Evening Report | Sept. 3, 2021
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Your Pro Farmer newsletter is now available… Exporters and the market are still trying to assess damage in the wake of Hurricane Ida, with the Louisiana export disruptions impacting basis. Meanwhile, the market is gearing up for another USDA crop production and S&D update next week, with the department surprising the market by saying it may adjust corn and soybean acreage a month early. We updated our old- and new-crop balance sheets leading up to the report. Also of note, USDA hiked its farm income forecasts for 2021, and Ag Secretary Tom Vilsack indicated aid for hog and biofuel producers should be coming soon. Access this week’s newsletter here.
IHS market raises U.S. corn crop outlook, lowers bean crop forecast… IHS Markit lowered its U.S. corn yield projection by 1.1 bu. from last month to 175.4 bu. per acre, according to Reuters. But a boost in acreage still helped push the private analytics firm’s production estimate 180 million bu. higher to 15.091 billion bushels. IHS Markit also cut its soybean yield projection from 51.5 bu. per acre last month to 50.0 bu. per acre, which dropped its production estimate by 106 million bu. to 4.358 billion bushels.
Hiring slowed dramatically in August… The U.S. added only 235,000 non-farm payrolls in August, well shy of expectations for 720,000 jobs added and far below the revised July figure of 1.053 million. But the unemployment rate dropped 0.2 point to 5.2%. Hiring slowed sharply as the Delta variant of Covid impacted employer, worker and consumer confidence. Average hourly earnings rose 0.6% from July and are now up 4.3% over the past year.
The disappointing jobs growth may give the Fed reason to push back tapering of its monthly bond purchases, though most economists didn’t expect that to start until December.
India expands the number of ports allowed to import GM soymeal… India today permitted imports of genetically modified soymeal through three more ports, according to a government order seen by Reuters. The country last month decided to permit imports of GM soymeal for the first time to help the country’s poultry sector, but the government initially only permitted imports of such products through a few ports. Imports of GM soymeal will only be permitted through the end of October.
U.S. exports of pork retreated in July, while beef shipments ramped up… The U.S. exported a total of 508.223 million lbs. of pork during July, a 9.9% retreat from June and an 8.5% year-over-year decline, according to data from the Department of Commerce. Mexico was the top buyer of U.S. pork in July, with China slipping from the No. 1 spot a year-ago to the No. 4 position this year. China’s July pork shipments from the U.S. plummeted 62.2% from year-ago. The data confirms talk about a slowdown in Chinese demand amid an increase in supplies and drop in price within China, as well as some consumer shifts away from pork.
On the other hand, U.S. exports of beef and veal climbed 11.3% from June to 297.304 million lbs., which was a 17.9% increase from July 2020. Japan and South Korea were the largest and second largest buyers of U.S. beef, respectively.
The Commerce data showed U.S. broiler exports slowed 8.2% from June, but at 596.007 million lbs., total shipments were up 1.5% from year-ago.
Bright future for renewable diesel… A new soybean crushing plant will be built in Buena Vista County near Alta, Iowa. When the Platinum Crush plant becomes operational around March 2024, it will crush 38.5 million bu. of soybeans annually. This is the latest in a string of new soy crush plants amid increased demand for soyoil used to produce a greater amount of sustainable, carbon-neutral fuels.
Renewable diesel is not biodiesel. It is molecularly the same as petroleum-based diesel and can fill 100% of the tank. Phillips 66, Marathon Oil, Chevron and others are investing in new soy crush plants so they can obtain the soyoil.
Peter Meyer, head grain/soybean analyst for S&P Global Platts, says: “In our opinion, feedstock demand for renewable diesel (RD) and sustainable aviation fuel (SAF) combined could reach 40 billion lbs. by 2025 based on the number/capacity of RD/SAF plants. In our opinion, soyoil will need to account for 68% of total RD and SAF feedstock by 2025, which would be 27 billion pounds. USDA has total biofuel soyoil demand at 11.5 billion lbs. in 2021-22 on production of roughly 25 billion lbs., so we think the soyoil demand number has potential to double in three years, dependent of course on increased crush capacity, and possibly higher oil content, above the current 19.5%.”
“We’re crushing for oil instead of meal and we’ll use all the oil we make and stockpile meal,” says Meyer. “The U.S. export system will have to evolve and that means beans and soyoil stay here and the meal gets exported.”
House Ag Dems press USTR, USDA to confront China, Mexico on biotech trade policies… A group of House Agriculture Committee Democrats is asking U.S. Trade Representative (USTR) Katherine Tai and USDA Secretary Tom Vilsack to hold China and Mexico to trade commitments regarding ag biotechnology — including the use of enforcement action against Mexico under the U.S.-Mexico-Canada Agreement (USMCA) if it fails to comply.
In a letter sent to Vilsack and Tai, the lawmakers recalled the Biden administration’s 2021 Trade Policy Agenda which “emphasized expanding export markets for farmers and ranchers, fighting climate change, and enforcing the rules.” They said China and Mexico’s continued non-tariff trade barriers on ag biotech products “undercut those parts of the agenda.”
Biotech trade barriers “have a chilling effect on global adoption and commercialization of new technologies,” forcing farmers to choose “between innovative technologies or access to foreign markets,” the lawmakers said. China and Mexico in particular, “are failing to comply with their commitments to science-based, and timely regulatory approval processes,” they wrote.
In China’s case, it agreed under the U.S./China Phase 1 trade deal to abide by “predictable and consistent average timelines for regulating biotechnology products for import” and “not to request information unnecessary for assessing the safety of a product for its intended use.” However, more than two years into the agreement “timelines for product approvals for import still average more than seven years,” the lawmakers noted. “We encourage you to hold China accountable to this Phase One commitment so that American farmers maintain access to these innovative production tools,” they wrote.
Meanwhile, Mexico committed to “enhanced biotechnology measures and sanitary and phytosanitary standards” under the U.S.-Mexico-Canada Agreement (USMCA), but has instead “demonstrated a troubling reversal in its treatment of U.S. biotechnology products,” the lawmakers said. They noted that Mexican regulators have not issued a biotech approval in more than three years. Further, “the Government of Mexico published a decree on Dec. 31, 2020, intending to ban the use of biotechnology corn by 2024,” they added. Because of Mexico’s actions, “U.S. farmers are at risk of losing access to a critical market should they choose to use biotechnology tools,” the lawmakers warned.
If bilateral engagement fails to yield results with Mexico, the lawmakers urged USTR and USDA “to leverage a range of enforcement tools at your disposal to enforce the USMCA.”
