Evening Report | Sept. 13, 2021

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G/E rating for corn slips as Midwest harvest begins… USDA rated 58% of the crop in “good” or “excellent” condition, whereas traders expected ratings to be steady. The amount of crop rated “poor” to “very poor” rose a percentage point to 15%. But with harvest getting started (see next paragraph), the market will focus less so on condition updates and more so on crop progress.

As of Sunday, USDA reports 87% of the crop is dented (81% on average over the past five years) and 37% of the crop is mature (vs. 31% for the five-year average). Four percent of the U.S. corn crop had been harvested as of Sunday, which compares to 5% harvested at this point last year and for the five-year average.

Steady soybean rating as growing season winds down… Fifty-seven percent of the U.S. soybean crop is still rated G/E, thought the excellent rating edged a point higher to 12%. Last year at this time, 63% of the crop fell in the top two categories.

Today’s update shows 38% of the crop was dropping leaves as of Sunday, which is nine points ahead of the five-year average and a 20-point jump from the week prior. USDA will issue its first harvest progress update of the season next week.

Cotton ratings improve as harvest begins… Cotton condition ratings improved after a big drop the previous week for Texas caught the market off guard. USDA now rates 64% of the crop G/E, a three-point gain from last week.

Today’s report shows 96% of the U.S. cotton crop is setting bolls vs. 99% for the five-year average. As of Sunday, 36% of the crop had bolls opening vs. 43% on average. That includes 38% of the crop in 33% of the Texas crop, 38% of Louisiana’s and 43% of Georgia’s as Tropical Storm Nicholas approaches. Damage is expected to be limited. Cotton harvest is also getting started, with 5% of the crop out as of Sunday, three points behind the five-year average. In top-producing Texas, 11% of the crop has been harvested.

Winter wheat planting off to a quick start… USDA reports 12% of the winter wheat crop had been seeded as of Sunday, a seven-point gain for the week and four points ahead of the five-year average for mid-September. Top-producing Kansas has planted 4% of its intended acres, which is in line with the norm.

Farm sector hopes disappointing midterm primary could prompt Argentine government rethink… Argentine President Alberto Fernandez’s center-left, Peronist government was badly beaten in a midterm congressional primary election Sunday, which has some saying a political rethink is clearly needed ahead of the full vote in November. That has the country’s farm leaders pushing the government to review interventionist policies in the sector, including higher export taxes on grain and soy shipments and, most recently, caps on beef exports. Leaders of the Argentine Agrarian Federation (FAA) and the Argentine Rural Confederations (CRA) told Reuters the election underscored the need for the government to rebuild bridges with farmers. The Peronist party has a long history of clashing with farmers.

The farm leaders indicated the results should prompt a government rethink on ag matters, but if not, odds for a new coordinated action in protest of beef export caps would rise. Farm groups have weighed the possibility of a grain sales strike. A decision on that front should come by week’s end.

Sales of Brazil’s safrinha corn crop running well ahead of last year… Brazilian producers have planted 16.7% of their intended full-season corn crop as of Sept. 10, reports the consultancy Safras & Mercado. The firm also reports that producers have sold 70.1% of their recently harvested 2021 safrinha corn crop, which compares to 62.6% sold last year at this point. This year’s crop is much smaller in size due to adverse weather and demand remains strong for the grain, both at home and abroad.

Meanwhile, agribusiness consultancy AgRural says some growers in Parana have started planting their 2021-22 soybean crop after recent showers. But many growers are waiting for more soil moisture improvement to begin planting.

Reconciliation measure includes hike to special valuation for family farm property… The House Ways and Means Committee released a summary regarding tax policy and pay-fors that are part of Democrats’ $3.5 trillion social infrastructure package. Of note to agriculture is a proposed increase in limitation of estate tax valuation reduction for certain real property used in farming and other trades or businesses. The provision “amends section 2032A to increase the special valuation reduction available for qualified real property used in a family farm or family business. This reduction allows decedents who own real property used in a farm or business to value the property for estate tax purposes based on its actual use rather than fair market value. This provision increases the allowable reduction from $750,000 to $11,700,000.” We suspect this is an attempt to “buy” some ag votes for the contentious package.

Farm and biofuel groups say fix is needed regarding aviation fuel in reconciliation effort… Also of note, biofuel and farm advocates called on Democratic leaders to “to fix a major flaw in the House Ways & Means Committee text released Friday night for tax provisions of the budget reconciliation.” Fuels America said: “As drafted, the text could leave American farmers and biofuel producers cut out of the Sustainable Aviation Fuels (SAF) market, in favor of foreign imports. Despite farm-friendly promises as recently as Thursday from White House leaders, the legislation under consideration would rely on foreign standards based on decade-old models, rather than updated lifecycling modeling by scientists at the Department of Energy who study the U.S. agricultural supply chain, including both direct and indirect land use.”

The American Farm Bureau Federation, American Soybean Association, National Corn Growers Association, Growth Energy, Fuels America, and other farm and biofuel groups sent House Speaker Nancy Pelosi (D-Calif.) and Majority Leader Schumer (D-N.Y.) a letter asking them to correct the flaws in these three bills.

Ways and Means Chair Ricard Neal (D-Mass.), Rep. Bill Pascrell (D-N.J.) and Rep. Tom Suozzi (D-N.Y.) released a separate statement that said: “President Biden’s historic Build Back Better plan is one of the most significant bills Congress has ever considered. Its makeup is complex and will be shaped and crafted continuously to get it right. So, what we consider now is an important step in the process, but not the final step.”

Five-alarm fire at JBS beef plant in Nebraska… The JBS beef plant in Grand Island, Nebraska caught fire Sunday evening. The bulk of the damage appears to be in the rendering side of the plant. The company said today, “The fire did not impact our primary production areas. We will not run the plant today, but we expect to resume operations tomorrow [Tuesday], pending ongoing assessment of the situation.” The facility has a daily slaughter capacity of 6,000 head.

Meanwhile, a 57-year-old mechanic was killed in an industrial accident at a Prestage Foods pork processing plant in Eagle Grove, Iowa over the weekend. The company plans to conduct an internal investigation and will cooperate with an Occupational Safety and Health Administration investigation.

North Korea’s latest test… North Korea successfully tested new long-range cruise missiles over the weekend, state media reported, calling them a “strategic weapon of great significance.” This is the second missile test North Korea has conducted this year after it tested short-range ballistic missiles in March. The test adds urgency to meetings this week in Japan between U.S. envoy for North Korea Sung Kim and his South Korean and Japanese counterparts.

Louis Dreyfus Company the latest to set up decarbonization platform… Ag commodity merchant Louis Dreyfus Company announced today it would create a carbon solutions platform and team to lead its decarbonization effort. The platform “will be an active participant in both compliance and voluntary carbon credits markets, and will work closely with climate solutions experts like South Pole and all of LDC’s business lines to set science-based emissions reduction targets for the Group.”

Signal to Noise podcast… Pro Farmer Policy Analyst Jim Wiesemeyer and AgriTalk Host Chip Flory talk infrastructure bill, Afghanistan, and President Biden's Covid-19 vaccination mandate. Listen here.

Chart Trend: Long-term trend for soybeans turns sideways… Find updates to our short-term, intermediate- and long-term trends for commodity and key outside markets here.