Evening Report | Oct. 8, 2021

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Your Pro Farmer newsletter is now available… Harvest of the U.S. crop is rapidly advancing, while early expectations are for Brazil to produce record soybean and corn crops… but planting is just getting started and there’s a lot of growing season left. We expect some big changes to USDA’s balance sheets next week as it incorporates Sept. 1 stocks data and revises its corn, soybean and cotton crop estimates. Meanwhile, lawmakers kicked the can down the road on the debt limit, giving them more time to work out agreements on dual infrastructure measures. Meanwhile, it would appear President Joe Biden’s trade strategy is pretty similar to Trump’s. Find more on these topics and many others in this week’s newsletter. You can access the file here.

Another disappointing jobs report for September… The U.S. added only 194,000 non-farm payrolls in September, far less than the 500,000 increase in payrolls economists expected. The unemployment rate dropped 0.4 points to 4.8% amid a drop in the participation rate. The report said, “Notable job gains occurred in leisure and hospitality, in professional and business services, in retail trade, and in transportation and warehousing. Employment in public education declined over the month.”

Also, non-farm payrolls for July were revised 38,000 higher to 1.091 million jobs added and the August number also climbed 131,000 payrolls to 366,000.

Average hourly earnings for all employees on private non-farm payrolls climbed by 19 cents to $30.85 in September following large increases the previous five months. The average workweek climbed by 0.2 hours to 34.8 hours, with manufacturing hours holding at 40.4 hours and overtime edging 0.1 hour higher to 3.3 hours.

Economists worry the disappointing jobs performance is unlikely to change the Fed’s anticipated taper timing, raising worries about stagflation (rising inflation combined with a weak jobs market and slowing economic growth). Recall that Fed Chairman Jerome Powell noted after the conclusion of the September Federal Open Market Committee that he did not necessarily have to see a robust jobs number for September for him to think the Fed had met the "substantial further progress" relative to the jobs market after having already met that relative to price stability.

Marginal decline in Russian wheat export duty… The duty on Russian exports of wheat will stand at $58.70 per metric ton for Oct. 13-19, a 10-cent retreat from last week’s high, according to the country’s ag minister. The duty is up sharply from when it initially took effect in June.

Mexico quietly rejects application for GMO corn imports… For the first time, Mexico’s health safety regulator Cofepris has rejected a new variety of GMO corn, the head of the country’s National Farm Council (CNA) told Reuters. While Mexico has never permitted commercial cultivation of GMO corn, it has for decades allowed imports of such varieties that are largely used for feed. Mexico is a major market for U.S. exports of the corn, importing more than 16 MMT of primarily GMO corn from the U.S. in 2020.

Mexican President Lopez Obrador issued a decree late last year that would ban use of both glyphosate and GMO corn for human consumption by 2024, and there’s still a lot of uncertainty as to whether the GMO ban would also apply to livestock feed.

CNA says Cofepris rejected a permit for a new GMO corn variety by Bayer that was designed to tolerate the week-killer glyphosate in late August. The regulator reportedly said it considers the herbicide dangerous and rejected the variety based on a “precautionary principle.” But the decision was not publicly disclosed.

CNA President Juan Cortina described the rejection as the “first obstacle,” and said more such hurdles are coming, with seven other GMO corn seed permits waiting anywhere from 14 to 34 months for a resolution. He believes Cofepris’s decision violates the U.S.-Mexico-Canada Agreement (USMCA)

Bayer also said the decision goes against the USMCA pact. It is evaluating its legal options. 

Iowa records another record-breaking farmland sale… Iowa has recorded another record high price for farmland of $26,000 per acre for a 76-acre parcel of land in Johnson Co., Iowa. A second parcel of around 76 acres brought $21,000 an acre. The record-setting sale comes on the heels of a then-record $22,600 per acre sale in August.

Jim Rothermich, a farmland real estate appraiser with Iowa Appraisal and Research, reports the sale conducted by Hertz Farm Management brought in a huge crowd and aggressive bidding. The parcels were located roughly a half mile south of Cedar Rapids and is located partially within the Swisher city limits.

Is new WHIP+ a minus for some producers? Could be… It didn’t take long for some in the ag sector to spot a potential glitch in the WHIP+ program for 2020 and 2021 ag disasters. Some producers that took the initiative to protect themselves with RP insurance may see little or no WHIP+ payment, says one observer. “We started doing some calculations on WHIP+ indemnities using the WHIP+ formula used in 2018 and 2019. We found out there could be some issues now with the harvest prices for commodities such as wheat and dry edible beans being much higher than in the spring, 40% to 60%.  In most cases producers who had an RP policy and had a loss for wheat or dry beans will not qualify for a WHIP+ payment using the previous formula. Producers who selected a yield protection policy (no price coverage) may even come out ahead of producers who bought the better coverage."

Comments: The program for 2020 and 2021 is not bound to the okayed WHIP program rules. Hence, USDA can address any glitch in its rule making.

Confused about all the policy items ahead, and the dates? You are not alone… Here is a cheat sheet to help:

• BIF is the bipartisan infrastructure bill… “traditional” infrastructure. That around $1 trillion measure has passed the Senate but not the House. Progressives (liberals) say they will not vote for BIF until reconciliation passes.
• BBB is the Build Back Better measure via the reconciliation process… the social infrastructure and climate change bill that currently totals $3.5 trillion in the Senate but has to be reduced to some level due to objections of the price tag from centrist Democrats.
• CR is the continuing resolution or stopgap spending measure that provides spending through Dec. 3.
• Oct. 31 is the latest date House Speaker Nancy Pelosi (D-Calif.) has given for the House passing the BIF bill.
• Dec. 3 is the date the CR runs out and is also the date other action is needed on the debt limit.

Tai to comment on the WTO’s role next week… On Oct. 14, U.S. Trade Representative (USTR) Katherine Tai is to deliver remarks on the WTO’s “important role, why it must adapt to the rapidly changing global economy and how it can help workers and unlock broad-based economic prosperity,” USTR said. Expectations are that Tai will lay out U.S. objectives for WTO reforms. Most will be watching to see if she offers any views on the Appellate Body at the WTO, which has been non-functional since December 2019, as the U.S. has blocked naming new members to hear appeals to trade decisions. The Biden administration has maintained the blockade on new members to the Appellate Body to the surprise of some in the world trade community.

Audit shows spike in JBS purchases from farms with ‘irregularities’ in the Amazon… A 2020 audit shows 301,00 cattle purchased by JBS SA in 2020 from the Brazilian Amazon state of Para came from ranches with “irregularities” like deforestation. That represents 32% of the cattle the company purchased from the state, a big jump from 8% in 2018 and 19% in 2018. JBS acknowledged the need to implement “additional measures to reinforce its due diligence work in the state" and said it would invest 5 million reais ($908,265) to improve the sustainability of its supply chain. On the other hand, the 2020 audit found no irregularities related to cattle purchases from Minerva, South America’s largest beef exporter. JBS and other Brazilian meatpackers reached a settlement with prosecutors in 2013 in which they agreed not to buy cattle from ranches that were cleared illegally since 2008 or otherwise blacklisted for environmental crimes or slave labor. The agreement has recently been criticized for lacking any teeth on the enforcement front.