsack said his use of the CCC is not “discretionary” because he has been following the rules on what the secretary is allowed to do.

Sen. Roger Marshall (R-Kan.) said farmers in his state “feel like how you're using the CCC is outside of the law.” Vilsack said the $3.5 billion Partnerships for Climate-Smart Partnerships initiative grew out of suggestions from farm groups. When it comes to CCC funding, “We’re very careful to stay within the statutory language… and we never ever, ever put at risk farm programs,” he said.

SNAP/food stamp program issues were also contentious issues. Committee Chair Debbie Stabenow (D-Mich.) asked Vilsack to affirm that the 2018 Farm Bill directive to USDA to re-evaluate the Thrifty Food Plan used to determine SNAP benefit levels did not say it was supposed to be revenue-neutral, even though some previous directives included a budget-neutral provision. Vilsack said the directive did not contain a budget neutral provision, but Boozman said he said he doesn’t think Vilsack’s argument “holds water” because the Congressional Budget Office scored the provision as budget-neutral, based on information from USDA. The provision has added $300 billion to the cost of SNAP, Boozman noted.

Vilsack said the info came from USDA when Agriculture Secretary Sonny Perdue was in office during the Trump administration and that he was “not bound” by what Perdue said. “We are not bound by you finding loopholes,” Boozman said. “We are bound by the law and the directive of what we were supposed to do,” Vilsack countered. “When you are going to spend $300 billion you come to Congress,” Boozman said. “I am not saying it didn’t need to be updated, that we didn’t need to spend some money.”

But it was Stabenow’s opening statement that had the key news item for the day’s hearing. Cut SNAP, she said, and the rest of the farm bill will be pared back, too. Stabenow said “threats we are hearing from some in the House in favor of reckless and indiscriminate mandatory budget cuts will result in cuts to all farm bill programs. We cannot go backward at a time when our farmers and families need us most.”

Sen. Chuck Grassley (R-Iowa) said he hopes the next farm bill imposes stricter payment limitations, but Vilsack said doing that correctly would be difficult.

Vilsack was asked his views on ownership of U.S. farmland by Russia, China, North Korea and Iran. Vilsack detailed that collectively, those countries own only 330,000 acres. Most foreign-owned farmland is in the hands of Canada, the Netherlands, the United Kingdom, Germany and Japan, he said, asking lawmakers writing a restrictive land ownership bill if they will restrict people from those countries too.

Vilsack said the government is a long way from developing a vaccine for high-path avian influenza or dealing with the questions about whether other countries would accept meat from vaccinated poultry. His comments came as the Dutch government touts an effective vaccine test. “We’re a long way away from having a vaccine that is effective and a long way from having a vaccine that the rest of the world accepts,” Vilsack said. The Dutch government announced that two vaccines they have tested in a veterinary research center proved effective against bird flu. “Not only did the vaccines give poultry used in the lab protection against disease symptoms but they also countered the spreading of the bird flu,” the Dutch government said in a statement. “I’m happy that we have two vaccines with which we can take the vaccination process against bird flu forward. I'm putting in the next steps as quickly as possible but in a responsible way (...),” Piet Adema, Dutch agriculture minister, said in a statement.

Vilsack in his testimony also remarked that there are a “number” of vaccines in the U.S. that are being tested. Having a successful test of a vaccine is not the same as having a vaccine ready to be put into production and be ready for use in the marketplace, but efforts in the U.S. and around the globe are continuing to move forward at finding solutions.

Sen. John Hoeven (R-N.D.) asked Vilsack if he would maintain the sugar program, but Vilsack would only say: “I understand the importance of the sugar program.”

As for other commodity programs, Hoeven pushed Vilsack on supporting and strengthening crop insurance and the farmer safety net programs like ARC and PLC. Vilsack said he’d be willing to work with the committee on that, but countered, “I hope that you will help and work with us, to ensure that in addition to all of that, which is important and necessary, that we focus on also market development, domestic market opportunities for small and mid-sized operators. Because as good as the countercyclical program is, as good as the crop insurance program is, we are still losing a lot of our small and mid-sized farming operations.” Hoeven countered that the U.S. needs productive farmers to which Vilsack said he agreed. “But I think we have to have a broader view on this. I think we also have to have a view of maintaining life and opportunity in rural places.”

USDA officially announces funding for emergency grain storage program... The funding is under the Emergency Grain Storage Facility Assistance Program (EGSFP). The program helps grain producers with eligible disaster events that damaged or destroyed local commercial grain facilities. USDA has set aside $20 million from the Commodity Credit Corporation (CCC) for the effort to address damage to facilities that took place from Dec. 1, 2021, to Aug. 1, 2022, saying the producers or groups of producers could be eligible under the effort for cost-share assistance “to construct needed storage facilities to meet on-farm grain storage capacity and handling needs necessary to support the marketing of grain. Grain producers in affected counties in Illinois, Indiana, Iowa, Kentucky, Minnesota, Missouri, North Dakota, South Dakota, Tennessee and any other affected counties” as determined by the agency.

The application deadline is Dec. 29, 2023, with funds available until they are exhausted. The payments will be subject to funding availability.

USDA specifically noted Kentucky grain producers have an “immediate” need for the help as the owners of a commercial grain facility in Mayfield, Kentucky, that was destroyed in December 2021 have not yet begun to rebuild it nor have they decided to rebuild the structure. Affected counties for the aid were identified using a 30-mile radius from the damaged facilities. Cost-share will be 75% will be available with 90% cost-share for underserved producers.

USDA will announce any additional counties by Oct. 27. Facilities and structures must have a useful life of three years and EGSFP can be used to renovate existing structures to store grain. Baggers and bags are deemed to be eligible.

Does the Chinese Communist Party own U.S. land?... Chinese investors’ ramped-up purchases of U.S. land in the past decade are drawing concerns among U.S. politicians who say this poses a national security threat. PolitiFact looked at this topic. Highlights:

• Chinese investors, entities and U.S. corporations with Chinese shareholders collectively owned 383,935 acres of agricultural and non-agricultural land in the United States, as of 2021.
• It is unclear how many of these acres are controlled by the Chinese Communist Party.
• An expert said that although the Chinese Communist Party could influence or coerce Chinese individuals or entities to use farmlands for spying or other purposes, there hasn’t been good evidence of such activity.

Kremlin holds stance on 60-day extension. The Kremlin stated earlier today that Russia was extending the Black Sea grain deal for 60 days, reiterating previous statements by the Russian Foreign Ministry. Though Ukraine and Turkey have said the deal, set to expire on Saturday, must be rolled over in full under existing terms, including the 120-day duration. Alessandra Vellucci, director of the U.N Information Service, said negotiations on an extension were continuing, “without speculation on what is going to happen.”