Evening Report | Sept. 10, 2021

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Your Pro Farmer newsletter is now available… Soybeans rebounded after USDA released its latest S&D and Crop Production reports. You’ll find plenty of report coverage and related market-by-market analysis in this week’s newsletter. Meanwhile, concerns about inflation and its impact on the economic recovery linger. And comments from White House officials signal actions are coming soon regarding alleged consolidation in the meat industry. You’ll find more on these topics and others inside this week’s newsletter. Access it here.

 

Markets firm after USDA's September reports… USDA added 1.7 bu. to its U.S. corn yield estimate and it raised harvested acreage by 590,000 acres from its June forecast to 85.085 million acres, pushing its production estimate near 15 billion bushels. This also resulted in a larger-than-expected increase to new-crop U.S. ending stocks.

USDA’s soybean yield estimate climbed a bit more than anticipated to 50.6 bu. per acre, but the department also trimmed harvested area by 284,000 to 86.436 million acres, resulting in a production estimate near in line with analysts’ expectations. New-crop soybean carryover also came in near expectations.

USDA’s cotton production estimate jumped quite a bit more than analysts anticipated, with it hiking yields by 95 lbs. per acre, which more than made up for a 434,000-acre cut to harvested acres that now stand at 9.922 million. The following expectations are based on survey work by Reuters (Bloomberg for cotton).

2021 U.S. Production

                Corn     

 

Production
(bil. bu.)

Yield
(bu. per acre)

USDA

14.996

176.3

Average est.

14.942

175.8

USDA Aug. est.

14.750

174.6

 

Soybeans

 

Production
(bil. bu.)

Yield
(bu. per acre)

USDA

4.374

50.6

Average est.

4.377

50.4

USDA Aug. est.

4.339

50.0

 

Cotton

 

Production
(mil. bales)

Yield
(lbs. per acre)

USDA

18.509

895

Average est.

17.690

NA

USDA Aug. est.

17.264

800

 

 

Some surprises on the carryover front… Analysts did a good job anticipating USDA’s cut to U.S. wheat carryover following some big misses in recent months. But global new-crop carryover for both wheat and corn came in much higher than anticipated. Global ending stocks of soybeans also topped expectations for 2021-22, though the miss was less extreme. U.S. cotton carryover for 2021-22 came in 700,000 bales higher than traders anticipated as the bigger-than-expected crop estimate was only partially offset by a boost in projected exports. Find more analysis and report highlights

U.S. Carryover

Corn – billion bushels

 

2020-21

2021-22

USDA

1.187

1.408

Average est.

1.169

1.382

USDA August

1.117

1.242

 

Soybeans – million bushels

 

2020-21

2021-22

USDA

175

185

Average est.

166

190

USDA August

160

155

 

Wheat – million bushels

 

2020-21

2021-22

USDA

844

615

Average est.

NA

616

USDA August

844*

627

*Set by June 1 stocks.

Cotton – million bales

 

2020-21

2021-22

USDA

3.15

3.70

Average est.

NA

3.43

USDA August

3.20

3.00

 

Global Carryover

Corn – MMT

 

2020-21

2021-22

USDA

286.48

297.63

World less China

84.30

90.46

Average est.

NA

286.01

USDA August

280.75

284.63

 

Soybeans – MMT

 

2020-21

2021-22

USDA

95.08

98.89

World less China

62.28

63.90

Average est.

NA

96.89

USDA August

92.82

96.15

 

Wheat – MMT

 

2020-21

2021-22

USDA

292.56

283.22

World less China

148.45

142.20

Average est.

NA

279.03

USDA August

288.83

279.06

 

Cotton – million bales

 

2020-21

2021-22

USDA

91.30

86.68

World less China

52.05

51.73

Average est.

NA

87.67

USDA August

91.78

87.23

 

AFBF and tax experts weigh in on Vilsack’s op-ed on stepped-up basis… USDA Secretary Tom Vilsack is taking heat from the ag sector regarding an op-ed piece he penned for the Wall Street Journal regarding stepped-up basis. Recall that former House Agriculture Committee Chairman Collin Peterson (D-Minn.) called it ruinous for producers wishing to pass on the family farm due to the transfer tax that is imposed. American Farm Bureau Federation Managing Director for Public Policy Ryan Yates told Chip Flory on AgriTalk, "I don’t know how I can be more clear. This creates a new tax on hardworking farmers and ranchers." Listen here.

Tax policy experts say there would be major implications for farmers and ranchers from the proposed tax policy changes. These include:

  • Transfer tax: Many family farms appreciate in value over the lifetime of the primary owner and that appreciation is currently automatically given to an heir when inheriting the family farm. Under the new proposal, a son or daughter inheriting the family farm from a parent would owe 39.6% on the difference in the value from the original purchase to the time of inheriting on anything over $1 million as well as the 3.8% net investment income tax. This would hit the majority of family farmers who rely on the farm for their primary income. The only solution many of these farmers would have would be to sell off a portion of the family farm to pay the tax and likely be left with a farm no longer able to provide them a stable income.
  • Regarding estate taxes, the acreage, equipment and capital required to operate a family farm has rapidly increased in the recent past. The increase in the estate tax exemption lined up with this recent trend and allows for the seamless transition from generation to generation in a family farming operation. With the proposed reduction in estate tax, this transition would quickly become extremely difficult for family farms. With tax levels exceeding 40% for many family operations, it would put the future generations in jeopardy of not being able to continue the business and further pushing the younger generation away from farming. In a time where the average age of farmers is quite high it seems counterintuitive to put in place additional barriers for the next generation.
  • Many farmers and ranchers currently use Section 1031 to exchange appreciated property with new property for many purposes, including upgrading land quality and acquiring land located in a more convenient location. Farmers and ranchers would no longer have the ability to upgrade their land without paying the exorbitant taxes on the original property sold.

 

La Niña likely to return by winter… The U.S. Climate Prediction Center (CPC) predicts a “70% to 80% chance of La Niña redeveloping during the Northern Hemisphere winter,” though it should be a relatively “weak” event. World Weather Inc. says this La Niña won’t likely have as much impact as last year’s event. Rains are expected to be sporadic and lighter than normal in southern Brazil, though conditions aren’t likely to be as dry. It also believes this year’s dryness will be “less intensive” across Argentina.

 

Record-breaking summer heat for western states… California and several other western states this year endured the hottest summer on record, according to federal data released Thursday. California, Idaho, Nevada, Oregon and Utah also set all-time heat records for the meteorological summer, spanning June through August. Sixteen other states also saw a top-five warmest summer on record, according to the National Oceanic and Atmospheric Administration. Nationwide, the stretch from June to August tied with the 1936 Dust Bowl summer as the hottest on record, with temperatures across the country averaging 2.6 degrees above average.

 

USDA accepts more than 2.5 million acres in grasslands CRP signup… USDA announced it has accepted offers for more than 2.5 million acres from agricultural producers and private landowners for enrollment through this year’s Grassland Conservation Reserve Program (CRP) signup. This is double last year’s enrollment. That pushes total acres enrolled across all CRP signups in 2021 to more than 5.3 million acres, surpassing USDA’s 4-million-acre goal. Producers and landowners submitted offers for nearly 4 million acres in Grassland CRP, the highest in the signup’s history, USDA reports.

As part of USDA’s Grassland CRP, participants can conserve grasslands, rangelands and pastures, while retaining the right to conduct common grazing practices like haying or harvesting seed. USDA’s Farm Service Agency rolled out improvements to CRP signups this year meant to bolster enrollment. This included setting a minimum payment rate for Grassland CRP and establishing new national priority zones, including the greater Yellowstone elk migratory corridor and the historical Dust Bowl region.

 

House Ways and Means Committee measures include a provision bolstering retirement savings... Yesterday the panel by a 22-20 vote approved measures aimed at bolstering Americans’ savings for retirement. The legislation would apply a tax penalty to employers with more than five employees who do not automatically enroll in a retirement plan unless the workers opt out. The bill specifies that the retirement accounts must deduct 6% of wages from paychecks, rising to 10% over several years, and sets target-date funds as the default investment. Committee Republicans lamented the tax penalty, warning that it would lead to job losses and hurt the smallest businesses. Two Democrats, Stephanie Murphy of Florida and Ron Kind of Wisconsin, voted against the retirement legislation.

The panel also approved paid family leave for U.S. workers on a 24-19 vote largely along party lines during a markup of their legislation yesterday. Details: A universal paid leave mandate administered by Treasury that provides up to 12 weeks of family and medical leave for all workers including those self-employed at up to 85% of their weekly pay. It’s unclear how the new entitlement would interact with existing state paid leave and employer programs.

 

German official labels talks with China on ASF ‘difficult’… Discussions between Germany and China on African swine fever (ASF) were labeled “difficult” Friday by German Junior Agriculture Minister Uwe Feiler. Germany has pressed China to adopt a regionalization concept on pork trade relative to ASF after the country banned imports from Germany in September 2020 after the first ASF case was found. Feiler pointed out that Germany is not alone in wanting China to adopt a regionalization concept which would limit any trade restrictions relative to ASF to specific states/regions of the country where the disease was found as opposed to blocking shipments from the entire country. "But other countries have shown their readiness to accept the regionalization concept and we are continuing to work towards China also accepting this,” Feiler said.

The U.S. also does not have a regionalization agreement with China on ASF but one relative to avian influenza was successfully negotiated as a result of the Phase 1 Agreement.

 

Agriculture gets little mention in relaunch of U.S./Mexico discussions… There was scant attention given to agricultural trade between the U.S. and Mexico as both sides touted the relaunch of the U.S./Mexico High-Level Economic Dialogue (HLED) that was established in 2013. Recaps of the agreement to relaunch the HLED effort noted that the relations with Mexico was important, and that Mexico was currently “our largest trading partner in goods, including as a top market for U.S. agricultural exports.” There was no mention of rising tensions between the two over Mexico’s action on glyphosate and inaction on approving several GMO crop varieties. 

 

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