Evening Report | Sept. 17, 2021

( )

Click here for weekly livestock slaughter and meat production charts.

Check our advice monitor on ProFarmer.com for updates to our marketing plan.

 

Your Pro Farmer newsletter is now available… Louisiana ports continue to repair damage from Hurricane Ida with a few facilities coming back online. But China has hedged its bets by booking some Brazilian bean supplies for fall delivery. Meanwhile, combines are beginning to roll in the Midwest thanks to a warm, dry close to the growing season. The verdict is out whether that’ll take the top end off yields. Meanwhile, Washington is quite busy with dual infrastructure measures, spending bills and a looming debt ceiling with which to contend. Find more on these topics and many others in this week’s newsletter. Access it here.

 

IHS Markit expects slightly larger U.S. corn and soybean crops than USDA… The private analytics firm IHS Markit now forecasts the U.S. corn crop at 15.046 billion bu., which tops USDA’s latest estimate by 50 million bu., according to a client note seen by Reuters. The firm is using a harvested acreage forecast that’s 420,000 above USDA’s and a yield estimate of 176.3 bu. per acre, which matches USDA’s outlook.

IHS Markit’s soybean crop peg of 4.381 billion bu. tops USDA’s latest estimate by 7 million bushels. Once again, the firm matched USDA’s soybean yield estimate of 50.6 bu. per acre but it used a slightly higher harvested acreage forecast.

Looking out to the 2022 growing season, IHS projects corn plantings will edge 0.6% higher to 94.3 million acres, with soybeans likely to dip 0.9% to 86.6 million acres. All wheat seedings are expected to climb 3.3% to 48.5 million acres. Cotton seedings are expected to jump 5.0% to 11.753 million acres.

 

APK-Inform expects big jump in 2021 grain crop and exports... Ukraine’s 2021 grain crop will likely total 80.6 MMT, a 24% leap from last season, forecasts APK-Inform. It expects this year’s crop to include 31.2 MMT of wheat, 37.8 MMT of corn and 9.4 MMT of barley. The firm expects Ukraine to export nearly 57.0 MMT of that grain in 2021-22, including 21 MMT of wheat, 30.0 MMT of corn and 5.4 MMT of barley.

 

USDA analysis skewed by including many small farms and not including non-operating landlords… Ag Secretary Tom Vilsack said he hopes reconciliation and infrastructure bills can be passed soon that include significant commitment to climate-smart agriculture, as well as funding for forestry, agricultural research and broadband expansion. He also continued pushing for changes in “stepped-up basis” as a way to pay for the packages, provisions that House Ways and Means Democrats opted to leave out this week. President Joe Biden’s plan proposes eliminating stepped-up basis for inherited assets greater than $1 million for individuals’ estates and $2 million for married couples’ estates while deferring capital gains tax liability on business assets as long as the business remains family operated.

“I am confident that what I’ve said is accurate, which is that the stepped-up basis presented by the president, in his plan, doesn’t impact 98% of farms in this country,” Vilsack said, adding that the existing exemptions would protect most farms from being subject to changes. He acknowledged that the Senate Finance Committee could add changes to stepped-up basis into the reconciliation bill although the likelihood is still unknown.

The ag sector has clamored for the release of USDA analysis on which Vilsack’s comments regarding the changing of capital gains taxation at death are based. USDA’s Economic Research Service finally released that analysis. The report abstract says: “The results suggest that of the estimated 32,174 family farm estates in 2021, 1.1% would owe capital gains taxes at death, 18.2% would not owe capital gains taxes at death but could have deferred tax liability if the farm assets do not remain family owned and operated, and 80.7% would have no change to their capital gains tax liability.

Of note, the report says, “The 18.2% of estates not taxed at death with carry-over basis on some farm assets accounted for 63.2% of estates’ value of production. In comparison, the 80.7% of estates that owed no tax at death and received stepped-up basis on all assets accounted for 34.6% of estates’ value of production. The remaining share of the value of production (2.1%) was estimated to be produced by the 1.1% of farm estates taxed at death that will have a carry-over basis on all farm assets.”

The report relies on USDA’s definition of a farm as “as any place that produced and sold—or normally would have produced and sold—at least $1,000 of agricultural products during a given year.” Family farms, specifically, are defined as “any farm where the majority of the business is owned by the principal operator—the person who is most responsible for making day-to-day decisions for the farm—and by individuals who are related to the principal operator.”

The analysis did not include information about operators who were not identified as the principal operator or the spouse of the principal operator—a segment that accounted for around 10% of farms in 2019. “Households associated with non-principal operators may also have a capital gains tax liability at death depending on the size of the assets and the ability to pass on their share of the operation to a family member who continues to operate the farm,” the report noted. The study included farms regardless of structure. It did not cover the tax implications for non-operator landlords who owned approximately a third of all farmland in 2014.

Paul Neiffer, CPA and principal at CliftonLarsonAllen LLP, commented, that USDA’s inclusion of any farmer with more than $1,000 of gross sales “jumped out at me.” He says, “The analysis really should be for those farmers who actually make a living primarily from farming. In that case, likely more than 90% of them would be affected since many of them would also not meet the family farm definition, at least based on current law.”

Neiffer continued, “Their analysis does show that at least 63% of the farms would owe a transfer tax, either during lifetime, at death or at some point in the future. They couch their terms in potentially deferring the tax but it will be paid at some point in the future, especially since there will be an IRS lien on all farm property which will result in most banks requiring the lien to be paid off.”

As noted above, the analysis also ignored land values by excluding non-operating landowners. The report essentially ignored landlords and of course land is where a substantial amount of the value is for farm country. “Once you start including land values, which they are ignoring, you’re talking huge numbers,” Neiffer says.

 

Vilsack chides ‘market-based’ component in China Phase 1 agreement… The Biden administration is conducting a review of the U.S./China trade relationship and the Phase 1 agreement inked between the Trump administration and China. While that assessment still is not yet finished, Vilsack on Thursday criticized a provision in the agreement that allows China to make its purchases based on market conditions. “There is a provision in that agreement that basically gives China the ability to use market conditions as a reason, or an excuse, to not get to a particular level,” Vilsack told reporters.

He also criticized the enforcement mechanisms in the agreement, saying, “the enforcement mechanism is not really an enforcement mechanism.” However, he did not give any indication of what that comment meant.

Vilsack said China has “obviously improved their purchases from where they were a couple of years ago. But the challenge is they aren’t yet at the level” agreed to in the Phase 1 deal. But Vilsack did comment that China’s record level of purchases could be in part due to his conversations with his Chinese counterparts about fulfilling their obligations.

 

World food prices surged by a third over the past year… The rise hit family budgets and caused inflationary headaches for central banks. One United Nations measure shows costs are higher now than for most of the past six decades. The poorest, import-dependent nations tend to suffer most. Even the biggest economies are feeling the pressure.

The U.S. — where almost 9% of people said they haven’t had enough to eat in the past week — is boosting assistance to low- and middle-income via food stamp benefits. Meanwhile, Hurricane Ida struck the heart of the U.S. fertilizer industry, and Storm Nicholas threatened even more damage in the Gulf of Mexico, potentially driving up the cost to produce food.

This week, a U.K. government committee said it’s starting an investigation into how labor shortages sparked by the pandemic, Brexit, and rising commodity prices are plaguing the food sector.  It wants to know if things could get worse and whether the state needs to do more to help.

 

Covid surge in Southeast Asia also contributing to commodity price gains… A recent surge in Covid-19 cases in Southeast Asia has throttled ports and locked down plantations and processors, sparking extended disruptions of raw materials such as palm oil, coffee and tin. Restrictions in Malaysia, the world’s second-largest producer of palm oil, have prevented migrant laborers from traveling to plantations, raising prices of the edible oil used to make candy bars, shampoo and biofuel. Lockdowns in Vietnam, the world’s No. 2 coffee exporter by volume, have delayed the processing and export of coffee beans. The global tin supply has been hit by Covid-19-related interruptions at a smelter in Malaysia, contributing to higher prices for the industrial metal. Prices for each of these commodities have risen to multiyear highs in recent months, adding costs that are being passed on to consumers.

 

United States Steel Corp. said it plans to begin construction of a new steel mill in the U.S. next year… The company is chasing rising demand from a rebounding manufacturing sector. The U.S. Steel mill would increase new production capacity under construction or planned in the U.S. to about 12 million tons annually, or almost 21% of sheet-steel consumption in 2019. The new mill represents a bet by U.S. Steel that demand—and prices—will remain elevated for an extended time.

 

Latest News

PF Report Reaction: Bullish USDA data for corn
PF Report Reaction: Bullish USDA data for corn

Corn planting intentions and March 1 stocks came in lower than expected.

Report Snapshot: USDA shows lighter-than-expected corn acres and stocks
Report Snapshot: USDA shows lighter-than-expected corn acres and stocks

USDA reported corn acres of 90.036 million acres for 2024 and March 1 stocks of 8.347 billion bu., both well below trade estimates. Soybean acres were slightly lower than expectations, while stocks were higher.

Timeline and Issues in Getting Baltimore Port Channel Reopened
Timeline and Issues in Getting Baltimore Port Channel Reopened

Exxon Mobil and SAF | Fed governor says ‘no rush’ to lower rates | Russia aids Cuba | Key USDA reports today

Cattle Strength Wanes | March 28, 2024
Cattle Strength Wanes | March 28, 2024

Japan works to support Yen, Eurozone cuts production forecast and the Biden Administration will repair Baltimore Bridge...

Ahead of the Open | March 28, 2024
Ahead of the Open | March 28, 2024

Corn, soybeans and wheat traded in tight ranges overnight, with grains showing relative strength into the break.