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Next week could prove to be the most important of the year so far when it comes to agricultural markets.
- On Tuesday, USDA will deliver its May World Agricultural Supply and Demand Estimates, or WASDE, report, which will offer the department’s initial outlook for the new crop year.
- On Wednesday, the House is slated to vote on long-sought legislation to green-light year-round sales of E15.
- President Donald Trump is scheduled to visit China Thursday and Friday, where a meeting with leader Xi Jinping is hoped to bring affirmation that Beijing will follow through on commitments to buy U.S. soybeans – and maybe other agricultural goods.
- And then, there’s the Iran war and the potential for more market-driving headlines.
All the elements are there for relief, exuberance, or disappointment. We break it all down in this week’s Pro Farmer newsletter and will be tracking the developments and offering real-time analysis next week.
Strong payrolls: The U.S. economy added 115,000 jobs in April, government data showed Friday. Economists surveyed by the Wall Street Journal had forecast a gain of 55,000. The unemployment rate held steady at 4.3% as expected. Signs of a solid labor market will reinforce expectations the Federal Reserve will be reluctant to resume cutting interest rates as policymakers assess the inflationary impact of a surge in crude oil prices as a result of the Iran war.
No rate cuts this year: Bank of America economists pulled the plug on their forecast for rate cuts later this year. They had previously penciled in a quarter point cut between September and October. They still expect the Fed’s next move to be an easing, but now they don’t see it until July to September of next year. They noted that Fed officials have been sounding more hawkish, or more inclined to keep money tight, in recent appearances. Meanwhile, inflation remains stuck well above the Fed’s 2% target with the pass-through from surging oil prices still in the pipeline.
- “Therefore, it would have taken a weak April jobs report to keep the balance of risks within a range where [incoming Fed chair Kevin] Warsh could push cuts through,” they wrote. “But private payrolls might be accelerating and the u-rate is range bound, suggesting downside risks to the labor market have waned.
China oil mystery: While oil prices have soared as a result of the virtual closure of the Strait of Hormuz, they haven’t neared the panic levels some analysts have feared. Part of the reason, argues Bloomberg columnist Javier Blas, is that China has cut its imports by around a quarter from pre-war levels, making more crude available on the global market.
How China has done it is particularly mysterious given that China hasn’t tapped its strategic reserves and that its commercial inventories are actually rising. Prewar stockpiling may account for around a third of the import cut, Blas wrote, but the remainder has been the subject of intense speculation.Some traders suspect it may have to do with the country’s chemicals sector, he said, noting that on top of its traditional industry that uses oil and natural gas as feedstock, it has parallel production that relies on coal.
Since the war began in late February, coal-to-chemicals profit margins have improved significantly, he wrote, noting that the industry had typically operated with plentiful spare capacity, leaving room for a significant shift to coal from oil as a chemical feedstock.
Vegoil prices hit nearly 4-year high: The U.N. Food and Agriculture Organization’s Food Price Index rose 1.6% in April, a third straight monthly rise that puts it up 2% from a year ago, amid rising energy prices and supply disruptions resulting from the Iran war. Vegetable-oil prices jumped 5.9% from March, to hit its highest level since July 2022. The gans were largely driven by the prospect of higher demand from the biofuel sector, with several countries taking steps to incentivize production. Support also comes from fears of lower production in Southeast Asia, the FAO noted.
- Meat prices hit a record high, up 1.2% in April and 6.4% year over year. Beef prices rose to a new peak, underpinned by higher export quotations in Brazil amid limited supplies of slaughter-ready cattle, reflecting ongoing herd rebuilding. Additional support was provided by strong international demand, particularly from China, where import quotas under a new three-year safeguard framework are being rapidly filled, FAO said.
Water deal: Without a longer-term agreement mapping how to share a key but dwindling water source in the U.S. West, three states agreed to cut back significantly on consumption to prop up reservoirs in a short-term pact following the driest winter on record, the Associated Press reported.The plan aims to save up to 1 million acre-feet (44 billion cubic feet) of Colorado River water through 2028. That’s in addition to cuts already announced by the three states and Mexico, and would bring the total proposed savings to 3.2 million acre-feet (139 billion cubic feet), or about enough water to serve more than 25 million people a year, the report said.
- “We have kind of a crisis situation that this past winter has created,” Tom Buschatzke, Arizona’s lead negotiator, said earlier this week. “We need to do everything we can, and that’s what our plan does, to find a short-term fix.”
Russia-Ukraine ceasefire: President Donald Trump on Friday announced a three-day ceasefire in the war between Russia and Ukraine. “I am pleased to announce that there will be a THREE DAY CEASEFIRE (May 9th, 10th, and 11th) in the War between Russia and Ukraine, Trump posted on TruthSocial.
Russia blasts Israel over rejected grain shipment: Russia accused Israeli authorities of caving into pressure from Ukraine after a consignment of disputed grain was turned away from an Israeli port in April. Ukraine contends Russia stole the grain from Ukraine regions seized by its foe in the war.
“Moscow regretted this step, clearly taken under pressure from Kyiv,” Russia’s foreign ministry said in a statement Friday, according to Reuters."This runs counter to the Israeli authorities’ declared commitment to maintaining Russian-Israeli economic cooperation and threatens Israel’s own food security.”
No whey, dude: The protein craze is credited with driving demand for everything from red meat to seafood to lentils. It’s also transformed demand for whey protein concentrate, once considered a cheap byproduct of the cheese manufacturing process. But that unprecedented demand is now creating shortages, Food Dive reported, with some suppliers sold out for the remainder of the year.
- The report noted that the lack of supply is boosting prices, with standard whey power prices up more than 50% since January, according to DCA Market Intelligence.
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